Mortgage help wanted

Associate
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Rainham - Kent
Ok so I'm a bit dense when it comes to working out what's the better deal for me to pay more off my mortgage over 5 years.

My current deal is due to end and would have a balance of 89k left to pay.

What I need to know is what would pay more off the capital
Deal A)
Currently 20 years left and mortage of £450 a month and over paying by £250 a month
Deal B) reducing the term to 12 years and that works out at £700 a month also
After the 5 year fixed term which one would have paid off more?
 
Soldato
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and how much is the product fee? are they the same?

personally I would keep term at 20 years and overpay. that way if your financial circumstances change for the worse then you can elect not to overpay the £250 and your monthly outgoing is £450, where as on option 2 you have to pay £700 a month regardless.
 
Associate
OP
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and how much is the product fee? are they the same?

personally I would keep term at 20 years and overpay. that way if your financial circumstances change for the worse then you can elect not to overpay the £250 and your monthly outgoing is £450, where as on option 2 you have to pay £700 a month regardless.

Yes that had crossed my mind and is a factor if there's hardly any difference between it.

Im too dense to work out the balance after 5 years on both deals to see what one would leave me with less capital in 5 years time?
 
Man of Honour
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I don't mean to be *that guy* but, as a homeowner you really do need to be able to work this out for yourself. The knowledge really is only a couple of Google searches away. It'll help you immeasurably as it's not really possible to communicate your appetite for risk as well as current and projected financial circumstances over the Internet.

The answer to "which will pay more of the capital of" is obviously the 12 year option, as it's the exact same rate then every penny extra spent will be coming off the capital, so £250 per month (£15k over the term). However, this almost certainly isn't the question you should be asking yourself when choosing a mortgage. You need to look at total cost over the fixed term, and hold that against current and future financial circumstances.

The option of a smaller payment with the option to overpay is far, far better than committing yourself to a big monthly payment. Unless you intend to pay off more than the annual threshold for early repayment charges, then you're just boxing yourself in for absolutely no reason.

For example, if you choose the £450 option, and then pay £250 per month extra, you'll get exactly the same result as the second choice at £700, except if times are hard you'll be able to choose not to overpay!
 
Associate
OP
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I don't mean to be *that guy* but, as a homeowner you really do need to be able to work this out for yourself. The knowledge really is only a couple of Google searches away. It'll help you immeasurably as it's not really possible to communicate your appetite for risk as well as current and projected financial circumstances over the Internet.

The answer to "which will pay more of the capital of" is obviously the 12 year option, as it's the exact same rate then every penny extra spent will be coming off the capital, so £250 per month (£15k over the term). However, this almost certainly isn't the question you should be asking yourself when choosing a mortgage. You need to look at total cost over the fixed term, and hold that against current and future financial circumstances.

The option of a smaller payment with the option to overpay is far, far better than committing yourself to a big monthly payment. Unless you intend to pay off more than the annual threshold for early repayment charges, then you're just boxing yourself in for absolutely no reason.

For example, if you choose the £450 option, and then pay £250 per month extra, you'll get exactly the same result as the second choice at £700, except if times are hard you'll be able to choose not to overpay!

So you're saying as long as I pay the £700 total a monyh either way the amount of capital left in 5 years time will be exactly the same on either option?

If that's so then yes it's better to stay at £450 and over pay by £250 a month.

I'll be the first to admit that im hopeless at working these sorts of things out, which is why I came here for some advice, because I know someone here would know the answer and be able to help me out. Think I was getting lured by thinking I would only have 12 years left, when in reality all I need to focus on is the next 5 years.
 
Associate
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don't pay a product fee - on a £90K mortgage you would be better off not paying one
Im not paying one.
They offered £691with £1500 product fee or £703 with no product fee(so the fee is built in on both deals)
Im not going to be paying any lump sum though

Zefan says you can easily find out online. Please tell me where I can find that info out?
It would be great if you can show me where I can see what my balance would be in 5 years time.
 
Caporegime
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Im not paying one.
They offered £691with £1500 product fee or £703 with no product fee(so the fee is built in on both deals)
Im not going to be paying any lump sum though

Zefan says you can easily find out online. Please tell me where I can find that info out?
It would be great if you can show me where I can see what my balance would be in 5 years time.

type mortgage comparison money saving expert into google.

in fact the MSE mortgage section is where you can find you all the info you need.

also fix for 2 years. you are paying more by fixing for 5.
 
Associate
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I know you pay more for the longer you fix it for, but interest rates are also very low atm, can only see them going up. Would hate to finish 2 years and come out of the deal and they were 4 or 5 %
 
Associate
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also fix for 2 years. you are paying more by fixing for 5.


By that logic why fix at all? A variable would be even cheaper.

In reality though it's really not that simple, you need to compare it to your appetite for risk as interest rates are already so low even if there were a small drop in the future the effects on a fixed would be negligble. Because interest rates are so low short 2 year fixed mortgages also tend to have realtively high product fees and if you get into the habit of very low rates but with £1000 product fees you might find that the 2 lots of fees you pay taking two seperate two year fixed deals outweigh the interest saving.

You also dont have the same protection that you would have if interest rates do sharply rise and you had a longer fixed term.
 
Tea Drinker
Don
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Don't add the product fee if you can. The compound effect of adding product fees every two years would be eyewatering if you worked it out. The total fee will effectively double at the end of the mortgage let alone if you mortgage every couple of years and keep adding the fee to the mortgage.

Try and pay it now.
 
Associate
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I'm in a similar position. HSBC has 1.99% 5 year no fee. I think LTV is 60%? Nationwide is 2.09% no fee iirc. Both a bit better. I have spent a bit of time comparing the deals.

Usually its 10% overpayment a year on the opening balance.

Get hold of excel or libre office and get to work. Start with balance in one column and each row a month, take off monthly repayment in second column. Work out monthly interest in third column and add it on to the next month. Fourth column in sum of the interest paid. Fill down over 20 years (240 columns). Where it hits zero is were you finish and you can see how interest you played. You can then add an overpayment column and play around.

If you have a large mortgage it may be OK but By paying a fee I'm about £900 pounds down!!!
 
Soldato
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  • HSBC Mortgage 5 year fix no fee 1.99% 60% LTV

  • Barclays Mortgage - 5 year fix @ 1.90% with 75% LTV + £999 product fees

  • Lloyds 2 year fix for 1.43% with £999 fee - 60% LTV

  • Barclays mortgage - 1.63% fixed for 2 years - £299 fee 60% LTV
Some mortgage deals out there this month.

For me it is important to overpay without penalty, so you would need to check the t&c - but i am working to be mortgage free asap and keeping a low interest rate. I am currently on a variable which has risen from 1% to 1.5% in the last 2 years, although i could switch, i can make unlimited overpayments without charges.
 
Soldato
Joined
25 Aug 2006
Posts
6,337
I'm in a similar position. HSBC has 1.99% 5 year no fee. I think LTV is 60%? Nationwide is 2.09% no fee iirc. Both a bit better. I have spent a bit of time comparing the deals.

Usually its 10% overpayment a year on the opening balance.

Get hold of excel or libre office and get to work. Start with balance in one column and each row a month, take off monthly repayment in second column. Work out monthly interest in third column and add it on to the next month. Fourth column in sum of the interest paid. Fill down over 20 years (240 columns). Where it hits zero is were you finish and you can see how interest you played. You can then add an overpayment column and play around.

If you have a large mortgage it may be OK but By paying a fee I'm about £900 pounds down!!!

I just used this:

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

It's great to see actual charts/figures and how best your overpayments can work for you.
 
Caporegime
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21 Jun 2006
Posts
38,372
By that logic why fix at all? A variable would be even cheaper.

In reality though it's really not that simple, you need to compare it to your appetite for risk as interest rates are already so low even if there were a small drop in the future the effects on a fixed would be negligble. Because interest rates are so low short 2 year fixed mortgages also tend to have realtively high product fees and if you get into the habit of very low rates but with £1000 product fees you might find that the 2 lots of fees you pay taking two seperate two year fixed deals outweigh the interest saving.

You also dont have the same protection that you would have if interest rates do sharply rise and you had a longer fixed term.

Only a moron would pay a product fee on a £90k mortgage.

Product fees generally only make sense to those borrowing a minimum of £300k.
 
Caporegime
Joined
21 Jun 2006
Posts
38,372
  • HSBC Mortgage 5 year fix no fee 1.99% 60% LTV

  • Barclays Mortgage - 5 year fix @ 1.90% with 75% LTV + £999 product fees

  • Lloyds 2 year fix for 1.43% with £999 fee - 60% LTV

  • Barclays mortgage - 1.63% fixed for 2 years - £299 fee 60% LTV
Some mortgage deals out there this month.

For me it is important to overpay without penalty, so you would need to check the t&c - but i am working to be mortgage free asap and keeping a low interest rate. I am currently on a variable which has risen from 1% to 1.5% in the last 2 years, although i could switch, i can make unlimited overpayments without charges.

With Brexit hitting the UK expect people to lose jobs others barely be able to afford their mortgages as prices rise.

Banks will be forced to lower interest rates to get people spending.

It's not a good outlook at all.

Lots of companies have already left and more are leaving every day.

Expect a mini crash in house prices too for any home over £450k. Bottom end usually doesn't get effected as much.
 

Jez

Jez

Caporegime
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18 Oct 2002
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33,073
Expect a mini crash in house prices too for any home over £450k. Bottom end usually doesn't get effected as much.

House prices have been tumbling for a while in Oxfordshire, we have been keenly looking at the market for a while with a view to perhaps do one more move. Across the board we are seeing asking prices tumble by hundreds of thousands. (Clearly this also means that the house which we will sell has probably also lost a 6 figure amount, but moot when up sizing) Price points obviously a lot more than £450k but its certainly happening. Sub 450-500 i cant see the market moving downward much, the basic need for housing doesnt change.
 
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