2006-09-11 02:17:28 · 13 answers · asked by kaydee 3 in Business & Finance ➔ Other - Business & Finance
Most banks and building societies have to buy money in to offer mortgages, particularly fixed rates.
Before a rate is placed open to the public, all costs have to be accounted for (any freebies like valuation, costs of staff, promotion costs, legal costs to bank/BS, costs of premises, other costs of processing) and then a rate is arrived at. This rate would then cover all of the above and allow some profit (all companies need profit to survive) and in the days of small margins, sometimes this arrangement fee is the only profit made on a mortgage.
By placing an arrangement/admin fee on the mortgage this allows for profit up front, rather than over the 2 years or whatever of the mortgage product, and allows the rate to be reduced. I have seen a £499 fee reduce the rate payable on a mortgage by over 0.75% in the past.
It doesn't go to the adviser (I wish!!!) it is just a way of offering a good rate.
2006-09-11 03:07:14 · answer #1 · answered by Valiant 3 · 0⤊ 0⤋
Its the fee your mortgage broker charges you to arrange your mortgage usually 1 or 2 percent of your mortgage which I personally think is a rip off.
2006-09-14 02:16:13 · answer #2 · answered by skelomalso 3 · 0⤊ 0⤋
It's the fee payable to the mortgage broker. Normally the mortgage lender would pay this fee though as they are getting business for them.
It might be worth finding your nearest Independant Mortgage Advice Bureau. They're not linked to any companies so can offer you the best rates available completely impartially. I just used them myself and I'm not paying anything to them.
Try the below link to see if you've got one nearby:
http://www.imab.net/
2006-09-11 02:23:50 · answer #3 · answered by Wafflebox 5 · 0⤊ 0⤋
Mortgage lenders have to offer a competitve rate to get business. six months later the mortgage tarts (is that the phrase?) go to the next cheapest offer.
So what do the lenders do? They offer the best deal on the market then they add the arrangement (administration ) fee upfront that pays for the whole deal.
No one said that money lenders were fair, did they?
2006-09-11 02:22:51 · answer #4 · answered by choco_mint 2 · 0⤊ 0⤋
Basically, it's to pay for the time and paperwork it takes the bank to sell you into a mortgage! Some lenders either don't charge it, but they make it up by charging a higher rate or they add it into your mortgage so you don't have to pay a chunk up-front. This way, though, you end up paying more than you would in a one-off payment.
2006-09-11 02:25:41 · answer #5 · answered by kpbunches 3 · 0⤊ 0⤋
as above, just another charge to stick you for fifty quid or whatever.
Factor this into your overall costs when choosing the mortgage. Don't avoid it on principe, as one with a fee may work out cheaper over-all to an alternative.
2006-09-11 02:24:30 · answer #6 · answered by le_coupe 4 · 0⤊ 0⤋
A charge that supposedly covers the broker or lender costs in arranging your loan.
More often than not it is simply a way of taking more money from you.
2006-09-11 02:19:24 · answer #7 · answered by Anonymous · 0⤊ 0⤋
At the moment it's at 2% average but I managed to get 1.6% on a 1 day contract.
It's suprising what you can achieve by haggling with estate agents.
2006-09-11 02:23:21 · answer #8 · answered by Lorraine R 5 · 0⤊ 0⤋
Its a fee they charge to make money - simple as that.
2006-09-11 08:38:29 · answer #9 · answered by MSMORTGAGE 3 · 0⤊ 0⤋
Simply put, Commission!!! Another way for them to make more money from you, in a non discrete manner. Don't figure...
2006-09-11 02:24:00 · answer #10 · answered by 345Grasshopper 5 · 0⤊ 0⤋