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A mortgage Product Fee is a charge payable by the borrower and levied by the Mortgage Lender to enable the borrower to take advantage of a particular mortgage product, such as a fixed, capped or discount rate plan.
Below, we take a more detailed look at the mortgage Product Fee, and why it's an option that's definitely worthwhile considering. We also look at how Shire Direct can assist with a mortgage or remortgage.
Table of Contents:
A Product Fee is a charge that is levied by the lender, and payable by the borrower so they may take advantage of a particular product, for example a fixed, capped or discount rate plan. These fees are also known as the "Lender's Arrangement Fee".
The Product Fee is a recent development in the mortgage market place, providing the borrower with a further choice, by way of paying a higher "Product Fee", and enjoying a more competitive mortgage rate of interest.
For example, a lender may offer a 5-year fixed interest at the following alternative rates, the rate itself being determined by the level of "Product Fee" charged:
| Product Fee: | 5-year Fixed Rate: |
|---|---|
| £0.00 | 6.75% |
| £495.00 | 6.55% |
| £995.00 | 6.35% |
| £1495.00 | 6.15% |
| £1995.00 | 5.95% |
Well, the matter will require careful consideration.
The outcome will depend on certain factors, including cost, needs and circumstances. There are of course many permutations of costing. For instance, if the mortgage is comparatively small, the benefit could be comparatively small, as the cost per £1,000 borrowed will be much higher than if a larger amount was being borrowed.
Let's consider an example.
| Mortgage Amount: | Product Fee: | Cost per £1,000 borrowed: | Interest Only Payment: |
|---|---|---|---|
| £40,000 | £0 | £0.00 | £225.00 |
| £40,000 | £495 | £12.33 | £211.67 |
| £40,000 | £995 | £24.88 | £205.00 |
| £40,000 | £1495 | £37.38 | £211.67 |
| £40,000 | £1995 | £49.87 | £198.33 |
| £450,000 | £0 | £1.10 | £2531.25 |
| £450,000 | £495 | £1.10 | £2456.25 |
| £450,000 | £995 | £2.21 | £2381.25 |
| £450,000 | £1495 | £3.32 | £2306.25 |
| £450,000 | £1995 | £4.43 | £2231.25 |
The above table assumes the Product Fee is paid upfront, as opposed to being added to the loan.
So you can see that the borrower who is looking for a £40,000 mortgage would pay £13,500 in interest payments over the five year fixed-rate term if they had opted not to pay a Product Fee, whereas had he paid a Product Fee of £1,995, his interest only payments would have been £11,900, only £1,600 less.
However, the borrower mortgaging for £450,000 would pay £151,875 in interest charges during the fixed rate period if he elects not to pay a Product Fee. If however, he elects to pay a £1,995 Product Fee, his interest only charges for the fixed-rate period would be £133,875, a massive saving of £18,000 over the period!
It's also important to consider paying the Product Fee on an upfront basis, rather than adding the fee to the mortgage, where interest would be payable, not just over the 5-year fixed rate period, but over the full term of the loan.
If you are thinking of applying for a mortgage or remortgage, you may wish to check out your options with us. You can speak with a Shire Direct qualified Mortgage Advisor up until 10.00pm daily - including weekends on our Freephone lines 08000 282 281, or alternatively you may wish to enquire online instead, its quick and simple!
We're confident that you'll find our approach to be friendly, helpful and professional, and we'll always come up with a rapid in-principle decision - whatever your circumstances!
Our aim is to help in any way we can, and to provide a comprehensive personal service. So if you require any information or assistance, we would of course be delighted to hear from you! So get in touch today, you'll be glad you did!
So that concludes our look at the Mortgage Product Fee and why it's an option worth taking into consideration. We hope we've provided the answers to any initial questions you may have had. Remember, we're here to help, and would love to hear from you!
The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.
There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.
THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Adding existing debt to your mortgage will increase the repayment term and overall cost.
Are you worried and becoming stressed because you are having problems getting a mortgage or remortgage? Worry and stress no more! Here at Shire Direct we provide tailor made mortgage solutions to suit you, and can usually help with all kinds of circumstances including...
Remember, we're here to help, and would love to hear from you!
Over £2,000 worth of Argos Vouchers to be won in the Shire Direct Grand Prize Draw 2008! Terms and conditions apply - please read article for full details.
Shire Direct and Shire Direct Mortgages are trading styles of Shire Processing Centre Limited which is
Authorised and regulated by the Financial Services Authority in respect of regulated mortgage products and general insurances.
Registered No: 302389. Commercial funding and Secured Loans are not regulated by the FSA.
Licensed Credit Brokers. Consumer Credit Licence Number: 349999.
Shire Processing Centre Limited is registered under the provisions of the Data Protection Act by the Information Commissioners Office: Registration No: Z6795249. Registered in England & Wales. Company number: 2732202. Telephone calls may be recorded for training, monitoring and security purposes. All applicants must be aged 18-years or over.
