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fee free deals highlight the need to check the total cost of a mortgage
Published: 21/04/2009 |
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Andrew Hagger of Moneynet.co.uk emphasises the importance of establishing the true or total cost of a mortgage deal rather than being influenced by a low rate or a low or free fee deal. We are very slowly starting to see a little more appetite from lenders for mortgage business with some LTV requirements being relaxed. As the mortgage market starts to pick up, lenders will be keen to catch the eye of borrowers with attractive looking deals and headline grabbing offers. With house prices at heavily discounted values compared to their 2007 peak, and more interest being shown at Estate Agents, we may well start see an increase in mortgage demand over the coming months. However, it is vital that would be borrowers, whether first time buyers, remortgagers or movers check the true cost of any deal before signing on the dotted line. With a range of rate/fee combinations, there is no one deal that fits all, and with fee free and percentage fee deals only adding to borrower confusion, finding the true cost of a mortgage is key unless you want to be needlessly pouring money down the drain EXAMPLES £150,000 mortgage assuming 25 year term (75% LTV) Alliance & Leicester 4.69% FEE FREE fixed 3 years = £895.55 per month x 36 months = £30943.80 HSBC 3.99% fixed 3 years = £799.30 x 36 months = £28,774.80 plus fee £599 = £29373.80 In this scenario the HSBC deal is £1570 cheaper over 3 years. (Equivalent of £43.61 per month) £100,000 mortgage assuming 25 year term (75% LTV) Alliance & Leicester 4.69% FEE FREE fixed 3 years = £573.03 per month x 36 months = £20629.08 HSBC 3.99% fixed 3 years = £532.87 per month x 36 months plus £599 fee = £19782.32 In this scenario the HSBC deal is £846.76 cheaper over 3 years. (Equivalent of £23.52 per month) Don’t assume that a low rate or no fee deal is best, it’s essential that borrowers always compare the total cost of the mortgage they are looking at and not be swayed by a low rate or no fee deal. The best deal for one person may not be the best for another. To find the best mortgage for your particular circumstances, you will need to take into account all of the following details - the mortgage amount, the length of the fixed or discounted term, the interest rate and the fee. A calculator such as http://www.moneynet.co.uk/Mortgages/Calculators/Cost will help you work out these numbers, but if you’re not comfortable with doing that yourself, make sure you enlist the services of an IFA or mortgage broker to do the sums for you. For most people their mortgage is the biggest financial commitment they will undertake so it makes sense to obtain independent whole of market advice from a professional to ensure you don’t end up paying over the odds for your home loan. 21 April 2009 ENDS
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