Remortgage Arrangement Fee: Costs, Fee-Free Deals and How to Compare
A remortgage arrangement fee is a charge attached to some mortgage products. The important question is not simply whether a mortgage has a fee, but whether the rate and fee together produce a lower overall cost for the period you expect to keep the deal.
In short: arrangement or product fees are commonly charged separately from valuation, legal and other remortgage costs. Some mortgages have no product fee at all, while others exchange a higher upfront fee for a lower interest rate. Compare the complete cost rather than choosing on rate or fee alone.
What Is a Remortgage Arrangement Fee?
A remortgage arrangement fee is a charge associated with taking a particular mortgage product. Lenders may also describe it as a product fee. The terminology varies, so the lender's mortgage illustration or product information should make clear exactly what is being charged.
The fee is generally associated with the mortgage product itself. It should not automatically be treated as a combined payment for every cost involved in remortgaging.
In particular, a mortgage valuation, legal or conveyancing work, a booking or application fee, a broker fee and charges for leaving your existing mortgage can all be separate items. A lender may offer some of these services free or as part of an incentive package, but that does not make them part of the arrangement fee itself.
Arrangement fee and product fee: these terms are often used for the same broad type of mortgage charge. Do not assume that a booking, reservation or application fee is the same thing; check the lender's own terminology and illustration.
How Much Are Remortgage Arrangement Fees?
There is no single standard fee. Some mortgages have no arrangement or product fee, while others charge a fixed amount or, in parts of the specialist and buy-to-let market, a percentage of the loan.
As a general consumer guide, MoneyHelper currently lists arrangement or product fees of around £1,000 to £2,000+ among the potential costs of taking out a mortgage. The amount on an actual remortgage can be lower or higher, so always use the fee stated for the specific product you are comparing.
A fee should never be judged in isolation. A £0-fee mortgage is not automatically cheaper, and a £1,499 or £1,999 product fee is not automatically poor value. The mortgage balance, rate difference, deal period and other incentives all affect the result.
For further independent guidance on mortgage charges, see MoneyHelper's guide to mortgage fees and costs.
Why a Lower Mortgage Rate Can Still Cost More
Mortgage comparisons become misleading when the interest rate is considered without the product fee. A lender may offer one product with no arrangement fee and another with a lower rate but a sizeable fee.
The lower-rate mortgage only becomes better value if the interest saving is large enough to compensate for the fee and any additional cost created by financing that fee.
The lowest headline mortgage rate is not necessarily the lowest-cost mortgage.
MoneyHelper illustrates this with a comparison in which a mortgage carrying the lowest interest rate also has a £2,000 product fee. Once that fee is included, the lower-rate product produces a higher overall cost than the slightly higher-rate fee-free option.
That is why a useful remortgage comparison should consider both the interest rate and the charges attached to the deal.
How to Compare a Fee Deal With a Fee-Free Deal
Start with the mortgage balance you expect to refinance, then compare the rate, arrangement fee and the period for which you expect to keep each deal. If you are likely to switch again when a two-year fixed period ends, for example, a large product fee has only two years in which to be recovered through rate savings.
A simple illustrative comparison
Example: 0.25 percentage point rate difference
Imagine two otherwise comparable two-year products:
- Deal A: 4.75% with no product fee.
- Deal B: 4.50% with a £1,499 product fee.
On a £200,000 balance, a 0.25 percentage point rate difference represents roughly £500 of first-year interest on a static balance, or about £1,000 across two years before allowing for repayments and other variables. On that simplified basis, the £1,499 fee has not yet been recovered.
On a £400,000 balance, the same rate difference represents roughly £1,000 of first-year interest on a static balance. Across two years, the potential rate saving is larger and may be enough to outweigh the fee.
This is deliberately a rough illustration rather than a mortgage quotation. On a repayment mortgage the balance normally falls, monthly payments differ, fees may themselves attract interest, and products can have different incentives and charges.
For an accurate comparison, use the lender's mortgage illustration and compare the amount payable during the period you expect to keep the product, together with all relevant fees and incentives.
Should You Pay the Arrangement Fee Upfront or Add It to the Mortgage?
Some lenders allow a product fee to be added to the mortgage rather than paid from cash at the outset.
Paying the fee upfront
Paying upfront avoids increasing the mortgage balance by the value of the fee. Provided the product completes and the fee is payable as expected, this also prevents you from paying mortgage interest on that fee.
Adding the fee to the mortgage
Adding a fee can reduce the amount of cash you need at the start, but it increases the amount borrowed. You can therefore pay interest on the fee as part of the mortgage.
For example, if the mortgage required is £300,000 and a £1,500 fee is added, the borrowing would become £301,500 before considering any other amount being financed. The fee is added to the borrowing; it is not subtracted from it.
On regulated mortgages, FCA rules prevent fees from simply being rolled into the loan automatically. The customer must make a positive choice to add them.
Adding a product fee can also affect the mortgage amount and potentially the loan-to-value calculation. Check the lender's illustration rather than assuming the effect will be negligible.
Are Remortgage Arrangement Fees Refundable?
It depends on the lender, the particular fee and the stage at which the application stops.
Some charges may be refundable if the mortgage does not complete; others may be non-refundable once paid or once particular work has begun. You should therefore check the product terms before paying rather than assuming an arrangement fee will be returned if you change your mind or the application fails to proceed.
MoneyHelper specifically recommends checking whether booking and arrangement fees are refundable if a mortgage does not go ahead.
If refundability is important to you, establish this before submitting the application and keep the relevant product documentation.
What Is a Fee-Free Remortgage?
A fee-free remortgage normally means the new mortgage does not charge the arrangement or product fee being compared. It should not automatically be interpreted as meaning that every part of the remortgage costs nothing.
There may still be costs connected with valuation, legal work, a broker, administration, leaving the existing mortgage or repaying the old product early. Conversely, some lenders offer packages that cover certain valuation or legal costs, or provide cashback.
When can a fee-free deal be attractive?
Fee-free products are particularly worth comparing when the mortgage balance is relatively small, the product is likely to be held for a shorter period or the rate advantage on the fee-paying alternative is modest.
On a larger balance, however, even a relatively small difference in interest rate can have a greater monetary effect. A fee-paying lower-rate product can therefore become more competitive.
Neither structure is universally better. The correct question is which product produces the better overall result for the borrowing and timescale involved.
What Other Remortgage Costs Are Separate From the Arrangement Fee?
To keep an arrangement-fee comparison accurate, separate the product charge from other expenses that can arise when refinancing.
| Potential cost | What it relates to | Always payable? |
|---|---|---|
| Arrangement / product fee | The particular mortgage product selected. | No. Some products have no fee. |
| Booking / application fee | Reservation or administration of an application where charged. | No. |
| Valuation | The lender's assessment of the property's value for mortgage purposes. | Not always; some products include a free valuation. |
| Legal / conveyancing cost | Legal work required to complete the refinance. | Varies; some remortgage products include a legal package. |
| Broker fee | A fee charged by a mortgage broker or intermediary where applicable. | No; charging structures vary. |
| Mortgage exit / administration fee | A charge associated with closing or redeeming the existing mortgage where applicable. | Depends on the existing mortgage terms. |
| Early repayment charge | A charge that can apply when leaving an existing deal before the relevant penalty period ends. | Only where the current mortgage terms provide for one. |
If an early repayment charge applies, it can materially change the economics of refinancing and should be considered before concentrating on the new lender's product fee.
When Might a Higher Arrangement Fee Make Sense?
Paying a larger fee can make financial sense when it unlocks a rate reduction that saves more than the additional fee over the period you intend to keep the mortgage.
That tends to become more relevant as the mortgage balance increases, because a given percentage-point reduction is applied to a larger amount of borrowing.
On the other hand, when the balance is small, the rate difference is minimal or you expect to change product again relatively soon, there may be less time for the lower rate to recover a substantial upfront charge.
Avoid using a rule such as “always take the lowest rate” or “always choose no fee”. Compare the combination of rate, fee, incentives, existing-mortgage charges and expected deal period.
A Practical Remortgage Fee Checklist
Before choosing between a fee-paying and fee-free product, gather the figures required to make a like-for-like comparison.
- Current mortgage balance: know approximately how much must be refinanced.
- Current deal end date: check when any fixed, discounted or penalty period ends.
- Early repayment charge: establish whether leaving now creates a cost.
- New interest rate: compare equivalent products over the same relevant period.
- Arrangement or product fee: include it even when it will be added to the mortgage.
- Other incentives and charges: account for valuation, legal packages, cashback and other applicable costs.
- Method of paying the fee: compare paying it upfront with adding it to the borrowing where that option exists.
- Total cost over the deal period: do not judge the mortgage from the headline rate or monthly payment alone.
Frequently Asked Questions About Remortgage Arrangement Fees
Is an arrangement fee the same as a product fee?
The terms are commonly used to describe the fee attached to a particular mortgage product. Lender terminology can vary, so use the description in the mortgage illustration rather than assuming every lender labels its charges in the same way.
Is a booking fee the same as an arrangement fee?
Not necessarily. A booking, reservation or application fee can be a separate charge. Some lenders charge one, some do not, and its refund terms may also differ from those of a product fee.
Does a remortgage arrangement fee include valuation and legal fees?
Normally they should be treated as separate items. A lender may provide a free valuation, legal service or other incentive as part of a remortgage package, but that does not mean these costs are inherently included within the arrangement fee.
Can I add an arrangement fee to my mortgage?
Some lenders allow it. Doing so increases the amount borrowed, which means interest can be charged on the fee. Check the lender's illustration for the effect on the loan and repayments.
Is it better to pay the mortgage fee upfront?
Paying upfront avoids borrowing the fee and therefore avoids mortgage interest being charged on it. However, the right choice also depends on your available cash and the terms of the product. If the mortgage does not proceed, refund rules are also important.
Are remortgage arrangement fees refundable?
It depends on the lender and product. Some charges may be refundable if the mortgage does not proceed, while others may not be. Check this before paying the fee.
Does a fee-free remortgage mean there are no costs?
No. It commonly means there is no arrangement or product fee on the new mortgage. Other costs, such as legal work, valuation, broker charges, exit fees or early repayment charges, may still apply unless they are specifically covered or waived.
Is a £999 or £1,499 arrangement fee worth paying?
There is no universal answer. Compare the rate saving generated by the fee-paying product with the fee itself over the period you expect to keep the deal. Mortgage balance, rate difference, incentives and any cost of financing the fee all affect the result.
Compare the Complete Remortgage Cost
An arrangement fee is only one part of the calculation. Put the product fee beside the rate, expected deal period, existing mortgage charges and other switching costs before deciding which structure offers better value for your circumstances.
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