Comparing Morgage deals

Budgeteer_2

Once the decisions about how much, fixed or tracker, and how long, have been made there are still a zillion offers varying the rate and combinations of charges to make decisions impossible.

If the total charges for taking out a mortgage were calculated, divided over the length of the deal, and then converted into an effective additional rate, wouldn't this help with comparing the deals?

For example, an interest rate difference of 0.1% on £100k costs around about £6 a month. So a 5.25% rate costs about £15 more a month than a 5% rate.
A £500 arrangement fee for a 2 year deal costs about £21 a month, which would the equivalent of an extra 0.35% on the rate.
So a 5% offer with £1000 fees would be a worse deal than a 5.5% offer with no fees at all.

For a £50k mortgage 0.1% costs about an extra £6 a month. In this case the £500 arrangement fee would add an equivalent of 0.7% to the rate. So a 5% offer with £1000 fees would be worse than a 6% offer with no fees.

What other significant factors have I missed?

Trying_to_be_good

Legals, surveys, exit penalties, early repayment charges?

It depends so much on individual circumstances, you have to do this for yourself.

Budgeteer_2

Legals, surveys, arrangement fees, land registry fees, these would all be added together as part of the total costs, to be divided down.

It can't suit everybody, but I would have thought the majority of people would be expecting to get a new deal when the current one runs out, and would avoid penalty fees beyond the life of the deal.

How else do you compare one deal with another with a rate of 0.2% greater but free survey?

Trying_to_be_good

Everything you're saying makes sense.

But it doesn't help you compare a 2-yr deal against a 3-yr deal against a lifetime deal unless you calculate the figures yourself for exactly what you're looking at/for. It's not something that would necessarily help individuals if lenders did this, but it's what I do whenever I remortgage, or help a friend out to understand what's on offer.

Budgeteer_2

Yes, decisions like the length of deal, and fixed or variable, can only be decided based on individual circumstances and attitude to risk.

Once those have been decided, however, there are still several hundred mortgages that vary only by rate, arrangement fee, and what free or discounted offers on other fees they offer. I am hoping that a simple spreadsheet might help sort out the good from the con

Budgeteer_2

And why can't it compare a 2 year deal and 3 year deal? The costs are just spread over the length of the deal. It can't help judge what interest rates will do, but then no amount of guessing will help with that.

Retired_I.F.A.

Write to your MP.

What todays borrower wants is an APR calculated over the term and an APR calculated over the term of the fix/capped/discount offer.

Get that and most mortgage brokers would be signing on the dole.

Budgeteer_2

Isn't it simpler just to divide the costs over the term of the deal?
I don't think most borrowers are interested in the whole term, only over the term of the deal. At the end of each deal anybody following the advice on this site would be looking for the next best deal.