A and B are very similar. The only difference is that, with A, the fee is added to the mortgage and a little more interest will therefor be paid while with B, you pay the fee now and no interest will be added to the £999 (unless you need to borrow to pay the fee). If you borrow £999 to repay at the end of 5 years at 4% interest, then you will need to repay £1169 in 5 years time.

The difference with C, in money terms, will be about 0.2% of the total, or £200 per year, which, over 5 years, is about the same as the fee. However, this extra will be added to the debt piecemeal over the 5 years rather than on the first day.

My preference from these options would be C, but the difference is small.

Hi,

From the three mortgage options below, how do I work out which one is cheaper in the long run when borrowing say £100k for example..

Mortgage A

Interest Rate: 3.99%

Fee: £999 - Added on to mortgage

Term: 5yrs

Mortgage B

Interest Rate: 3.99%

Fee: £999 - Paid upfront (So borrowing £100k + £1k = £101k)

Term: 5yrs

Mortgage C

Interest Rate: 4.19%

Fee : £0

Term: 5yrs

Please could someone show me how I can work this out with clear calculations and/or a formula?