product fee

Sometimes it's simply better not to pay a fee, and other times it is better to pay the fee. Big factors include the term of the mortgage itself, the size of the mortgage, the length of the fixed rate, etc.

Rocketdogroya wrote: »

what is the benefit of paying the product fee on a mortgage?

we have settled on a remortgage on a 2 year fix and below are the comparisons

£408.81 for 2 years with £999 product fee
£421.70 with no fee
This means over the 2 years it only an extra cost of £309.36 at which point we would look to remortgage.

This makes the product fee an excess payment really but they must offer it for a reason? It makes sense for us not to pay it but am I missing something? I would like to have opinions if making this payments is worthwhile at all?
Thank you.

That's the big mistake many make you CANNOT just look at the difference in payment.

On the lower rate you pay off more debt.

but as you have missed off the critical information on the deals, rate and the amount you want to borrow it is not possible to work yours out.


so as an example.

£100k over 25years with 2y fix rates 2.53% £999 fee and 2.78% no fee

£100k @ 2.78% £463pm after 2 years £94298
£100k @ 2.53% £450pm after 2 years £94119

Difference in payments £312 less £999 net down £687

Difference in amount owing £179

Total saving £389. but £999 fee so net down £610

but there is the fee to consider add those to make the starting point the same.

£100,000 @ 2.78% £463pm after 2 years £94298
£100,999 @ 2.53% £455pm after 2 years £95047

Difference in payment £192 but we have accounted for the fee in the amount owing -£749 net is £557

next make the payment the same so the only difference over the 2 years is the difference at the end.

£100,000 @ 2.78% £463pm after 2 years £94298
£100,999 @ 2.53% £463pm after 2 years £94850

The real difference is down £552.

just accounting for the difference in payment was down £687


the other quick way to do a check is to just use the rates £100k * ( 0.0278 - 0.0253) * 2 = £500 less than the fee so not worth it if it was more than the fee then the full check is worth doing.


(these are based on ideal situations in the real world the differences are slightly different due to timings and a bit of rounding but are going to be within £10 so it is only when the calculations most of the time it will be clear that fee or no fee is better.)