Confused About Mortgage Fees

pezz18

Hi,
Sorry if this has been asked before but,,,
I was using the MSE mortgage calculator to compare mortgage costs over the term of the mortgage, anyhow, I have noticed that the calculator gives a lower amount if you add the fees to the mortgage.

I presumed that the amount would either be the same or slightly higher if you were adding more money to the mortgage?

Hope this makes sense? and someone can explain to me how come it is cheaper to add mortgage fees to your mortgage!

Thanks
Andy

CLAPTON

an example would be good

pezz18

Ok, So for example, enter on the 'compare fixed rate mortgages' calculator

Current Mortgage Debt: £62,000
Remaining Mortgage Term: 15 Years
Fixed Rate: 3.65%
Mortgage Fee: £500
2 Years Fixed Rate
Standard Rate After: 4%

You then have the option of adding the Fees to the mortgage.

Results:
Fees Added:
Monthly Fixed Payment: £451
Cost over Fixed Term: £10,834
Remaining Debt After 2 Years: £56,004

Fees NOT Added:
Monthly Fixed Payment: £448
Cost over Fixed Term: £11,247
Remaining Debt After 2 Years: £55,556

Maybe it's me been daft! The difference between the remaining debts is £448, yet your paying more each month, and its cost you less over the 2 years!?

betmunch

If the £500 is not added then you have paid it so its right to have the cost over the fixed term higher and the remaining debt lower.

harvey115

By adding the £500 fee into the mortgage you are £162 worse off then paying the fee upfront. So adding the £500 to the mortgage costs you the fee to be £662 instead of £500.