Nationwide mortgage terminology

jaxx-chris

One of our NW mortgages is £ 142k and the tracker is expiring at the end of June, currently 0.79%

the online portal provides me some options

1. Lowest cost deal
2. £999 product fee upfront
3. £999 product fee added to loan
4. No product fee

anyone know what Lowest cost deal actually means?

I'll be going for a tracker as I need to remortgage for home renovations once I know how much I need which may not be till early 2022 and may move to Barclays. The tracker enables me to move with no penalty, the other 2 NW mortgages are tracker also on no fee for early payment.

1) tracker offered is 2 Year Tracker 1.29% (Variable: base rate + 1.19%) £810.58 +£999 upfront, £182,278 over term +£999 fee
2) tracker offered is 2 Year Tracker 1.29% (Variable: base rate + 1.19%) £810.58 +£999 upfront, £182,278 over term +£999 fee
3) tracker offered is 2 Year Tracker 1.29% (Variable: base rate + 1.19%) £816.26 £999 added to loan £182,550 over term
4) tracker offered is 2 Year Tracker 1.69% (Variable: base rate + 1.59%) £836.37 No fee £182,497 over term

all 2 year trackers which is fine

I assume the upfront fees are not included in the total payments over term.

To me it looks like the lowest cost is option 4, option 4 - option 1 X 24 = £618.96 which is cheaper than £999 fee

next would be option 3 with the £999 added to the loan I could then just pay the £999 to the loan over a few months and avoid the majority of the compound interest while also benefitting from the lower tracker rate if things change.
The £5.68 pm difference between option 1 or 2 and 3 = £136.32 over the 2 years which isn't a huge amount (obviously not accounting for compound interest)

over the full term options 3 & 4 are £727 to £780 less than option 1 or 2


what am I missing here? why is the lowest cost deal not the lowest cost deal?

Is there a good calculator I can use to verify the term costs from NW as they don't supply their workings?

K_S

@jaxx-chris Off of the top of my head, NW would have also factored in the outstanding balance at the end of the fix to their total cost calculation, which would be the right way to do it.

BUT the above is assuming you stay with NW for the whole 24 months. Your plan is to potentially remortgage away in the first year, so the no-fee option may well be best for you.

getmore4less

Full term costings are pretty useless to do any sensible comparisons as the numbers will change and they include most of the time on the SVR.


Paying a fee up front is just the same as an overpayment.


The key for your scenario is relatively simple how many months to recover the fee and  will we switch before then.

top level is max saving interest only 

£142k 1.29% £999 V 1.69%

Each month you save £142,000 * (0.004/12) = ~£47pm so catch up at 22 months

its longer for the repayment mortgage catch up is at 23 months for your payments


with the 2year fixes and a payment of £836 at the 2year point only £65 difference.

amount	rate	payment	owing
£142,999.00	1.29%	£836.00	£126,420.34
£142,000.00	1.69%	£836.00	£126,485.81

pay the fee up front that drops to £57

amount	rate	payment	owing
£142,000.00	1.29%	£836.00	£125,395.24
£141,001.00	1.69%	£836.00	£125,452.49

why not switch to Barclays now and then take on extra borrowing when needed or get enough to cover contingency and overpay what you don't use.
 

lonibra

With what you are aiming for, looks like the zero fee tracker is better.