Cheaper rates versus cheaper fees

As a mortgage broker, it’s important that we make sure our clients get the best value mortgage option that is available to them.

So, which is the most suitable option for you?

This where a broker really comes into their own. A thorough understanding of the market is a very helpful commodity as the answer is not clear-cut; there is no one-size-fits-all solution.

Mortgage lenders will target various markets via low or no fees, good headline rates and potentially better rates for borrowers who are looking for higher sums of money.

One of the key parts of our job is to cut through this; offering a bespoke solution to each and every client.

Some mortgage lenders will offer different products for either no fee, a reduced fee (typically £495) or the regular £995/£999; even for higher net worth clients a £1,495 fee on greater balances.

The higher the fee, the lower the initial interest rate.

The important thing is the overall cost to the client. And this will depend on their individual circumstances and often the mortgage balance itself.

Whilst there is no hard and fast formula, as a rule of thumb, for those borrowing less than £100,000, the differential in rates and/or fees on offer would usually make a zero fee or sub £500 fee most financially viable.

For most customers, these days borrowing between £100,000 and £300,000, the familiar £995/£999 fee products will often work out the best value. For those clients looking for in excess of £300,000 – or in some lenders’ cases £500,000 – the rate offered with a higher £1,495, or similar fee, may be pitched specifically at costing them less per month than lower fee options.

In all cases, you need to take into account the lender’s follow on or standard variable rate after the initial deal ends; and any other incentives common in re-mortgages yet sometimes available on purchases, such as free valuations or a contribution towards legal fees.

Summing up, these are the reasons it’s important to get specific personal advice for your circumstances based on your financial situation and your mortgage capacity.

Good brokers will do this. We are glad to be able to do this for you.

April 2019