What does ‘arrangement fee’ mean?

An arrangement fee is a fee that mortgage lenders charge for setting up a new mortgage for you (mortgage lenders are the people that give out mortgages).

The average arrangement fee varies from no fee to around £2,000. But they can vary a lot. Some lenders will even calculate your arrangement fee based on a percentage of the mortgage you’ve applied for.

Normally, you can choose whether you want to pay the arrangement fee upfront or whether to add it to your loan. If you choose to add it to your loan, it might make the fee more manageable (by spreading it out over a longer period) but you’ll pay more overall as you’ll be charged interest on it (interest is a fee lenders charge you for the pleasure of borrowing their money).

Nuts About Money tip

Make sure to take arrangement fees into account when you’re comparing mortgage deals and deciding which lender is best for you.

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