Effect of adding product fee to mortgage

ValHaller

Let_Us_See wrote: »

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.

Clear as mud?

I *added 2 numbers, *divided the result by one of those *numbers and *multiplied by another number

and I got a result valid for both interest only and repayment mortgages.

You *multiplied 2 numbers and *divided by another number

and you got a result which is only valid for Interest Only mortgages.

Heaven help us if an extra addition makes mine as clear as mud.

kirstym100

As a newbie I can't post a link, but there is a calculator on this site that allows you to compare rates, with or without product fee, added to the mortgage or not, term of choice. It's on the mortgage section.

amnblog

This maths is all very interesting but isn't it as simple as pay it if you can -add it if you cant?

Vixstar

Thank you for all the advice. It is definitely a case of pay it if you can add it if you can't, but the mortgage lender I was looking at had two comparable mortgages on with fees and one without and I wanted to get a feel for how much of an impact adding the fees to the mortgage would impact monthly payments. You have let me do this and passed on som useful hints about overpaying, this bit of the house buying process now feels a little clearer.