switching mortgage deal questions

kezzygirl

Hi everyone, hard to believe but we are coming to the end of our two year mortgage deal, since purchasing as first time buyers in may 2018.

I have looked at the offers available for nationwide- our current provider- and have a few questions:

Interest rates seem better on fixed deals with a fee- 1.54% with a £999 fee upfront, or no product fee for 2.04% interest. with a fee added to the loan, it increases payments by £4 per month, which of course is an extra £200 over two years. I do have the option to pay the fee upfront on a 0% credit card.
Which deal is better?

also, our current deal is over 28 years, I would like to reduce this to 25 or even less, I understand there will be affordability checks etc- however I can also overpay by 10% per year, and have this reduce my term. which is the better option?


Thanks for your help

getmore4less

Paying up front or not makes a tiny difference to the comparison it can be ignored.

Missing information

how much are you borrowing?

The difference in rate is 0.5% for a 2 years fix that would be £102k ish with a £999 fee interest only.

bigger the payment/shorter the term the bigger the mortgage needs to be

for a 25y term its around £104,700

overpayment mean the mortgage needs to be bigger to be worth paying the fee.

kezzygirl

Borrowing £166,000 on a £199,000 house. Ltv is something like 83.7%. Currently paying £786 per month 3.64% interest.

kezzygirl

Apologies I dont quite understand what you mean about the 102k? I am happy with a 2.04% interest rate, but if it works out better to have 1.54% with the £999 product fee added,I will go with that

ashe

If you get the better rate with a fee and can put the fee on a 0% card, you will be at least the £200 better off that you mentioned as you aren't paying interest on the card and you aren't paying interest on it on your mortgage by having it added to your deal. just put it on the card, pay it off, and you benefit from the lowest rate.

getmore4less

4Those were the minimum mortgage to make paying the fee better.

£166k is over both the interest only and 25y term min, and will be big enough that even with big overpayments payment of the fee is the better choice.

Moneyminded

If you are happy to stick with your current provider that makes it easier as you don't need to get a solicitor involved.

Have you spoken with Nationwide? You have looked at the options based on your current LTV but have you asked them what rates they will offer you? It may be that you house has increased in value since your purchase and therefore you could qualify for a lower LTV bracket? Worth a phone call to check.

As others have mentioned if you already have the 0% cc and can afford to pay off the fees on the card within the 0% deal then it makes sense to go for this option.

Good luck

kezzygirl

Thankyou, these interest rates etc are what have been quoted via the nationwide portal which allows us to switch to a better deal online. We can fix our deal now, but it wont kick in until 3months before our deal ends in may. I'm wanting to get in quick due to Brexit plus I like to be organised.

Ok, so pay the £999 fee, take the lower interest rate, and overpay to reduce the term as opposed to requesting the term is formally lowered?

Retired_Mortgage_Adviser

That's right.

With regard to saving interest over the lifetime of the mortgage, overpaying has the same impact as shortening the term.

Overpaying and shortening the mortgage term do exactly the same thing. Yet overpaying has the advantage that you can stop it if you want or need to.

https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

kezzygirl wrote: »

Ok, so pay the £999 fee, take the lower interest rate, and overpay to reduce the term as opposed to requesting the term is formally lowered?

kezzygirl

Thankyou, it really helps to talk to people instead of trying to work it out myself. I think the 1.54% is a good rate, I doubt it will go lower so it thinking of fixing for 3 years

dimbo61

So you bought your house for £199,000 and it maybe worth more or less in May 2020.
So speak to the mortgage centre as they can do a " desk top valuation " and your Loan To Value may now be 75% LTV and therefore you might get a better deal.
Rates are very very good at the moment and maybe a 5 year fix it you have no plans in moving ?? Would be a good plan so your LTV is less than 60% next time your looking to remortgage.