What are Low fee Mortgages?

Low fee Mortgages essentially refer to the arrangement fee and other costs charged by a mortgage lender to process and set up a mortgage. This fees can vary but they do tend to be upwards of £2,000 regardless of the size of your mortgage. This is because the checks carried out on the mortgage are usually the same regardless of the mortgage size.

Low fee mortgages are mortgages were the mortgage lenders reduce the mortgage arrangement fees substantially which makes them more affordable to almost everybody. Mortgage lenders may charge a few hundred pounds or less to process a mortgage as a limited time or long term offer. They will do this to attract more prospective first-time buyers.

Advantages of Low fee mortgages

Low fee mortgage allow more people to access a mortgage as they reduce our upfront costs.

Ensure you compare mortgages appropriately to know what your total cost for each mortgage you are eligible for is including any fees (a mortgage broker may be able to help you do this).

Doing this ensures you make the right decision rather than doubting if that high fee mortgage with a low APR could have been cheaper.

Disadvantages of Low fee mortgages

Low fee Mortgages usually may have other unfavourable terms from which the lender will recoup whatever loss made from the discount they offer you initially. This might be much higher APRs, higher early repayment fees etc.

Your digital mortgage broker will not recommend a mortgage to you based on the fees charged except you request this.

You also don’t necessarily need to pay off the mortgage lenders fees in one lump sum prior to the mortgage starting. You can simply add the fees to your mortgage and pay them off over the mortgage term.

The danger with this however is that you end up paying interest on the mortgage fees and this interest might end up being 5 or even 10 times the cost of your mortgage fees as you repay it over a typical 25 or 30 year mortgage term.

To avoid this you can slowly make overpayments on your mortgage in the first few months after your mortgage starts. This will help pay off the mortgage fees you added to your mortgage. You should check with your mortgage lender to ensure you will not have any overpayment penalties and what terms are present in regards to overpaying your mortgage before deciding to go through this route.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.