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    • Rocketdogroya
    • By Rocketdogroya 3rd Jul 17, 8:50 PM
    • 7Posts
    • 4Thanks
    Rocketdogroya
    product fee
    • #1
    • 3rd Jul 17, 8:50 PM
    product fee 3rd Jul 17 at 8:50 PM
    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.
Page 1
    • glosoli
    • By glosoli 3rd Jul 17, 8:58 PM
    • 552 Posts
    • 303 Thanks
    glosoli
    • #2
    • 3rd Jul 17, 8:58 PM
    • #2
    • 3rd Jul 17, 8:58 PM
    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.
    • Lilla D
    • By Lilla D 3rd Jul 17, 11:58 PM
    • 233 Posts
    • 108 Thanks
    Lilla D
    • #3
    • 3rd Jul 17, 11:58 PM
    • #3
    • 3rd Jul 17, 11:58 PM
    While glosoli is correct, I hope a little extra explanation is ok.

    In your case the difference in monthly payment is small and thus the higher rate with no fee makes sense. However, if someone has a bigger mortgage amount and/or a different mortgage term, the difference in the monthly payment may be way more than just £13 per month. If they have a difference of £130 pm, then the lower rate deal may make more sense for them. So this is what you were missing, not a catch with the deal itself
    I am a Mortgage Adviser
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    • getmore4less
    • By getmore4less 4th Jul 17, 7:41 AM
    • 29,115 Posts
    • 17,411 Thanks
    getmore4less
    • #4
    • 4th Jul 17, 7:41 AM
    • #4
    • 4th Jul 17, 7:41 AM
    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.
    Originally posted by Rocketdogroya


    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.)
    • logie48
    • By logie48 12th Jul 17, 10:54 PM
    • 66 Posts
    • 9 Thanks
    logie48
    • #5
    • 12th Jul 17, 10:54 PM
    • #5
    • 12th Jul 17, 10:54 PM
    Looking at your calc; would you not add the difference in payments to the difference in amounts owed, to work out total saving?

    i.e. 312 + 179 = 491
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