Does £2500 up front seem a lot?

mixwell

A broker has found a decent mortgage that overall will work out about £800 cheaper over five years but it will cost £2500 upfront for arrangement and valuation etc.

I can get fee free and others with £995 up front but overall will cost a bit more, surely I want the money now to help me move....

But £2500 up front seems too much even, but it may be the norm??

_Andy_

No such thing as the 'norm'. All depends on what's more important to you . Overall value over X years etc

GMS

Arrangement fees can make a lower rate mortgage more expensive than a higher rate with no/lower fees.

Paying a £2000 fee may make the payments £800 cheaper over 5 years but you will either be carrying a £2000 additional amount on the mortgage or paying it up front. The fact that it is cheaper per month would be fine if the mortgage was to run its full term with that lender but if you look to move after the 5 year fixed term then you will have paid £400 per year for the privilege of the rate, approx £33 per month. If there is a fee free deal at £33 per month more than the £2000 fee product then it looks to be like for like. Fees added to the loan will have interest charged for the term which will mean additional cost to be considered.

Some deals offer free valuations and legals, or cashback towards the fees.

Cheapest rate is not always the best overall deal.

dunstonh

Higher fees tend to mean lower interest rates. Typically aimed at the larger borrowers. Smaller fees tend to mean higher interest rates and typically aimed at the smaller borrowers.

getmore4less

What are the numbers lets check the true difference over the fixed terms.


on £100k @ 4% no fees the £2.5k fee option needs a rate of 3.41% to break even over 5years.

handytips

I think this is a case of chasing the rate. Remember the rate is important but not everything, there are good deals out there with much smaller arrangement fees, and some will also carry a free valuation on purchase business, some rates with certain companies have lowered today, tell the broker how much as a maximum you want to pay as an arrangement fee, but 2.5k upfront is very very risky imo.