Product Fee
A product fee is sometimes attached to a mortgage when you make an application. The fee is paid to ensure the mortgage is reserved for you and to account for all the admin costs associated with the application. It is known by different terms as well, such as an arrangement fee or reservation fee, but regardless of terminology, all the terms mean the same.
The amount paid for a product fee does vary. You can expect to find fees ranging from around £1,000 to £1,500. Some lenders choose a £999 fee as psychologically it looks more appealing than one in four figures.
There are two ways you can pay the product fee connected to your mortgage. You can either pay the sum upfront or add it onto the amount you are borrowing for your home loan. One important factor to remember about the product fee is that it is rarely refundable. This means if the deal doesn’t go ahead or you back out of the mortgage or property purchase for some reason after paying the fee, you won’t get it back. Some lenders also deny a refund even if they turn down your application, since they have already put in some work going through the process of reviewing your application.
Hence why some buyers choose to add it onto the mortgage itself. This means you would still have the option to back out if needed, and you wouldn’t have paid the fee in advance. Do check the terms and conditions for the mortgage and the fee however, to make sure you know where you stand.
Already have a mortgage quote, recommendation or application? Get a free second opinion on the rate, product fee and overall cost.
If the mortgage you’ve been offered includes a product fee, the important question should not simply be “How much is the fee?” It should be “Does this mortgage still represent good value once the rate, fee and other costs are taken into account?” We can review the mortgage you have already been offered and compare the overall cost with suitable alternatives. If your existing deal still makes sense, we will tell you. If another option could give you a better outcome, we will explain why.Already have a mortgage quote or application?
Is it worth paying a product fee on a mortgage?
Sometimes yes, but a mortgage with no product fee is not automatically cheaper. Mortgage lenders can price their products in different ways. One mortgage may have a lower interest rate but a larger product fee, while another may have no product fee but a slightly higher rate.
The right comparison is therefore not to simply look at the interest rate or the product fee in isolation., but to consider the total cost of the mortgage over the period you expect to keep that deal.
For example, a £999 product fee may outweigh a relatively small interest rate saving on a smaller mortgage, whilst on a larger mortgage, the saving produced by a lower rate could be considerably greater than the fee.
There are other considerations such as cashback, free valuations, legal fee incentives, early repayment charges and the length of the initial mortgage deal, which can all affect the calculation too.
This is why the lowest mortgage rate is not necessarily the cheapest mortgage, and a quick review can be well worth it.
The mortgage deal review is free and there’s no obligation to change your mortgage or proceed. If you subsequently choose to proceed with mortgage advice through The Mortgage Broker, a fee may become payable in line with our normal terms but of course, we will take this into consideration if and when it applies, and still include it in any costs we save you. We save thousands of customers money and our advice fee is for our service is finding you those more suitable products.
Get a free mortgage deal review
Free, no obligation advice
Review Today
Product fee or no product fee: what should I compare?
| Compare | Why it matters |
|---|---|
| Interest rate | Determines the interest charged on the mortgage |
| Product or arrangement fee | Can materially alter the true cost |
| Mortgage amount | Larger loans can change whether a fee/lower-rate combination makes sense |
| Initial deal period | The longer the rate applies, the greater the potential impact of a rate difference |
| Monthly payment | Important for affordability and budgeting |
| Total cost over the deal period | Often the most useful comparison |
| Cashback and incentives | Can offset some initial costs |
| Valuation/legal incentives | Particularly relevant when remortgaging |
| Early repayment charges | Important if circumstances may change |
| Refund terms | Matters if the application doesn’t proceed |
Should I pay the product fee upfront or add it to my mortgage?
Some lenders allow a product fee to be added to the mortgage rather than paid upfront. Adding the fee to the mortgage can help you preserve cash flow, but it also means you are borrowing the fee and will therefore, normally, pay interest on it. Paying the fee upfront avoids that additional borrowing, but we would usually want to understand the lender’s refund rules in case the mortgage doesn’t proceed for any reason.
There is no single answer that is right for everybody and it all depends on circumstances and preference. Your available cash, mortgage amount, loan-to-value, product terms and the lender’s refund policy all need to be considered.
It depends on the lender and the mortgage product as they different from one to the next. Some fees may become non-refundable once an application has reached a particular point, while other lenders or products may operate differently. Before paying a fee, or cancelling an application where you have already paid one, check the mortgage illustration and the lender’s terms very carefully. If you want a second opinion, reach out to a mortgage adviser to help you review it. If you are considering moving to another deal, any fee you have already paid should form part of the price and rate comparison.Are mortgage product fees refundable?
Is a mortgage product fee the same as a mortgage broker fee?
No, they are two different things.
A mortgage product or arrangement fee is normally a charge attached to a mortgage product by the lender.
A mortgage broker fee is a separate charge that may be made for mortgage advice and arranging the mortgage.
Depending on the lender, mortgage product and broker being used, a customer could encounter one, both or neither.
At The Mortgage Broker, you can speak to us and have your mortgage options reviewed without an upfront advice charge. Our own fee structure is explained separately so you can see exactly when a charge may apply as we charge a mortgage broker fee, but only if you chose to proceed and happy with the solutions being offered. If you do not proceed, then all our advice is free.
Already submitted your mortgage application?
You can still get a second opinion.
If you have already applied for a mortgage, don’t cancel your existing application simply because you have found a rate that looks lower. A proper comparison should consider the deal you already have, any fees you’ve paid, whether those fees are refundable, the cost of the alternative mortgage and whether changing applications could affect your timescales.
We can review the position with you before you make a decision.
If staying with your existing mortgage is the better outcome, we will tell you that too.