FTB with a mortgage operating query!

kittykitten

I'm a FTB and have had an offer accepted on a house - yay! Met with financial adviser on monday and got agreement in principle (think that's what it's called?) from santander, now waiting for them to do surveys etc.

Question is, I was advised by FA to add santander's £995 fee to the mortgage, rather than pay now, for what seemed a very logical reason at the time - if (god forbid) I'm gazumped or sale falls through for another reason, fee is non-refundable so I'd have lost the money if I pay it now. However if I add it to the mortgage and house falls through, because I'm not taking out mortgage I've lst nothing. He's advised me to put off paying the solicitor's deposit until survey comes back for the same reason (that's ok though, as solicitor hasn't asked for it yet!)

But, what I hadn't really thought about until now is the fact that adding the fee to the mortgage actually costs me more, as even if I pay the fee amount off on day 1 of the mortgage, rather than that reduce my monthly payments to what they would have been without fee, what it will actually do is be classed as an overpayment, which reduces the term of the mortgage. This in theory is ok, as the minimal amount it increases my monthly payment by isn't a problem, but seems silly to pay more when I have money saved up for the fee. Any advice from someone who knows how these things work would be really approciated. Can you overpay on your mortgage and request that, rather than the overpayment decreasing the term, it decreases the monthly repayment instead? Or am I just being naive and silly?

Thrugelmir

kittykitten wrote: »

Question is, I was advised by FA to add santander's £995 fee to the mortgage, rather than pay now, for what seemed a very logical reason at the time - if (god forbid) I'm gazumped or sale falls through for another reason, fee is non-refundable so I'd have lost the money if I pay it now. However if I add it to the mortgage and house falls through, because I'm not taking out mortgage I've lst nothing.

Read the small print. I would be surprised if the fee is not payable even if initially you intend adding it to the mortgage.

Your liability to the fee arises on making the application, not whether the mortgage process reaches a conclusion.

claireandrichard

I would speak with Santander about making overpayments. I am with someone else for my mortgage and I can pay off 10% each year of the remaining balance on my mortgage with no penalty, it reduces the monthly repayment keeping the term the same. That way reducing the amount of interest paid over the course of the mortgage. Check to see if you can do something similar.

Engeroosi

It all depends on what the terms and conditions of your mortgage are. Usually though you can overpay a certain amount without incurring a repayment fee.

Also you can usually decide if you would rather the term reduce or your monthly payment reduce.

kittykitten

I know I can overpay up to 10% annually without incurring charges. Will speak to Santander about overpaying to reduce monthly payment instead of decreasing term, thanks!

DVardysShadow

You really are making a meal of this. You have the money saved for the fee, but the MA is advising to add the fee to the mortgage. No problem, you add the fee to the mortgage and then you have the fee sat in your bank account. So put the fee to your deposit for the property purchase and borrow exactly what you were going to borrow anyway.

kingstreet

DVardysShadow wrote: »

You really are making a meal of this. You have the money saved for the fee, but the MA is advising to add the fee to the mortgage. No problem, you add the fee to the mortgage and then you have the fee sat in your bank account. So put the fee to your deposit for the property purchase and borrow exactly what you were going to borrow anyway.

Shouldn't she reduce the mortgage amount by £995 to get back to where she was?

GMS

Abbey usually allow the arrangement fee to be paid without penalties within 14 days of completion.

Add it to the mortgage, then once completed pay it off.

TMoose

GMS wrote: »

Abbey usually allow the arrangement fee to be paid without penalties within 14 days of completion.

Add it to the mortgage, then once completed pay it off.

I can confirm that this is exactly what we are doing.

Moose

DVardysShadow

kingstreet wrote: »

Shouldn't she reduce the mortgage amount by £995 to get back to where she was?

Having increased it for the fees by £995 from what she planned to borrow, then she should reduce it by £995, which leaves her borrowing what she planned to borrow in the first place.

kingstreet

DVardysShadow wrote: »

Having increased it for the fees by £995 from what she planned to borrow, then she should reduce it by £995, which leaves her borrowing what she planned to borrow in the first place.

Aye. The annoying thing is they'll add it without adjusting the mortgage amount, so she has to do that manually to get back to square one. Annoying, IMHO. Why don't they just ask at the outset.