Mortgage Fee - when best to pay

hufc2002

Hi all

I have just moved to a new product (5 Year Fix with Virgin) which come with a £995 fee which I initially chose to add to the mortgage rather than pay up front.

Is there an optimum time to pay this £995 fee in one payment?  Am I correct in that my monthly payments will be reduced and not the term?

Thanks in advance.

El_Torro

Assuming you want to pay it off in one go (you don't have to) then whenever you want to really. Interest will be accruing on this money on a daily basis so as soon as you want to stop paying interest on it is the answer. 

You just need to bear in mind how much you are able to overpay your mortgage without incurring penalties. 

Normally your mortgage provider can either reduce your monthly payments as a result or keep the payments the same and reduce the term. You'll need to check what the default position is but normally you can choose one or the other, if you tell them. 

saajan_12

There's now no difference between the £995 and the rest of the mortgage balance. You can choose to overpay any amount subject to the limits they have (usually 10% per year but it can vary so check). You have the same options that the lender provides for any overpayments, regarding whether it reduces the payment or term. 

BarelySentientAI

saajan_12 said:

There's now no difference between the £995 and the rest of the mortgage balance. You can choose to overpay any amount subject to the limits they have (usually 10% per year but it can vary so check). You have the same options that the lender provides for any overpayments, regarding whether it reduces the payment or term. 

Exactly this - you just have a £995 bigger mortgage, that's all.

BikingBud

On our mortgage we are advised:

£999.00 - Product fee for product XXXXXX, which you've asked to be added to the loan. You can pay this fee within 21 days following completion without penalty.

After that period it would have become part of the capital and therefore just becomes another £1k to pay off.

Jemma01

If you add it to your mortgage, you’ll pay interest on it at the same rate as the rest of your borrowing.