Mortgage - maths advice please!

cornish42

Hi everyone,

I seem to be failing at some basic maths here and would appreciate it if anyone could explain please.

I am looking to remortgage. I owe 97k on a house that is worth approx. 275k. My salary is just over 40k. I'm currently with NatWest. The best they are offering me is 1.39% with a 999 fee.

I've used Trussle and Habito at the moment and have had email recommendations from them. I understand that some online calculators (i've look at gocompare, uswitch and a few others) deal differently with any fees and some allow you to compare to prices over 1 year or the whole fixed term (I'm looking at a 5 year fixed).

Currently I've seen 1.14% with 995 fee from TSB, 1.24% with 490 fee from FirstDirect and 1.38% no fee from HSBC.

My question is - is it always best to pay the fee upfront straight away, if you are trying to pay the least amount possible over the intial term of your deal?

I thought it would, but the calculators I've looked at seem to show that adding it to the loan reduces the cost. I don't see how that can be the case as I thought that would be adding the cost of the fee plus the interest over the term. Perhaps it's just the way I'm using the calculators. My plea to Trussle and Habito to explain this for me fell on deaf ears so I'm hoping someone here will be able to help.

Thanks!

ukri

I don’t know how to explain it but with rough calcs isn’t HSBC 1.38% no-fee free-legals the cheapest hands down for a small 97k mortgage?

cornish42

@ukri Haha, thanks!  That's what I thought initially, but both Habito and Trussle have both said 1.14 with 995 fee from TSB is the lowest cost over a 5 year fixed. 
I've got myself all confused about it!

cornish42

Also, the MSE mortgage best buy link shows the lowest cost over the first year, not the 5 years. Over 5 years would be more useful to know!

ukri

cornish42 said:

@ukri Haha, thanks!  That's what I thought initially, but both Habito and Trussle have both said 1.14 with 995 fee from TSB is the lowest cost over a 5 year fixed. 
I've got myself all confused about it!

It could be to do with the amount outstanding at the end of 5 years. I struggle to understand how that works.

getmore4less

Most comparing sites do it wrong including MSE.

The rough guide which weeds out the way out options is max saving 

For yours £100k 5 years each 0.1% in rate  save a max of £500 if you were on interest only

As you will be on repayment you need the payment to do the proper calculations as the savings for the lower rate are less.

Add the fee make the payment the same and see how much is left after 5years.

Paying the fee up front only changes the comparison a small amount, it's just an overpayment.

ukri

cornish42 said:

@ukri Haha, thanks!  That's what I thought initially, but both Habito and Trussle have both said 1.14 with 995 fee from TSB is the lowest cost over a 5 year fixed. 
I've got myself all confused about it!

I think they are right. Including balance outstanding at end of 5 years, the TSB mortgage comes in at about £83 cheaper than the 1.38 no-fee if you pay the fee upfront and £32 cheaper if you add it to the loan.

cornish42

ukri said:

cornish42 said:

@ukri Haha, thanks!  That's what I thought initially, but both Habito and Trussle have both said 1.14 with 995 fee from TSB is the lowest cost over a 5 year fixed. 
I've got myself all confused about it!

It could be to do with the amount outstanding at the end of 5 years. I struggle to understand how that works.

Yes, same here. I was only looking at the 'total paid over 5 years' and not really looking at the total outstanding after the fixed term period is up. 
I'm still none the wiser though!

getmore4less

ukri said:

cornish42 said:

@ukri Haha, thanks!  That's what I thought initially, but both Habito and Trussle have both said 1.14 with 995 fee from TSB is the lowest cost over a 5 year fixed. 
I've got myself all confused about it!

I think they are right. Including balance outstanding at end of 5 years, the TSB mortgage comes in at about £83 cheaper than the 1.38 no-fee if you pay the fee upfront and £32 cheaper if you add it to the loan.

You can't work that out without knowing the payment.

ukri

ukri said:

cornish42 said:

@ukri Haha, thanks!  That's what I thought initially, but both Habito and Trussle have both said 1.14 with 995 fee from TSB is the lowest cost over a 5 year fixed. 
I've got myself all confused about it!

I think they are right. Including balance outstanding at end of 5 years, the TSB mortgage comes in at about £83 cheaper than the 1.38 no-fee if you pay the fee upfront and £32 cheaper if you add it to the loan.

Sorry OP, should have added that I’ve assumed a term of 25 years for the above numbers.

cornish42

Ah ok thanks, I'm looking at a 15 year term and hoping to overpay most months.