arrangement fee

theGrinch

what exactly is an "arrangement fee"?

dwsjarcmcd

An 'arrangement fee' is part of the price of a mortgage. A mortgage is based on the interest rate the lender borrows the money for and they then apply a margin to it, considering many other things such as arrears, possessions, income from insurance sales etc. This results in a rate to the public, however, because so much business is obtained via best buy tables the rate can be subsidised by a fee, the 'arrangement fee' and the bigger the fee the less the pay rate and vice versa.

It is NOT a fee for arranging the mortgage!! (but it is understandable why people think that it is)

David

KTF

It is essentially the 'price' for the product. By paying the fee you are 'buying' a rate that is fixed/discounted/etc. compared to an SVR.

theGrinch

i thought the price I paid for the money borrowed was called the rate of interest

also I am noticing that huge arrangement fees are not necessarily leading to best buys.

happybroker

theGrinch wrote: »

i thought the price I paid for the money borrowed was called the rate of interest

also I am noticing that huge arrangement fees are not necessarily leading to best buys.

the interest rate is the "cost" of borrowing the money, the "arrangement fee" is the cost of being provided with that interest rate

re the size of arrangement fees I think every one is scratching their heads at that, you're not alone in thinking what you are

theGrinch

is this the same as an "administration fee" or a "booking fee"?