Fee-free mortgages

Are fee-free mortgages as good as they sound?

It sounds great: a mortgage with reduced fees or no added fees at all. When fees can add up to thousands of pounds, it should certainly be an attractive mortgage option. Yet, are they as good as they appear to be? 

An example of a reduced fee offering not being quite what it seems is when lenders add the initial arrangement fee for the mortgage to the loan amount you’re borrowing. So it’s more a case of you paying more later than at the beginning. This can still be helpful, but even more helpful is the lender not charging an arrangement fee at all as well as offering cheaper valuation and legal fees.

There isn’t necessarily a catch. Low or no fee mortgages are offered because the lender wants your business. With the mortgage market being extremely competitive these fee-free mortgages can be what they seem. At the same time, you have to be wary of paying higher interest for the duration of the mortgage. This can cancel out any initial discount you get with lower or no fees. Likewise, by paying higher fees upfront it could reduce your long-term interest rate.

In the end, it’s what you feel is best for your own situation. Take everything into consideration when looking at a fee-free mortgage. Are you effectively still paying for these fees in another way? You can get a great deal out there with fee-free mortgages, and with so much competition in the market it can also pay to contact an independent financial advisor or mortgage broker for additional assistance.

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