Mortgage Reservation Fees...

gurured

I wonder if anyone can tell me 1) if I am totally being ripped off and 2) can they actually do that?!

So I'm re-mortgaging and decided to go for the First Direct offset as it fulfills all of my requirements (and don't worry I did do my research!) When I had my initial application telephone marathon they told me there was a £395 reservation fee... Woah! I initially thought, but when I did the sums I worked out that I'd recoup that money in about 3 months with the drop in my monthly payments - and I also knew that a lot of companies are doing this with their fixed rate mortgages..... So after reading all stuff they sent (incl the "key facts document") I called to book it and was told the fee was actually £495. After a bit of to-ing and fro-ing they came back to tell me that although I had it in black and white in front of me in the "key facts document", the reservation WAS £495 and that I had been misinformed. They are sending me out a new corrected KFD so I have a little breathing space.

So my questions.... Is it legal for them to charge this much to reserve a mortgage? And as in shops with incorrect prices, is there any way I can force them to honour the £395 I was originally quoted?

I'd be grateful for any advice......

dwsjarcmcd

In answer to your first question, yes they can charge what they like. These fees are part of the pricing of the deal and, £495 is pretty competative as these can be as much as £2k. But it really does depend on the whole 'package' i.e rate, fees, charges etc.

In shops you cannot force them to honor an incorrect price, a common misconception and the same applies with mortgages. They may do it as a gesture of goodwill, or they may not but that is as far as it goes.

dunstonh

Is it legal for them to charge this much to reserve a mortgage?

Yes. It is a retail product and they can charge what they like for it.

Remember that mortgage deals are costed over a period. Some very cheap rates have high initial charges and those with little or no initial charges tend to have higher rates. You need to cost the mortgages over a defined period to see the real cost.

I would suggest you see a mortgage broker as I think you will find that they will be able to better the direct line deal. With a whole of market fees free broker, it wont cost you a penny. Whereas at the moment, you are doing all the work of the broker but with a single company.

And as in shops with incorrect prices, is there any way I can force them to honour the £395 I was originally quoted?

as dwsjarcmcd says, shops dont have to honour mis priced items. In this case, as the error was spotted prior to you incurring any costs, they are allowed to correct the error. Had it gone later on into the offer letter stage or you had begun to incur costs, then they wouldnt normally be able to collect the extra charge.

Mr_helpful

495 is very cheap by todays standards I still think its a rip off but try phoning northern rock and asking for a cheap 2 yr fix. I advise sitting comfortably first.

AndrewSmith

gurured wrote: »

I wonder if anyone can tell me 1) if I am totally being ripped off

No you are not being ripped off

2) can they actually do that?!

Yes they can do that

So my questions.... Is it legal for them to charge this much to reserve a mortgage?

In the same way that it is legal for Tesco to charge you 97pence per litre for petrol yes. They can charge what they like, you have the choice of taking the product or not. If you don't like paying an application fee then go to a different lender.

And as in shops with incorrect prices, is there any way I can force them to honour the £395 I was originally quoted?

Firstly shops do not have to honour mis-priced goods. That is an old 'law' that has long since been superceeded. A shop would simply remove the item from sale and re-price it. They, like mortgage lenders, don;t actually have to 'sell' you anything if they don't want to.

You cannot 'force' the lender to honour what amounts to a typo. You do not have any given right to have a mortgage with them, likewise they are under no obligation to agree to lend you anything. They can refuse or decline a mortgage application at any stage prior to legal completion without reason or explanation.

The application fee you state of £495 is very reasonable.

Gray0103

I am looking to remortgage in the next couple of months.
Currently with Nationwide, and we got their info through this week.
As a Nationwide customer for more than 3 years I qualify for a re mortgage with no reservation fee, good way to keep you tied in.

johnydeath

I have always been told that any deal can change at any time.

The way I'm looking at it is to take the overall cost (inc additional fees) over the fixed term period.

My mortgage is a couple of months away from ability to change.

My current lender is offering a 3 year fixed @ 5.59% plus a setup/reservation/arrangement/transfer (delete as appropriate, whichever makes you feel as though it's value for money) fee, no valuation or legal if I stay. The overall cost over 3 years would be £24053, £644.56 a month capital & interest on 100k.

I can get a 2 year with them at £16295, £629.07 a month, but I am playing on the fact that the extra £15 a month will save money when the rates go up again as they are likely to do at 8am tomorrow to 5.5% base.

If anyone wants to kick in and suggest a 3 year fixed with overall less cost please feel free to do so. Mortgage is approx 50% of property, no additional cover/insurance required, all arrangement fees to be paid up front and not included in mortgage. No overhang after 3 years.

Thanks in advance.