do you pay interest on the arrangment fee.

evosy1978

hello all.

I was just wondering if you have the arrangment fee added to your mortgage, this means you are then in affect paying interest on the arrangment fee.
is this correct.

Ive been looking at lots of mortgages, and im narrowing them down to the one that fits my needs.

can anyone advise me on how to work out whether a high arrangment fee and lower rate is better than a low arrangement fee and higher rate.

we are looking for a property of £110000 and are putting 10% down. we want a repayment fixed for as long as poss.


thanks for any help

herbiesjp

If you add the arrangement fee to the mortgage, you will indeed pay interest on that amount also.

The best way is to get Key Feature Illsutrations (quotes) for the schemes you like, and then compare the figures.

Do not have credit checks done just to get an illustration. You can either get these direct from a lender or from a broker

qaklush

Yes you do have to pay interest on the arrangement fee if added to the mortgage but you might be nicely surprised...my husband and I have just set in place a new 2yr fixed deal with Nationwide to start 1st May at 5.14% (our current 2yr fixed rate with them of 4.95% finishes 30 April) - the only thing we were worried about was the £799 setup fee to secure this new rate (which we can't afford to pay upfront). We had several Key Feature Illustrations done on various rates at 5.14%, 5.33% and 5.53% over 2 and 3yrs to see the comparison on the monthly payments. We were going to go initially with the 5.33% for 2yrs at only £399 set up fee but then when we checked the 5.14% rate with the £799 fee added on to the mortgage our monthly payments would in fact be lower by £12.24 per month than if we had gone with the cheaper setup fee and higher rate.

I would go with the advice of getting Key Feature Illustrations also. For us the main thing was to keep the monthly payments as low as possible as we are remortgaging on £155,994 but everyone's circumstances are different.

plane_boy2000

Will depend on your circumstances to give a specific answer. You need to look at total cost over the period you intend to keep the mortgage to get a full understanding of which is best for you. As the other posts state - get the illustration and compare the options

evosy1978

thanks for the replies.

were hoping for a £110000 house, and were putting 10% down. we want a fixed rate for as long as possible.

i read somewhere on another thread that the arrangement fee is better to have on a house over £100000. is this true.

any advice welcome.]

thanks

tomstickland

A very good question. I had my fees added to my mortgage. It's fixed rate so I was very surprised when the monthly payments went up after an IR rise. In the end it turned out that my fees were being charged at the standard rate, not the discounted fixed rate. So ask some detailed questions. It took me an hour on the phone of constant fobbing off before I finally sorted it all out.

AHAR

When my mortgage was with Halifax they charged interest on the extra fees at their standard variable rate rather than the fixed rate of the mortgage.
When I switched to Nationwide I paid the fee upfront as I could afford the £199 at the time.
I've seen some really high arrangement fees which can wipe out the benefit of lower interest rates especially for smaller mortgage amounts. I think I'll look for longer mortgage deals when my current fixed rate finishes. I don't like the idea of paying these fees and having the hassle of switching every couple of years.

tomstickland

When my mortgage was with Halifax they charged interest on the extra fees at their standard variable rate

Aha! Small world. This is exactly what happened to me with the Halifax. When I asked them to point out whereabouts in the key facts document it stated this then they blathered on about it being the responsibility of the broker to tell me this. They never satisfactorily answered any of my questions about it. I think they knew full well from the start and set out to make their documents vague.