Is it better to pay an arrangement fee on my mortgage to get a lower monthly mortgage payment? This will depend on the size of your mortgage and the cost of the mortgage arrangement fee. By the end of this guide, all will become clear.
What is a mortgage product fee and is it worth it?
A mortgage product fee; also known as a mortgage arrangement fee is a fee that is added to a mortgage product. These mortgage products usually offer better interest rates and even cashback when your mortgage completes.
Most lenders offer 2 options on each mortgage.
- A mortgage interest rate with no arrangement fee
- A lower mortgage interest rate but with an arrangement fee
How do you know which one is best for you?
If the mortgage you are applying for is over £150,000 the answer is usually yes.
In this guide, we will dig deep to see what situations you will benefit from getting a lower mortgage interest rate by paying the mortgage fees. We will also show a few exceptions to the rule you should be aware of.
Can a mortgage arrangement fee be added to the mortgage?
Most mortgage lenders will allow you to add the arrangement fee to your mortgage and it’s been our observation that the majority of people decide to do this. Adding mortgage-related fees to your mortgage will technically increase the fee as you will pay some level of interest on the extra addition to the mortgage. We would highly recommend speaking to a fee-free mortgage broker for advice on any mortgage fees and your available options.
Could it be worth extending the term of my mortgage to save money?
Are you thinking “Can I increase the term of my mortgage?”. It may be that you are finding your finances stretched. If so another consideration would be to extend the term of your mortgage as this will reduce your monthly payments.
Get advice from your broker or mortgage adviser before you extend the term to reduce mortgage repayments. You will save money possibly thousands of pounds in the short term, however, over the long term, this will cost you a lot as you will pay far more.
You need to make sure that any mortgage fees you need to pay are beneficial to you and make sure that there is no early repayment charge or exit fee.
When is mortgage product fee payable?
When you apply for a mortgage, you will likely be required to pay a Mortgage Product Fee. This fee is charged by the lender and covers associated setup costs and administration of the loan agreement. Generally speaking, this cost must be paid upfront in full or over time without any possibility of reimbursement; accordingly, it is important to ensure that all fees are discussed before going forward with your application. As mentioned above, some lenders may offer the option to add the product fee to your mortgage balance, but this will increase the amount of interest you pay over the term of the mortgage. It’s important to factor in the cost of the product fee when comparing different mortgage products to ensure that you are getting the best deal for your circumstances.
How do I start to find the best mortgage?
There are more than a hundred different mortgage lenders in the UK and over 14,000 different mortgage deals to choose from. This means trying to find the right mortgage deal for you can leave you with a headache. However, there is a simple way to narrow this down to 2 main options which we will explain in the very next paragraph.
Get yourself an online free mortgage broker!
A mortgage broker’s job is to search the 14,000 different mortgages available to you and whittle this down for you. They will work to find you not only the best mortgage deals and interest rates but also find the mortgage provider offering incentives and the lowest mortgage fees to new customers.
Over 70% of mortgages arranged in the UK are completed by mortgage brokers as they provide the best level of support and advice,
Get yourself a fee free mortgage broker that communicates well online.
Not all mortgage brokers are the same! You will find brokers that will charge you a fee for arranging a mortgage for you as well as mortgage brokers that do not charge a fee.
- Mortgage brokers that charge a fee – Mortgage brokers that do charge will often cost between £500 and £2,000 to arrange a mortgage.
- Mortgage brokers that are fee-free – Mortgage brokers that are FREE do an identical job, however, do not feel the need to charge clients a fee for arranging a mortgage.
All mortgage brokers are paid exactly the same commission by each and every mortgage lender for arranging people’s mortgages. Therefore there is no need to pay an extra fee to a broker that wants to charge you on top! It just doesn’t make sense!
How do I find a Fee-Free mortgage broker?
The answer is simple: Google it! Here are a few search terms we would recommend using when ‘Googling’ for a local/online broker.
Google these search terms:
- Free online mortgage broker
- Free mortgage broker near me
- No-fee mortgage adviser near me
- Free independent mortgage broker
These search terms will bring up a list of brokers that will NOT charge you a fee to arrange a mortgage.
Alternatively, we can help get you a mortgage, free of charge!
Next step – Do your due diligence!
What do we mean by due diligence? What we mean is, to make sure that you don’t need to pay a mortgage broker fee and that the broker you’re considering has amazing customer service. The easiest way to do this is by taking a look at their website as well as their Trust Pilot and Google reviews. There should be plenty of reviews and they should be mostly 5 stars.
It is really important that you get expert mortgage advice, especially in the turbulent current market. There is no need to pay any unnecessary mortgage arrangement fees or administration costs when you get a mortgage or remortgage. Take things slowly and get sound financial advice!
This means that communication is the most important key to a smooth mortgage. We would recommend choosing a broker who uses modern technology to communicate.
You should be able to have a meeting with one of their advisers on Zoom or Skype. YesCanDo Money also uses WhatsApp, Facebook Messenger, and SMS as well as traditional email.
You have chosen a fee-free mortgage broker – Now what?
The broker will search the whole mortgage market to find you a mortgage with the best mortgage deals. With over 14,000 mortgages available they whittle it down to the very lowest interest rate with the best incentives and the lowest mortgage-related fees.
This will leave you with two options to choose from:
- An interest rate that has no arrangement fee
- A lower interest rate with an arrangement fee
You will need to make your own decision, however here are a couple of points that may help you in making it.
Size of mortgage – The larger the size of your mortgage the more you will benefit from a lower interest rate. As a mortgage broker with over 40 years of experience, it’s been our observation that the tipping point is often around £150,000. The monthly saving you will make outways the cost of the arrangement fee or a booking fee for a fixed rate for a mortgage above £150,000.
Cost of arrangement fee for the lower rate – The cost of a low rate from your mortgage lender will vary from lender to lender. However, most mortgage lenders charge a booking fee of around £999 for better interest rates. You will often have the option of paying the arrangement fee upfront or adding it to the loan.
What mortgage fees are included when I remortgage?
It is possible to make significant savings when remortgaging. The perfect scenario is to remortgage without paying any mortgage-related fees at all. Although this is possible sometimes it may be both necessary and also worthwhile considering small mortgage fees and lender’s administration costs however let’s dig deeper.
mortgage Arrangement fees
Arrangements fees are paid to buy a fixed rate from the mortgage lender. The rate will depend on the loan to value (LTV). This is the property value divided by the mortgage required. The lower the LTV the lower the interest rate and the better the mortgage deal available to you.
The application fee is an alternative or another name for the arrangement fee.
A completion fee is an alternative fee name for arrangement fees.
Mortgage Booking Fee
This comes under the heading of mortgage-related fees. This fee will often be asked upfront by the mortgage provider along with your mortgage application.
Mortgage account fee
The mortgage account fee is a fee for managing your mortgage and includes a fee for closing your mortgage account when your mortgage ends. There are a couple of mortgage lenders that do not charge a mortgage account fee however the vast majority do.
Mortgage Valuation Fee
When remortgaging it is nearly always possible to get a FREE mortgage valuation fee on your property however be aware that some mortgage lenders do charge a mortgage valuation fee. The fee pays for a valuer to visit your property to make sure it is worth the value you are saying it is.
When remortgaging you may need to pay legal fees for a conveyancer however this fee is often paid by the mortgage provider in a way as an incentive to attract you as a new customer.
Early Repayment Charge
When you leave your existing lender early they can charge you an early repayment charge. This is normally for the term on the fixed rate. You will be charged a mortgage exit fee if you leave before this date. If you’re on a standard variable mortgage rate you will pay no early repayment charge.
Mortgage Broker fee
The UK’s largest brokers will not charge you a fee as they get paid by mortgage lenders. This is one fee that you definitely do not need to pay. Introducing YesCanDo Money
How YesCanDo Money and its team of local mortgage advisors can help
Here at YesCanDo Money, we are a family-run independent whole of market mortgage brokers based in Hampshire. Our services are highly recommended and are completely FREE! We have built the business over the past 40 years by helping and advising clients to make the right and best decision for their situation.
YesCanDo money offers a combination of good old-fashioned customer care with the advantages of modern technology. Have a meeting with our mortgage advisors via video call on Zoom or if you prefer over the phone and via WhatsApp.
Our team of 17 experienced mortgage advisers and consultants will advise on the best mortgage providers and will find you the very best mortgage deal with the lowest mortgage fees and mortgage costs. They will then submit your mortgage application on your behalf as well as talk to your conveyancer through the whole process until completion giving you a relaxed mortgage experience.
WhatsApp has been very popular with our customers as it makes getting any question answered as well as updates very easy. Let’s get your mortgage journey started. We are here to help you every step of the way…Request a call back from one of our mortgage advisers, remember our services are always FEE-FREE!