How to Compare the Full Cost of a Mortgage

Start with equivalent assumptions

Compare the same borrowing amount, repayment basis and remaining term. Select a clear comparison horizon, such as the initial deal period, and consider what happens after it. Comparing a two-year deal only against the first two years of a five-year fix omits part of the decision.

A longer mortgage term can lower payments without making the borrowing cheaper overall. For interest-only borrowing, the capital repayment requirement remains even when the monthly payment looks smaller.

List the cash costs and incentives

• Payments due during the chosen period using the actual product terms.
• Upfront or financed product fees and the interest implications of financing them.
• Legal, valuation, booking and applicable broker costs, including package exclusions.
• Existing early repayment or exit charges where switching.
• Cashback only if the relevant conditions are met; note when it is actually paid.

Do not forget the remaining balance

Repayment mortgages reduce debt at different speeds depending on the rate, payment and term. Look at the balance remaining at the end of the comparison period as well as cash outgoings. Otherwise, a mortgage that leaves more debt could appear artificially cheaper.

For a consistent comparison of the same starting loan, one useful illustration is payments and upfront fees, plus remaining debt, less conditional incentives. Do not add financed fees again as upfront payments if they are already included in the balance. The actual illustration and advice should explain the assumptions.

A small example of why cashback is not enough

Suppose one option involves £25 more each month for 24 months: that is £600 more in payments. A £300 incentive only offsets part of that cash difference. You still need to compare fees, the balance left and suitability. These are hypothetical figures, not lender offers.

APRC is useful for a standardised longer-term comparison, but relies on assumptions about the mortgage beyond the initial period. It is not a forecast of future interest rates or a substitute for examining your expected ownership period.

Ask for the comparison in writing

Keep the product illustrations and ask your adviser to explain which costs have been included. If a fee or cashback condition is unclear, resolve that before proceeding. A comparison should show risks such as an early move, higher future payments or a product that does not fit your plans.