Is a £999 Fee for a Mortgage Offer normal practice?

jsavage_2

Last week I asked LloydsTSB for a mortgage offer. Was told how much I could borrow but was told that I could only get an offer letter after applying for a mortgage and committing to the non-refundable Rate Arrangment Fee of £999. (in addition to the £99 Mortgage Fee.) My concern is that if the purchase was delayed by 3-4 months then I would have to apply again and pay the Rate fee once again.

Is is normal, these days, to have to pay for a Mortgage Offer?

James

Trying_to_be_good

My understanding is that they can only offer you the money by reserving the funds, hence you have to pay the fee. Ask them how long the offer is valid for - normally it's about 6 months so you may be worrying about nothing.

dunstonh

Is is normal, these days, to have to pay for a Mortgage Offer?

Depends on what you mean by "mortgage offer". If you mean an agreement/decision in principle then no you dont pay for those. However, if you mean proceeding with the application to get the mortgage offer then yes arrangement fees for fixed rate mortgages are common and as the banks have to book the funds, increasingly they are making them non-refundable as it is harder to get replacement terms.

My concern is that if the purchase was delayed by 3-4 months then I would have to apply again and pay the Rate fee once again.

You typically have 6 months with most of them and can port the fixed rate during that period if you have to change property as long as you still meet the criteria for lending at that time.

turbobob

It could be worse. I read the other day arrangement fees of up to £40000 were being charged for very large mortgages :eek: http://www.ft.com/cms/s/0/31e40ee4-2e7b-11dd-ab55-000077b07658.html

Mandark

Halifax charged me £999 just to switch from variable rate to a tracker. Bit of a shock as they had put me on a tracker for free for 5 years in a row until the end of last year.

poppyangel

We have just also paid a £99 application fee and a £995 arrangement fee, our mortgage advisor was also saying large product fees are the norm now unfortunately.

dunstonh

poppyangel wrote: »

We have just also paid a £99 application fee and a £995 arrangement fee, our mortgage advisor was also saying large product fees are the norm now unfortunately.

The higher fixed rate arrangement fees are for typically lower interest rates. You can still get lower fee fixed rate mortgages but the interest rate isnt good.

jsavage_2

Thanks for all the comments/ I don't mind so much mind the principle of a fee for the mortgage but was suprised it was non-refundable even if you never drew down the mortgage. Incidently, I was told that I would have to draw down the money by the end of August and that the deadline was fixed date for the rate not relative to my application date.

James

Mandark

dunston wrote: »

The higher fixed rate arrangement fees are for typically lower interest rates. You can still get lower fee fixed rate mortgages but the interest rate isnt good.

Halifax at the time seemed to give a choice of £999 or £499 and the difference in interest rates didn't seem that great, especially on my smallish 40 grand mortgage, In the end I just went for the best rate on a two year tracker. I'll see how things are in 2010 then no doubt pay another exorbitant fee for another deal. I'd got so use to the freebie tracker extensions, I never thought they would end as I assumed they were desperate for my custom. Oh well!

Dan_Collins_2

Lloyds or C&G add the £999 but you have to pay the £99 up front.

dunstonh

Mandark wrote: »

Halifax at the time seemed to give a choice of £999 or £499 and the difference in interest rates didn't seem that great, especially on my smallish 40 grand mortgage, In the end I just went for the best rate on a two year tracker. I'll see how things are in 2010 then no doubt pay another exorbitant fee for another deal. I'd got so use to the freebie tracker extensions, I never thought they would end as I assumed they were desperate for my custom. Oh well!

The larger fee mortgages with the lower interest rate appeal to larger mortgages. That is the main target market for these.