After all, who wants to pay fees which could total anything from
£1,000 to £5,000 if they don't have to?
But fee-free deals may not be all they're cracked up to be.
Which means you need to keep your wits and your calculator
about you, if you don't want to end up getting fleeced.
Fee-free doesn't mean cheap
Mortgage
lenders exist to make a profit. True, deals like this bring
in extra custom, but they're not content with that.
So they boost their bottom line even further by charging higher
interest
rates on fee-free deals.
Here's what we mean
At time of writing, one leading lender was offering a fee-free,
five-year fixed-rate loan at 5.89 per cent annual interest.
For someone borrowing £100,000 on a repayment basis over 25 years,
the monthly cost would be £637.59 or £38,255
over the five years.
But a rival provider has a five-year fixed-rate loan at 5.49 per
cent, which gives a monthly payment of just £613.49
a cost of £36,809 over five years.
Even if you add in this deal's £399 set-up fee and add another
£600 for a valuation and basic solicitor's costs, you would still
be almost £450 better off going for the fee-paying
option.
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