We all dream of being mortgage free ahead of schedule.
It’s the main reason that I overpay on my mortgage every month, with the aim of trimming a few years off.
But now Halifax has launched a new prize draw, which offers winners the chance to have their entire mortgage balance paid off.
Three applicants who go for a qualifying mortgage deal between now and 30th December 2018 will have their mortgage paid off, up to the value of £300,000.
There will then be a further 100 runners-up who pocket cash prizes of £1,000.
To qualify for the big draw, you will need to be a homebuyer, remortgaging to the lender, or be an existing Halifax borrower changing those named on the mortgage deal, and you’ll need to register for the draw by the end of January and then complete on the mortgage by the end of March.
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What are the odds?
Perhaps unsurprisingly, it isn’t that easy to work out what your actual chances of winning are likely to be.
For one thing, Halifax can’t say for certain how many successful applicants it is going to get in the next couple of months.
But it’s also a little coy about how many typical mortgage applicants it gets each month, as this information is seen as “commercially sensitive”.
While UK Finance, the trade body, publishes data on the largest mortgage lenders in the UK, Halifax falls within the Lloyds Banking Group umbrella, alongside the likes of Bank of Scotland, Scottish Widows and Lloyds Bank itself.
So while Lloyds Banking Group is the market leader, with more than 21% market share and outstanding mortgages worth £290.3 billion, the group doesn’t publish any data on precisely how many mortgages it approves overall, let alone how many individual brands approve.
We know from UK Finance data that in September around 65,000 mortgages were approved by the market in total.
If we assume that Lloyds accounts for around one in five approvals, based on its market share, then over the two months that this draw runs for Lloyds would approve something like 26,000 mortgages, and Halifax likely makes up a large chunk of those, but really we are getting into guesswork territory here.
In other words, you’re entering a prize draw with very little to go on in terms of how likely you are to win.
That’s never good.
How do Halifax mortgages compare?
With any added perk – whether it’s the potential to get a bit of cashback, avoid paying a product fee, or entry into a prize draw – it’s important to consider how the qualifying deals actually compare to the rest of the market.
Let’s take a couple of examples using data from Moneyfacts, starting with a homemover looking to borrow £150,000 to buy a £250,000 property, which means the need for a 60% loan-to-value mortgage.
If we look at two-year fixed rates then the best deal from Halifax is a rate of 1.67%, with a £995 fee.
That works out at monthly repayments of £611.96. But if you go for Sainsbury’s Bank’s 1.48% deal, you cut those repayments to £598.50, with much the same mortgage fee, meaning you save around £312 in the first two years.
If you wanted to borrow £200,000, taking that LTV to 80%, and over a five-year fixed deal then the best offer from Halifax is a 2.32% rate with a £995 fee.
That would mean monthly repayments of £879.21.
But with Metro Bank you can halve the size of that fee and bag a rate of 2.04%, which means monthly repayments of £851.61. Over the course of the fixed rate, and with the smaller fee included, that’s a saving of around £2,000.
Is it worth signing up to a deal that you know will cost you more, for the outside chance of getting your mortgage paid off?
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Focus on the right deal
There are lots of things to consider when working out the right mortgage product for you.
The rate and fee should of course be near the top, but you’ll also need to think about how reliable the lender is and how quickly they can turn the deal around, particularly if you are in a lengthy chain.
If you have a mortgage broker, they can help with this.
Only after that can you start to think about the extra features.
Much as I’d love to win my outstanding mortgage balance in a prize draw, the long odds of that happening means that we should all focus on the fundamentals of the mortgage product we are signing up to first.
This sort of prize draw should be seen as an added bonus, not a deciding factor when picking the loan to go for.
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