Effect of adding product fee to mortgage

Vixstar

Been researching my mortgage options and was wondering whether there was any site or simple maths formula anyone knows of that I could use to see what impact adding the mortgage product fee to my mortgage would have on my monthly payments?

Thanks

ACG

Any mortgage calculator, do the figures on the loan amount and then the figures on the loan amount plus the fees being added to it.

It wont make a massive difference to the monthly repayments but you will be accruing interest on the amount added.

ValHaller

Vixstar wrote: »

Been researching my mortgage options and was wondering whether there was any site or simple maths formula anyone knows of that I could use to see what impact adding the mortgage product fee to my mortgage would have on my monthly payments?

Thanks

It is straight percentages or fractions

m(base+fee) = m(base) * ((base + fee)/base)

where
base = base borrowing
fee = fee borrowed
m(base) = monthly payment on base

Vixstar

Thanks...I had a feeling the solution would be simple

ACG

ValHaller wrote: »

It is straight percentages or fractions

m(base+fee) = m(base) * ((base + fee)/base)

where
base = base borrowing
fee = fee borrowed
m(base) = monthly payment on base

Thats confused the hell out of me and i do this for a living! (Only joking but i wouldnt say its easy to understand lol)

Goldiegirl

ACG wrote: »

Thats confused the hell out of me and i do this for a living! (Only joking but i wouldnt say its easy to understand lol)

That's why it always make me grin when people don't agree with how much those monthly payment is.

They don't know how it was calculated, when presented with the formula to calculate it they don't understand it, but they still just know their payment is wrong!

Let_Us_See

Blimey....that is as clear as mud. I certainly don't understand it. Hopefully, this may be easier?

Multiply lender's arrangment fee/product fee by interesr rate and then multiply by years in term. This will give you the cost of adding fee over the whole of mortgage term (as long as interest remains the same - which is unlikely).

Therefore, adding £999 fee x 3.50% (for instance) x 25 (year term) = £874.13 interest over term of mortgage.

If you want to work out monthly added cost to mortgage:-

£999 x 3.50% / 12 = £2.91 per month.

holly_hobby

The above figs of course relevant to an interest only arrangement.

If under a repayment arrangement, and using the same example as above, your monthly repayment would be slightly higher (at £5 pm, with total interest charge of £501.00) as it obviously includes an element of capital repayment, but as you can see, the reduction in chargeable interest over the term is significantly reduced.

The up shot is, you of course will be charged interest on any added fees, so if possible I would always advise to pay fees upfront - however especially with FTBs, it is completely understandible why it would be beneficial (budget wise) to add fees - just be aware that you'll be paying for the privilidge.

Hope this and LetsUsSee's above example has helped ....

Holly x

kingstreet

I mostly have fees added to loan for clients, just in case something goes wrong during the application and they are unable to get upfront fees refunded.

I recommend they pay them off within the permitted overpayment limit after completion, if they would prefer not to add them.

holly_hobby

Hi Kings. yes anothergood way to manage it, esp where its possible things may go pear shaped .....

Anything other than to leave it to be entirely repaid over the whole term (or at the end for IO) is advisable from a BA point of view and budget permitting of course.

Holly x

davilown

kingstreet wrote: »

I mostly have fees added to loan for clients, just in case something goes wrong during the application and they are unable to get upfront fees refunded.

I recommend they pay them off within the permitted overpayment limit after completion, if they would prefer not to add them.

Now that's one of the best but simplistic ideas I've heard in a long time! I'll use that when I remortgage in a few months if I need to.

Cheers!