Any mortgage experts on here? Lower rate with fee or higher rate?

10
Found 10th Mar
Trying to work out if I`d be better off taking a lower rate mortgage with higher fee or pay a higher rate......

£170,000 over 23 years on repayment 5 year fixed....
1.99% no fee or 1.79% £999 fee
I would pay the fee upfront, not add to mortgage.

Am I right thinking it would be better to pay fee? The mortgage calculators are adding the fee to the mortgage, so not getting a true cost.
Thanks
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10 Comments
ccnp9 m ago

Search Net Present Value for a calc to show you the future value of the …Search Net Present Value for a calc to show you the future value of the fee over 5 and 23 years 1.99% = £3,383 pa interest (subject to to how the lender calculates the rate)1.79% = £3,043 pa interest (subject to to how the lender calculates the rate)Saving = £340pa at today's valueAre both Interest only?Are there exit fees or over payment fees?Or other fees?I am old school so debt is something you pay off and own the asset. A lot of young people think that's old fashioned and that the new economics means you never repay debt. Yeah. Right.You sound pleasingly, boringly sensible. Never pay over the odds.


Repayment mortgages. Both with same provider. Can overpay both 10% & same reducing over term exit fees. Just trying to work out which option is better value.....

So £343pa over 5 years is £1715 - so I`d save £715 odd by paying the fee then?
Edited by: "cazsilver" 10th Mar
GAVINLEWISHUKD1 m ago

At end of year 5 you will owe: @1.99% £139,359@1.79% £138,735A net d …At end of year 5 you will owe: @1.99% £139,359@1.79% £138,735A net difference £624.So you are better off going for the fee free option.


Is that calculated adding the fee to the mortgage though?
GAVINLEWISHUKD7 m ago

No. I have completely excluded it from the calculation. It's just based on …No. I have completely excluded it from the calculation. It's just based on £170k over 23 years at the two different rates.


So I`d save approx £376ish over the 5 years? & wouldn`t have to pay the fee upfront!

Can I ask what calculator or how you worked it out for future reference....Thanks
Edited by: "cazsilver" 10th Mar
"inb4" @mutley1
Hang on a minute.

Looking at the MSE calculator, if you went with the 1.79% option with £999 fee by the end of year 5 you'd have paid 60 x £751 = £45060 + £999 fee = £46059

If you went with the 1.99% option and no fee, by the end of year 5 you'd have paid 60 x £768 = £46080 and no fee.

So based on what it has actually cost you, the option with the fee has cost £21 less over 5 years. And you'll have a debt that is £624 less, so by my reckoning the option with the fee will save you £645 over 5 years.
Guzzle15 m ago

Hang on a minute. Looking at the MSE calculator, if you went with the …Hang on a minute. Looking at the MSE calculator, if you went with the 1.79% option with £999 fee by the end of year 5 you'd have paid 60 x £751 = £45060 + £999 fee = £46059If you went with the 1.99% option and no fee, by the end of year 5 you'd have paid 60 x £768 = £46080 and no fee.So based on what it has actually cost you, the option with the fee has cost £21 less over 5 years. And you'll have a debt that is £624 less, so by my reckoning the option with the fee will save you £645 over 5 years.


Yes I think you are correct. I forgot to add back in the £17 per month you had paid extra between the different rates.

I have removed my posts with incorrect calculations.
I`v got brain ache!
Looks like I`ll have to cough up the fee upfront then....
Thanks guys - really appreciate it!
No problem, happy to have helped.

In this case as you're borrowing a large sum, the interest you're paying is enough to offset the product fee. The further you get through your mortgage (and assuming interest rates stayed the same) then you'd be paying less and less interest, until eventually there wouldn't be enough interest paid to offset the cost of the fee.
Guzzle16 h, 48 m ago

Hang on a minute. Looking at the MSE calculator, if you went with the …Hang on a minute. Looking at the MSE calculator, if you went with the 1.79% option with £999 fee by the end of year 5 you'd have paid 60 x £751 = £45060 + £999 fee = £46059If you went with the 1.99% option and no fee, by the end of year 5 you'd have paid 60 x £768 = £46080 and no fee.So based on what it has actually cost you, the option with the fee has cost £21 less over 5 years. And you'll have a debt that is £624 less, so by my reckoning the option with the fee will save you £645 over 5 years.


But have you adjusted it so that if you went for the non fee option but paid the fee in as an overpayment?
cmdr_elito3 h, 48 m ago

But have you adjusted it so that if you went for the non fee option but …But have you adjusted it so that if you went for the non fee option but paid the fee in as an overpayment?


£999 @ 1.99% is £19.88 worth of interest savings in year 1, so just over £100 of savings in interest over 5 years.

At the end of year 5 the amount owing on your mortgage will be about £1100 less than if you hadn't made the overpayment, but your outgoings on your mortgage would have been £999 higher.

So compared to the mortgage with the lower rate and the £999 product fee, the fee free mortgage would still cost approximately £540 more over 5 years.
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