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.