Adrian Garside

photo credit: deanoakley

One of the most common searches on google, outside those for ‘adult content’ is for “Mortgage Calculator”.

I often wonder about this. What are people really searching for?

Mortgage Calculator number one will simply work out the cost of a repayment mortgage if you type in the mortgage amount, term and interest rate, which is OK if you know the details you want to investigate, and these are everywhere…actually, everywhere but here, maybe I’ll add one.

Mortgage Calculator number 2 is an Affordability Calculator. These are specific to each lender – so you input your details and it will work out how much they are happy to lend you, assuming credit and survey are both OK. You may think ‘just multiply your salary by 3 (or 4, or 5) but many lenders have a more sophisticated approach, factoring in children, couples and even earnings matter – a family of 4 with a parent earning £30k may get 3.5 x salary, a family of 4 with a parent earning £75k may get 5 time salary. Simply because they have more spare income after family expenses.

Mortgage Calculator number 3 is the one I pay a subscription for. Simple versions are available on many websites – other mortgage broker sites and comparison sites such as Moneysupermarket. To a certain extent they work, but they don’t answer questions, simply because the answers these days are so complicated, but they do give you a starting point to answer questions. Mine takes into account income multiples and other criteria, down to blips on credit records, state benefits etc.

Mine also has a very handy function – lets say we are looking for a 3 year fixed rate. Say 200 products come up to choose from, and some have lower rates with big fees and some have higher rates with low fees. Some have free surveys, some have free solicitors fees and some have little cashbacks. Which is best?

Well, you can get handy with a calculator (a normal calculator, not a mortgage calculator) and add up 36 payments (for your 3 year fixed rate)  and any fees and create a little spreadsheet. Of course, there is a risk -  it may well be out of date tomorrow, I update my software twice a day!

Or, you can find an IFA with the software that does the calculation for every product, at the press of a button. Cheapest may not be best, but the best will be amongst the cheapest and it gives you some solid facts to work from.

“Simples”, as they say…

photo credit: Keith Williamson

One of the trends for mortgage over the last 10 years has been the rise and rise of booking fees.

Northern Rock started it. Throughout the 1990′s the rule of thumb was that variable rate products had no booking fee and fixed rate products did, usually £250 or £300.

Then Northern Rock took their fee up to £495 and everyone gasped, but they still recieved business, so more lenders copied.

Fees have risen since, and I think it was last year that I found myself saying to a customer ‘Look, this one’s OK, the fee is only £999′

Most mortgages have a £1000 fee these days, some have £1500 fees and there are some with amazingly high fees – I’ve never recommended a mortgage with an amazing large fee – £3k plus isn’t uncommon – but presumably someone does, because the lenders keep releasing them. Or, maybe nobody does, but the rates look good on posters in the lender’s window, drawing in new customers.

Most lenders have 3 ranges of products (sometimes more) – High fee, low interest rate, medium fee, medium interest rate and low/zero fee and high interest rate – usually medium/medium works out as best. On smaller mortgages, say those below £100k, the low fee, products usually win, and on really big mortgages the mortgages with high fees become more interesting.

There have been two new twists on these fees over the past year or two.

The first, I think, is unique to Woolwich – they have a ‘not taken up’ fee – if you apply for a mortgage that they approve, but subsequenty decide not to have it, they charge you £150. I can se how this has emerged, as a mortgage broker myself, if I recommend, say a 2 year fixed rate at 3.25% and then a new one is released at 2.99% I’m going to call my client to discuss it. If the client changes over, lender one is left with funds reserved and expenses but no come back.

The second is that some lenders charge £1000 fee, but ask for the 1st £100 or £200 up front (non refundable).

This week, Northern Rock have announced that they are reducing their fees.

That is ironic, but also most welcome!