⚠️ Why the Lowest Rate Isn't Always the Cheapest
Finding the cheapest mortgage isn't as simple as picking the lowest rate. Product fees, broker costs,
valuation charges and cashback all affect the total cost. This calculator compares up to 3 mortgage
products side by side, showing which one is genuinely cheapest over the fixed term — not just which
has the best headline rate.
It's one of the most common mistakes in mortgage shopping: assuming the product with the lowest
interest rate will cost the least. In reality, the total cost of a mortgage depends on much
more than just the rate.
Consider this example:
- Mortgage A: 4.5% rate with £999 product fee
- Mortgage B: 4.8% rate with no product fee
On a £200,000 loan over a 5-year fixed term, Mortgage A might look better at first glance. But when
the fees are factored in and the true cost calculated, Mortgage B could actually save money.
This is exactly why this calculator was built — to help see past headline rates and find the mortgage
that's genuinely cheapest for each situation.
How This Calculator Works
This mortgage comparison calculator analyses the total cost over the fixed term, not
just the monthly payment or interest rate. Here's what it calculates:
Total Interest Paid: The actual interest paid over the initial term, accounting for
how product fees affect the loan amount.
Total Fees: All upfront and exit costs combined, minus any cashback received.
Effective Annual Rate: The true cost of borrowing expressed as a percentage — this
is what should be compared, not the headline rate.
Cost Per Month: The total cost divided by the number of months in the term, giving a
simple monthly comparison figure.
The calculator then identifies which option costs the least overall and shows exactly how much could
be saved by choosing it.
Understanding Product Fee Options
When taking out a mortgage, there are typically three choices for how to handle the product fee:
Added to Loan: The fee is added to the mortgage balance. Nothing is paid upfront,
but interest is paid on the fee for the entire term. This increases the total cost but preserves
cash.
Paid Upfront: The fee is paid at the point of application with most lenders. This
means no interest is paid on the fee, reducing the total cost — but the cash is needed earlier in
the process.
Deducted from Loan: Some lenders deduct the fee from the loan advance. Less money is
received but the loan balance stays at the original amount. Interest is still paid on the full loan,
but the fee doesn't increase the debt.
Important for remortgages: When adding fees to the loan on a remortgage, bear in
mind this increases the total borrowing. If the property hasn't increased in value, the new loan
amount may exceed the lender's maximum loan-to-value ratio. In these cases, some of the existing
mortgage may need to be paid down to fit within acceptable LTV limits.
Use this calculator to compare the same product with different fee handling options — the results
might be surprising.
Fees to Include When Comparing Mortgages
A thorough mortgage comparison should include all associated costs:
- Product Fee: Also called arrangement or booking fee. Can range from £0 up to
10% of the loan amount depending on the lender and product type
- Broker Fee: If using a mortgage broker, their fee for arranging the mortgage
- Valuation Fee: The lender's survey cost to assess the property value
- Solicitor/Legal Fee: Conveyancing costs for the legal work involved
- Application Fee: Some lenders charge this separately from the product fee
- CHAPS Fee: The bank transfer fee for sending funds (typically £25-35)
- Exit Fee: Charged when the mortgage is paid off at the end of the term
- Cashback: Some products offer cashback which offsets costs
Products advertised as "fee-free" often have higher rates. This calculator helps determine whether
paying a fee for a lower rate actually saves money overall.
When to Use This Calculator
This mortgage comparison tool is particularly useful in these situations:
Remortgaging: When a fixed rate ends and new deals are being compared. Factor in all
costs to find the best remortgage option.
Purchasing a Buy to Let: Compare different BTL mortgage products to maximise
investment returns.
Deciding on Fee vs No-Fee Products: When torn between a low-rate product with fees
and a higher-rate fee-free product.
Choosing How to Pay Fees: Compare the same product with fees added to loan vs paid
upfront to see which is cheaper overall.
Tips for Accurate Mortgage Comparison
Get the most from this calculator with these tips:
Compare like with like: Only compare products with the same fixed term. A 2-year fix
and 5-year fix aren't directly comparable as remortgaging happens at different times with different
costs.
Use the same repayment type: Don't compare interest-only against capital repayment —
the monthly payments and total interest are fundamentally different.
Include ALL fees: It's tempting to skip small fees, but they add up. Include
everything for an accurate comparison.
Consider future plans: If the property might be sold or remortgaged before the fixed
term ends, early repayment charges (ERCs) become important — though these aren't covered by this
calculator as they vary by timing.
Don't forget cashback: A product with cashback might have a higher rate but lower
overall cost. Always include it in the comparison.
