Add on mortgage fee and overpay?

livalicious

Hi there

Hope this makes sense to someone, but we have to remortgage in the next few months, and I have just had this fixed rate offer from our bank:

5 year fixed rate 3.44% £905pm with £1000 fee
OR
5 year fixed rate 3.44% £922pm add on fee to mortgage

My question is, would it be better to add on the arrangement fee to the mortgage and then overpay by £1000 once its all sorted. Or would it be best to just pay the £1000 fee to the bank. I tried to work it out using the mortgage calculator on here but for some reason it doesn't show the increased cost per month with adding on the arrangement fee, unless Im doing something wrong.

Can anyone help with this please? Thanks

Dave_the_Ginger_Cat

Ultimately, if you want to keep costs down you should only borrow what you need. The only time it will make a difference is if the bank charge interest a different way to this part of the mortgage, and I can't work that out from your figures.

Suggest ask them this, and post their answer

Ilovemyfamily_2

The difference in payments is £17 a month x 60 = 1020 so really only £20 more by taking the higher rate but if you add the fee to your loan you will be charged interest on it. If you have £1000 to spare I would overpay it and take the higher rate with ne fee.

ACG

If you add the fee, you will be paying interest on that amount for however long it takes you to pay it off. Overpaying by £100 a month, means you will pay interest on £1000 in month 1, £900 in month 2, £800 in month 3.... and so on.

Were not talking huge amounts of interest. So its up to you really whether having the £1k in your bank is better or not. I would make the decision based on whats more convenient rather than monetry value as its neither here nor there.

JimmyTheWig

Is it the case that there are times that the mortgage doesn't complete but you still end up paying the fee if it wasn't added on? Or am I thnking of something different?

Also, as Dave suggests in post #2, I think the fee when added on often doesn't attract interest.

So I would reduce the amount you are borrowing by £1000 and add the fee on.