Should I pay an arrangement fee to get a lower interest rate?

lowest mortgage rates

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 an arrangement fee and is it worth it?

Most lenders offer 2 options on each mortgage. A mortgage interest rate with no arrangement fee and an even lower mortgage interest rate but with an arrangement fee. How do you know which one is best for you?

Why do mortgages have mortgage arrangement fees and are they worth paying? 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 a mortgage product fee. 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?

It is sometimes possible to add the arrangement fee to the mortgage. However, it is only advisable to do so if you cannot afford to pay the arrangement fee straight away but the lower rate will save you more money in the long run. Adding it 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 make this decision. 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 paid are beneficial to you and make sure that there is no early repayment charge or exit fee.

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 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 NO-FEE 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-freeMortgage 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 why 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:

These search terms will bring up a list of brokers that will NOT charge you a fee to arrange a mortgage.

Next step – Do your due diligence!

What do we mean by due diligence? What we mean is, make sure that the broker is not only No-fee but also that they have 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.

We are all facing difficult times during the coronavirus pandemic. It is really important that you get mortgage value advice as your property more than ever is so important to you. You will not want to pay any unnecessary arrangement fees or administration costs on your property. 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 the traditional email.

Paying too much for your mortgage?

Chances are you could save money with a better rate
Ever wondered how wonderful it would be to save money and reduce your monthly outgoings? We do everything for you whilst supporting you every step of the mortgage process.

You have chosen a fee-free mortgage broker – Now what?

The broker will search the whole mortgage market to find you a mortgage. With over 14,000 mortgages available they whittle it down to the very lowest interest rate with the best incentives.

This will leave you with two options to choose from:

  1. An interest rate that has no arrangement fee
  2. 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 your mortgage the more you will benefit from a lower interest rate. 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 for a low rate from your mortgage lender will vary from lender to lender. However, most mortgage lenders charge and 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.

Covid-19 CoronavirusAt this time we have seen a trend of people wanting to find the lowest interest rate possible. This will reduce the monthly mortgage payments. This is understandable as most people are trying to reduce their outgoings as much as possible.  If you would like a friendly ear and someone to discuss your options with, feel free to call YesCanDo Money on 02392 373235 or WhatsApp us a question.

What other 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 get advice first on the mortgage costs.

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.

Application Fee

The application fee is an alternative or another name for the arrangement fee.

Completion Fee

Also 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 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.

Valuation Fee

When remortgaging it is nearly always possible to get a FREE valuation fee on your property however be aware that some mortgage lenders do charge this. The fee pays for a valuer to visit your property to make sure it is worth the value you are saying it is.

Legal Fees

When remortgaging you may need to pay fees for a conveyancer however this fee is often paid by the mortgage provider in a way of 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 an exit fee if you leave before this date.

Mortgage Broker fee

The UK’s largest brokers will not charge you a fee as they get paid by the lenders. This is one fee that you definitely do not need to pay. Introducing YesCanDo Money

How YesCanDo Money and their 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 30 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. You will be able to have a face-to-face meeting (when social distancing measures aren’t in place) or via video call on FaceTime or Skype with a mortgage adviser or if you prefer over the phone.

Our team of 17 experienced mortgage advisers and consultants will advise on the best mortgage lenders you and will find you the very best mortgage deal. 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

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Steve Roberts
Steve Roberts

Stephen Roberts MAQ is the founder of YesCanDo Money, Hampshire's largest no-fee mortgage brokers. With over 30 years of mortgage experience, he has advised and helped thousands of First-time buyers buy their first home and home movers buy their dream home. Speak to a mortgage expert today by completing our contact form:

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