Number crunching the mortgage fees

When it comes to gaining good rates, the fees usually get a fair bit higher. Especially this last year! 

 

What happens when you add them to the total? 

 

It means you do not need to pay these fees up front. That will obviously save your cashflow a bit at the beginning. 

 

BUT... Sometimes you end up paying more over the term. 

 

Lets take for example, the current highest BTL lender's 7% fee being added to a £350k mortgage. 

 

Its relatively simple maths and we will use a 4.5% mortgage rate for ease. 

 

So a mortgage of £350k x 4.5% = £15750 in interest per year. 

 

If you add the 7% fee (£24,500), your new mortgage amount would be £374,500 and your yearly interest on this would be £16852. 

 

ALWAYS check before you add fees, that it works for you. 

 

I fully appreciate that paying the large fee at the beginning can be difficult or even just a bit annoying, but its worth running the calculations first. 

 

With the worry of property prices starting to fall again, its worth considering if the fees should be paid up front. 

 

Note: 7% is the extreme at the moment and there are many lenders out there offering lower fees, but the rates will vary. Interesting note; A 7% fee can give you access to lower rates and a better lending ratio due to the rental stress tests being worked out at pay rate. 

 

They certainly have their place but speak with a Broker to crunch the numbers first. 

 

Austyn Johnson 

austyn@hdconsultants.net  

07500 871 209