What is a product fee on a mortgage?

When are mortgage product fees charged?

If you opt to pay the product fee upfront, typically it would need to be paid on application. If you add the product fee to the loan, it’s added on completion and charged interest from the time of releasing the funds, at the same rate as the rest of the borrowing.

Do all mortgages have a product fee?

No, not all mortgages have product fees. Most lenders have a product range without a fee, where typically the rates are slightly higher than those with a fee. Fees normally start around £495 and move up to £1,495 or more.

Can you reduce or avoid paying mortgage product fees?

Yes, you can avoid paying a mortgage product fee by choosing a product without one. You could also select a product with a smaller fee. It just means you’re likely to have a higher interest rate.

At Midas, we explore all your options and use our sourcing system to see which option is cheapest over the length of that fixed period.

Can you negotiate on a mortgage product fee?

No, that’s non-negotiable. Lenders are big companies, and the products they release are non-negotiable. If a product has a fee, you either have to pay it up front or add it to the loan.

If you don’t want to pay for a product fee, then maybe a mortgage without one would be better for you.

Are mortgage product fees refundable?

Yes. For example, if your mortgage doesn’t go through, you won’t be charged a product fee.

I recently had an application where my client originally preferred to pay the product fee upfront – and then they changed their minds. They decided to go with a fee-free product, as rates had dropped. In this case, the fee was refunded as the mortgage hadn’t completed.

What other fees will I be charged?

This can vary from lender to lender, but often you would have a valuation fee. There are three types of valuations, starting with a basic valuation, which is typically free with most lenders and is for mortgage purposes only. A couple of lenders do charge for a basic valuation.

There is also the Homebuyer survey, also called the Level Two Report. Third is a building survey or Level Three survey. Each survey has a slightly different cost, with Level Three the most expensive. The Level Two is the middle ground option and the basic survey would be the cheapest.

There’s also a telegraphic transfer fee, which is normally around £30, charged by the lender on completion. Other costs to consider are legal costs, which vary from transaction to transaction. For a purchase, it could be anything between £1,200 to £1,800.

For a remortgage, it ultimately depends on the product. It could have free legals or perhaps cash back to cover the legal fees.

So there are a number of costs to consider, but your broker should make you aware of all of these when you are selecting your mortgage product.

How can a mortgage broker help with this?

A broker can really add value here. We would tell you which product is best for you, whether that is one with a fee or without.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.