jabbslad 's Profile

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The overall cost for comparison assumes that you will stay with that lender for the life of your mortgage (possibly 25 years plus) and pay their standard variable rate after the deal ends (which can be as soon as 2 years into that 25 years). For that reason, it can be a bit pointless using the overall cost for comparison to compare 2 year deals as you will, in theory, switch to another deal at the end of 2 years rather than pay the lender's standard rate.



For that reason, you have to ensure that you are comparing like for like and do a comparison over the deal term. ie if you are looking at 5 year deals, find out what the total cost over 5 years is.





http://www.moneyfacts.co.uk/searches/default.aspx allows you to do this.



After putting in the basic details of the mortgage you require, at the bottom of the Mortgage Search page click 'Ask me more'. On the next page select the deal period you are looking for (2, 3, 5 years etc) and then set the initial display order to 'True Cost' and ensure that the 'True cost period' matches the deal period you hve selected. ie If you want to compare 2 year fixed rates, set the deal period to 2 years and the true cost period to 2 years.



The table you then get will show the deals available ordered by the true cost over the deal period whcih should be your first point of reference.



If you are looking at, say, 5 year fixed rates and have 2 deals with similar costs over 5 years, it could be then worth looking to see which has the lower over all cost for comparison as this will show which has the lowest long term cost in case you are unable to remortgage for whatever reason.



Generally though you are are better working off the cost over deal period. If you are never going to change mortgage, look at the overall cost for comparison.

To work out which is truly a better deal, you need to look at how much interest rates would need to change before one deal beat the other. If you’re interested in this slightly more sophisticated approach, read this analysing the rate differences
briefing.

The regulator, the FSA, says collars (and it’s likely this applies to minimum rates too) may be invalid if they "weren’t in the Key Facts Document (KFD) when you got the mortgage". Therefore do the following...