Mortgage help wanted

[mr griffin]

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?

 

[mr griffin]

I think it would be useful to provide interest rates + the penalty amounts (if present) for over payments if poss

Both are the same, set at 2.19% for 5 year fixed and product fee added to it. Also you are able to pay up to 10k a year incurring no fees I believe

 

[mr griffin]

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?

 

[mr griffin]

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.

 

[mr griffin]

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.

 

[mr griffin]

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 %

 

[mr griffin]

Ok thanks guys for your input.

Think I've found the best deal for me, as advised in the thread. Big thanks.

Hsbc are offering 5 year fixed deal with no product fee for 1.99% with leaving mortage at 20 years payments are £450 a month plus then adding overpayment of £250 a month according to mortage calculator it will knock 8 years and 1 month off the term of my mortage and give me plenty of flexibility if my circumstances ever change.

Thanks again for the advice, it's saved me a few quid and made me look into it a little more than I probably normally would

I've got a mortgage adviser coming round too see if they can beat it, but they probably wont Im guessing, but it's worth a punt before I go with hsbc