Four in 10 mortgages now fee-free - but don't get sucked in - MSE News

One of the things that can get people sucked into the wrong mortgage is using faulty tools.

MSE mortgage calculator(s) get the wrong answers

because the Cost of fees and payment is not the correct way to compare what a mortgage really costs.

more on this later.

taking the examples(fees added!)

Two-year fix on a £150,000 mortgage (75% LTV), & 25-year-term*
Interest rate, Fee, Monthly repayment, Total cost over two years.
1.43% £1,700 £602 £14,443
1.89% £0,000 £628 £15,073
1.64% £0,534 £610 £15,100
1.54% £1,176 £607 £15,540
1.44% £2,034 £802 £16,240

It does not help there are errors in this table before we start on the real problem with the calculator.

As pointed out above the payment on No.5 is wrong(should be £603.76)
also
on the third option the the fees have not been added so the payment of £610 and total are wrong.

Now I am not sure on the table where the total cost comes from because it does not match the MSE calculator.
eg for No.4(1.54% £1176 fees) the calculator gets £14,578 NOT £15,540 (607*24=£14,568)

With 3 out of the 5 lines wrong that makes the order wrong.

---

These are the payments I get without adding fees, adding the fees and the total payments with the fees added
option, rate, fees, payment, payment added fees, total payments

1 1.43% £1,700 £594.98 £601.73 £14,441.44
2 1.89% 0000 £627.78 £627.78 £15,066.70
3 1.64% £0534 £609.82 £611.99 £14,687.82
4 1.54% £1,176 £602.73 £607.45 £14,578.87
5 1.44% £2034 £595.69 £603.76 £14,490.30

apart from the error ones these are close given there will be rounding.

---

Now the real problem

This has not taken account of the debt, different rates and payment pay off different amounts of capital

There are a number of ways to do this but lets start with a table that shows how much is owing after 2 years(when you add the fees) also show the interest paid over the 2 years and the real total cost, the money that does not pay off debt, the interest + fees.
option. Amount after 2, interest, interest+fees
1. £141,457.51 £4,198.95 £5,898.95
2. £140,431.12 £5,497.82 £5,497.82
3. £140,628.91 £4,782.73 £5,316.73
4. £141,105.52 £4,508.39 £5,684.39
5. £141,781.50 £4,237.80 £6,271.80

No.3 uses the least of your money to pay out real costs.
The amount owing on No.2 (no fee) is lower by £198 but that has £16*24=£284 more payments which makes the net owing on N0.3 lower when you count the cash still in the bank.



The method I use to account for the difference in payments is make the payment the same and see which mortgage leaves you with the smallest debt(after adding the fees)

option amount rate payment owing
1 £151,700.00 1.43% £627.78 £140,823.60
2 £150,000.00 1.89% £627.78 £140,431.12
3 £150,534.00 1.64% £627.78 £140,244.01
4 £151,176.00 1.54% £627.78 £140,610.42
5 £152,034.00 1.44% £627.78 £141,197.07


The winner is No. 3 1.64% with a £534 fee.
Close second(by £200) is the 1.89% with no fee

MSE. have just cost the consumer around £600 over 2 years recommending No1. which should be 4th on the list.

---

There may be other reasons the person wants/needs the smaller payment now and is prepared to take the hit on the finances in 2 years time.


(having a bit of a rant so I do hope I got these number right, if anyone can go over them and spot errors I can fix them. )