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

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What is an arrangement fee and is it worth it?

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

Why do mortgages have arrangement fees and are they worth it? When applying for a mortgage this question is often asked and the answer is not straight forward. However, 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 arrangement fees. We will also show a few exceptions to the rule you should be aware of.

Table of Contents

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 brokers 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 interest rates but also find the lenders offering incentives 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 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-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 the different banks and building societies for arranging peoples mortgage. 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 mortgage 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 fee-free 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 Facebook and Google reviews. There should be plenty of reviews and they should be mostly 5 star.

We are all facing difficult times during the coronavirus pandemic. This means that communication is the most important key to a smooth mortgage. We would recommend choosing a mortgage broker who uses modern technology to communicate. You should be able to have a meeting with one of their advisers on FaceTime 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 mortgage 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. An interest rate that is lower but 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 for a fixed rate for 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 lenders charge and a fee of around £999 for better interest rates. You will often have the option of paying the fee upfront of 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 fees are included in a mortgage renewal / re-mortgage?

When your mortgage renewal is near and you are looking to remortgage it can be possible that you may need to pay the cost for a valuation survey as well as conveyancing fees. By using a mortgage broker you should be able to avoid having to pay this cost as a lot of banks and building societies offer incentives like free surveys and free legal fees. Read information on the range of fees to expect when getting your first mortgage.

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 mortgage broker/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.

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 near Portsmouth, 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. We use 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 advice on the best mortgage for you. They will then submit your mortgage on your behalf as well as talk to your conveyancer through the whole process until completion. We have found WhatsApp to be really popular with our customers as it makes getting updates and communicating very easy. Let’s get your mortgage journey started. We are here to help you every step of the way…

FREE Re-mortgage Advice
Lower Your Monthly Repayments
You may be confused or even overwhelmed at the thought of sorting your re-mortgage during the Coronavirus Pandemic.
We would like the emphasise that we look after every aspect of the whole re-mortgage research and application and CHARGE NO FEE.
There is a high possibility it will save you money on your monthly re-mortgage payments.
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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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