Quick answer
Compare the total cost over the deal period: the fee plus the interest you pay until the fixed rate ends. In our example, a 2-year fix at 4.19% with a £999 fee beats a no-fee deal at 4.49% only when the loan is above about £168,000. On £250,000 the fee deal saves about £490; on £150,000 the no-fee deal is about £110 cheaper. Pay the fee upfront if you can: added to the loan, you pay interest on it for the life of the mortgage.1
Key takeaways
- Compare fee plus interest over the deal period, not the headline rate.
- The bigger the loan, the more a lower rate is worth, so fees favour large loans.
- In our example the break-even is a loan of about £168,000 over a 2-year fix.
- Adding a £999 fee to the loan costs about £615 of extra interest over 25 years at 4.19%.
- Every mortgage illustration (ESIS) must show the total amount to be repaid and the APRC.2
Lenders often offer the same product two ways: a lower rate with a fee of around £999, or a higher rate with no fee. The headline rate makes the fee deal look better. The maths often says otherwise for smaller loans.
The figures are illustrations, not current market rates: we use them to show the method. Use the rates and fees on the illustrations your broker or lender gives you.
How do you compare a fee and a no-fee mortgage?
Work out what each deal costs you until the fixed or tracker period ends, because that is when you will usually remortgage. For each deal, add the fee to the interest you pay over that period. The capital you repay is your own money either way, so leave it out.
MoneyHelper's point is the same: an upfront fee might get you a lower rate but might not save you money overall.1 The APRC on the illustration includes fees, but it assumes the initial rate runs for the whole term, so it is less useful for comparing two short fixes than the simple sum above.2
Worked example: 2-year fix, £999 fee or no fee
Deal A is 4.19% with a £999 fee. Deal B is 4.49% with no fee. Both are repayment mortgages over 25 years, compared over the 2-year fix.
| Loan | Deal A: interest + £999 fee | Deal B: interest, no fee | Cheaper |
|---|---|---|---|
| £150,000 | £13,288 | £13,182 | No-fee by about £110 |
| £250,000 | £21,481 | £21,969 | Fee deal by about £490 |
| £400,000 | £33,771 | £35,151 | Fee deal by about £1,380 |
Interest calculated month by month on a repayment basis over 24 months. Illustrative rates.
The break-even here is a loan of about £168,000: below it, the no-fee deal costs less over two years; above it, the fee deal does. A 5-year fix moves the break-even lower, because the rate saving runs for longer while the fee is paid once.
Should you add the fee to the mortgage?
Lenders often let you add the arrangement fee to the loan. MoneyHelper's advice is to pay fees upfront if you can, because if you add them to your mortgage you pay interest on them for the life of the loan.1 At 4.19% over 25 years, adding £999 costs about £5 a month and about £615 of interest if the rate held for the whole term.
Adding the fee can also nudge your loan-to-value up. That rarely matters, but if you are right on a band edge, such as 85.0%, check that the fee does not push you into the next band.
Checklist: comparing two mortgage illustrations
Put the two illustrations side by side and take the same five figures from each: the initial rate, how long it lasts, every fee (arrangement, booking, valuation), any cashback, and whether fees are added to the loan or paid upfront. Work out the interest for the initial period on the same loan amount and term, add the fees, take off any cashback, and compare the totals.
Then check the things that can outweigh a few hundred pounds: the early repayment charges if you might move or overpay, whether the deal is portable, and whether the fee is refundable if the purchase falls through. A small saving on paper is not worth a deal you may need to leave early.
Other fees to include
Some lenders charge a booking fee when you apply, which is often non-refundable, and some include a free valuation or cashback. Put every fee and incentive into the comparison: a no-fee deal with £500 cashback is £500 better than the figures above suggest. Broker fees apply whichever deal you choose, so they do not change the comparison.
Use the calculator for this topic
Frequently asked questions
Is a no-fee mortgage better?+
For smaller loans it often is. In our example, a no-fee deal 0.3 points dearer was cheaper over two years on loans below about £168,000.
How do I compare mortgage fees?+
Add each deal's fees to the interest you would pay until the deal ends, and compare the totals. Leave out capital repayments, which are the same either way.
Should I add the arrangement fee to my mortgage?+
Pay it upfront if you can. Added to the loan, you pay interest on it for the life of the mortgage: about £615 on £999 over 25 years at 4.19%.
Does the APRC tell me which deal is cheaper?+
Not for short fixes. The APRC includes fees but assumes the initial rate lasts the whole term. Compare the cost over the deal period instead.
Is the arrangement fee refundable if I do not complete?+
It depends on the lender. Booking fees are often non-refundable; check the illustration and the offer terms.
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OfficialThe figures and rules on this page are drawn from the official UK government sources below. Rates are the confirmed 2026/27 amounts. Each link opens the relevant official page in a new tab.
- MoneyHelper: Estimate your overall buying and moving costs www.moneyhelper.org.uk/en/homes/buying-a-home/estimate-your-overall-buying-and-moving-costs Best to pay fees upfront; added to the mortgage, you pay interest on them for the life of the loan.
- FCA Handbook: MCOB 5A Annex 2 (ESIS) handbook.fca.org.uk/handbook/MCOB/5A/Annex2.html Mortgage illustrations must show the total amount to be repaid and the APRC with its assumptions.
Verified against published UK government guidance. See also Methodology and Editorial standards.