MSE total cost vs outstanding balance

CHornsey

Hi,

I am trying to compare mortgage deals and was using the MSE total cost. This showed we were best taking a deal with no fees. However, I then saw on an illustration from trussle that the balance outstanding at the end of the 5 year period was different and it seems that actually it is worthwhile us paying a £995 fee over the 5 years as the difference in interest rate actually results in around £1180 saving (vs £1025 fee). 

Have I considered this correctly (as the lower the rate the less interest and so the more balance you would pay off) or am I missing something? 

FYI

balance £151,000

Term 20 years

5 year fixed period, repayment

rate 1.44% no fee

or 1.28%, £1025 fee

Thank you for any help you can give, I'm normally pretty good with these things so it is really frustrating me that I can't work this out!

getmore4less

You cannot use the MSE or many of the other  comparisons they get the answers wrong when you are around the breakeven sized mortgage.

they can be out by £100's

Also as it changes depending on the payment you need to take account of that if planning to overpay.


For your example 

£151k over 20 years and a 1.44% V 1.28% £1025 fee   5 year fix you are very close to  break even with £151k

for different terms

term	mortgage size needed
5	£254,664.64
10	£172,093.98
15	£155,290.43
20	£148,069.39
25	£144,059.01
30	£141,511.70
IO	£132,337.03

doing a like for like (add fee make the payment the same) **

amount	rate	payment	owing
£152,025.00	1.28%	£724.48	£117,201.64
£151,000.00	1.44%	£724.48	£117,221.77

after 5 years £20  better off paying the fee 


another common option is pay the fee up front(same effect as overpaying).

amount	rate	payment	owing
£151,000.00	1.28%	£719.57	£116,413.49
£149,975.00	1.44%	£719.57	£116,426.06

now down to £13 saved paying the fee 


what about a regular overpayment.of say £100pm and rounding to £825pm (adding the fee)

amount	rate	payment	owing
£152,025.00	1.28%	£825.00	£110,976.95
£151,000.00	1.44%	£825.00	£110,972.29

now better off not paying the fees and as the overpayments go up the saving increase.
breakeven at £806


pay the fees up front and the breakeven  payment comes down to £771pm



** The like for like is to make the cash flow out of your pocket the same, the timing of any payments makes a difference.
Many go pay the fee up front it saves money but forget to account for that with the no fee by taking it off at the beginning   on a £1k fee over 5 years at 1.44% that's £72  difference and can make the difference when close.

there are other factors to consider like you can get better rates than the mortgage so really want the smallest payment  to be able to save more but they come after the base calculation of which may be better and by how much..


Wonder if the breakeven by payment might be useful as well as the term table, 

CHornsey

This explains why I am finding it so difficult to work out which deal to go for. Thank you so much. With interest rates being so low perhaps we'll go for an overpayment and the fee free option. 

The outstanding balance calculations trussle gave varied by around £600 which is why I was surprised mse didn't include this on their table. 

Thanks again