Wether or not to pay a product to fee

pcpaul22

Hi,
We're coming to the end of our fixed rate and only have about £20k to pay. When comparing mortgages with and without a fee am I understanding this correctly?
Option1: 5 year fix No fee £318.64/mth
Option2: 5 year fix £995 fee £316.68/mth
So, over 60 months I would only save £1.96/mth or £117.60 over all, so I'm better taking the no fee?

Is that correct or am I missing something?

feynman33

The calculations not quite that simple, you'll also have slightly different outstanding balances at the end of your term to factor in. But yes fees are good for large mortgages, on 20k it won't even be close.

amnblog

£995 is 5% of £20,000

If the fee paid rate is within 1% of the no fee rate (and I imagine it is) forget it

la531983

I cant imagine paying a fee on a mortgage that small will be worth it.

I recently picked a new rate on my £75k (remaining) mortgage, picking the one with a lower interest rate but with a fee would have resulted in almost the exact same monthly payment. 

Newbie_John

feynman33 said:

The calculations not quite that simple, you'll also have slightly different outstanding balances at the end of your term to factor in. But yes fees are good for large mortgages, on 20k it won't even be close.

Cheers for that, I thought I understand mortgage in full but somehow missed this aspect when choosing fee Vs no fee options. I simply assumed that cheapest is that one that requires you to pay less monthly (with fee divided by each month).

The lower % results in lower balance (even with fee) at the end of term compared to higher. 

I had options of like 4.02% no fee for two years Vs 3.86% with £999 fee. Originally thought that no fee would be £400 cheaper but after reviewing the outstanding balance the one with fee will be £44 cheaper (unless I put £999 to savings account and gain interest for two years then again at 4% that would make no fee cheaper by £40 )

Good to know 👍