MAF To refund or not to refund?

Skippyd00

Hi,
(I posted a previous thread regarding this matter, regretfully with no response…so I’m hoping I’ll get lucky this time. Thanks!)

Oct 2006: I received a mortgage offer from the Abbey. The (non-refundable) Mortgage Admin fee was £995. I was asked if I wanted to pay the MAF upfront or add it to the mortgage – I paid the fee upfront.

6 months on, my purchase transaction was not successful (due to the vendors consistently making offers on places then pulling out), and the mortgage offer timescale has run out.

When I asked about the MAF, I was told that as I paid the fee upfront, I lose it, therefore no refund will be given – If I had added it to the mortgage offer, I wouldn’t have had to pay it – I DON’T GET THIS, DO YOU?

Instead of applying for another mortgage, I decided to re-mortgage a place that I let, again it’s with the Abbey with a MAF of £995 – My Mortgage Broker asked his contact if the original mortgage offer fee could be transferred and they’ve said NO!

In summary: Why is it that if one pays the MAF upfront - is it not refunded (especially as the purchase transaction failure was not in my control), and why is one not required to pay it if added to the mortgage offer? (and the mortgage does not proceed).

I hope this makes sense! Thanks in advance for your feedback!

millsy1980

If you add the fee you pay for it over the term of the mortgage. If you don't physically pay cash up front, should your application not proceed then you do not lose the fee as you have not paid up front. If you pay the fee up front then you risk losing it should your application not proceed.

Hope this explains it a little.

saxmund

So presumably your best bet is:

• agree to add it to your mortgage
• if you have the cash, pay an additional lump sum payment into the mortgage once you've completed

The advice on adding fees to mortgages used to be don't, on the grounds that you will end up paying interest for 25 years. But as these days you don't need to think about a mortgage lasting for any more than 2 years, it doesn't seem to me that it's so bad. If you need to borrow short term money, it's a very good rate.

I suppose my other comment would be - don't pay an unrefundable MAF if it's money you're not prepared to lose. I'd risk £200 to get a good deal (I did when I first took out my current mortgage) but I certainly wouldn't pay a grand.

PS - shouldn't your mortgage adviser have advised you about this? Get on his case - what does he think you pay him for?

MarkyMarkD

Some lenders charge some (or all) of the application fee up front; others charge it on completion.

If you have the option of paying on completion, as saxmund says, it's mad to pay it up front. Pay it off after completion if you get that far.

Skippyd00

Thank you to all who responded...

I guess my lesson for today is NEVER pay a MAF (mtg app fee) up front!

It's been an expensive lesson (a loss of £995 paid upfront). Had I known that if I'd said, 'I would add it to the mortgage', and the mortgage did not proceed, then I WOULDN'T have been charged a penny (I still don't get why a person is penalised for paying upfront!), I would have chosen the latter.

In future I will add it to the mortgage offer, then if the mortgage does not proceed, I won't be out of pocket (in this case by £995).

As for the mortgage broker, (he's a nice guy really!) he said, this is the first case where a client has physically lost money (normally client's add it to the mortgage, and the building society's don't invoice for the MAF if all falls through!! ...:rotfl: don't you just want to laugh, ha, ha:rotfl: ).

spurs_nut

Skippyd00 wrote: »

Thank you to all who responded...

I guess my lesson for today is NEVER pay a MAF (mtg app fee) up front!

It's been an expensive lesson (a loss of £995 paid upfront). Had I known that if I'd said, 'I would add it to the mortgage', and the mortgage did not proceed, then I WOULDN'T have been charged a penny (I still don't get why a person is penalised for paying upfront!), I would have chosen the latter.

In future I will add it to the mortgage offer, then if the mortgage does not proceed, I won't be out of pocket (in this case by £995).

As for the mortgage broker, (he's a nice guy really!) he said, this is the first case where a client has physically lost money (normally client's add it to the mortgage, and the building society's don't invoice for the MAF if all falls through!! ...:rotfl: don't you just want to laugh, ha, ha:rotfl: ).

Try this

http://www.fsa.gov.uk/pubs/public/unfair_contract.pdf

then take the little %&£*"()£'s to the cleaners. Make some noise and threaten to take them to the small claims court.

I wouldn't let it rest if I was you!

MarkyMarkD

I don't read anything in that document which states that this type of fee is unfair.

Many lenders have non-refundable mortgage application fees. This reflects the fact that they do work when you apply for a mortgage, and don't make any money on the mortgage itself if it falls through.

Whilst it may seem unfair that those who ask to have a fee added to their mortgage don't bear it, if the case falls through, but those who pay up-front DO bear it, that's a false understanding. It's still fair for you to pay it. It's just lucky for those who DON'T get charged it, that they don't. Fairness doesn't apply as a comparison between individuals, it's an absolute thing.