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Mortgage Help, Pleeeeese!

(5 Posts)
hollyhobbie Wed 21-Oct-09 22:26:21

Ok, I'm a first time buyer and I just can't figure this out.

Is it better to choose a 2yr fixed rate of 3.99% AND pay £801 in fees.
Or, a 2 yr fixed rate of 4.29% with no fees.

In instance one, over the 2 years we'd have paid out £15287 + (fees) £801 = £16088

In instance two, over the 2 years we'd have paid out £15771 + (no fees) = £15771

...I can see 3.99% is better, as it's a lower rate, so is this just about whether we can afford a lump sum of fees (plus the solicitor fees too!)?

Any help gratefully received!

ThingumyandBob Wed 21-Oct-09 22:52:32

Looks like you’ve just done the maths really, you need to look at the total cost that you’ll be paying to your new lender over the two years and option 2 would suggest that over a two year period you are paying out less, even if it means your instalment per year is slightly more.

How much are you borrowing? 4.29% with no fee’s is pretty good, unless you are getting a massive mortgage it won’t be worth your while paying a fee to get the 3.99% rate. The lower rates are a good headline grabber for the lender and a way of the making money from people who will do anything to get the lowest rate possible (even pay a silly fee). I used to work for a bank…I’m such a cynic!

hollyhobbie Wed 21-Oct-09 23:10:22

We're borrowing £120,000. We've just -by the skin of our teeth- managed to squeeze into the 25% deposit bracket.

So option 2 means we pay the bank less... I like it smile. Thanks for your help!

ThingumyandBob Wed 21-Oct-09 23:43:18

That’s good going getting into 25% bracket.

Def not worth paying the fees on your loan size, plus the fee you have to pay can quite often get added to your mortgage balance so you can end up paying back the £801 over 25 years which would cost you even more money, crazy! Good luck with the new place!

hollyhobbie Thu 22-Oct-09 08:40:24


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