Lender Fee or No Lender Fee? That is the Question

When I am discussing a client's needs and requirements on a mortgage the discussion always brings up the question as to whether the client is happy to pay a lender fee. This fee is usually called a product fee, booking fee or lender's arrangement fee.

Lenders make their money from either interest charged on a mortgage, or interest charged and a fee. Many lenders sometimes offer deals either with or without a product fee. The deals with the product fee tend to offer the lower rate. The amount borrowed and/or the initial period of the deal will indicate whether one could save more money having a lower interest cost than the amount of the fee charged.

Most of my clients usually require the best deal in terms of interest & fees charged over the initial period, which is typically, but not always 2, 3 or 5 years. The lender's product fee can usually be paid on application or added to the mortgage.

Some clients are happy to use their savings to pay the lender fee whilst others have limited savings and prefer to add the lender's fee to the mortgage. Others prefer not to pay a fee. Adding the fee to the mortgage means interest will be charged on that amount for the full term of the mortgage.

Whilst this discussion with a good mortgage adviser is important, fortunately the decision is not as onerous as poor Hamlet's.

 Your home may be repossessed if you do not keep up repayments on your mortgage.