A guide to mortgage costs

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By AdFeatures | Tuesday, March 27, 2012, 11:32

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Home ownership can come with several accompanying costs. Once you have used a mortgage calculator tool to earmark just how much you can borrow using either your household income or projected monthly rent, you will need to start budgeting for other costs related to your purchase. This will go beyond just looking at the headline interest rate of mortgages. Here is a brief overview of the types of costs you may incur when organising your mortgage.

Mortgage valuation

You will need to pay a fee for a basic mortgage valuation in order for lenders to be assured that your borrowing amount is warranted and that its reflects the true price of the property.

In addition, you should get a survey of your property carried out so that lenders have a full picture of its structural makeup, age and any potential problems. Further advice on surveys can be found on the website of the Royal Institution of Chartered Surveyors (RICS).

Arrangement fees

This fee can come under different guises from lenders such as a completion fee, administration fee or booking fee. This fee is the amount

you pay to organise your mortgage and a buy to let mortgages calculator may help you to identify how much you can borrow in the first place. Mortgage providers may charge more than one of these fees.

The average cost of an arrangement fee has climbed since its figure of £1,201 in August 2011. In January of this year the figure was £1,498.

If you decide to add this fee to your loan amount it will only add to the interest you pay over the average 25 year duration of your mortgage.

Early repayment charges

It seems illogical that you would be penalised for paying off your mortgage early, but most lenders earn their money from the years of monthly or yearly interest you pay. The terms of ERCs will be outlined when you get your mortgage out and it will normally involve paying a fixed percentage of your outstanding mortgage. Some mortgages may not include ERCs.

Fees for early exits

If you decide to close your mortgage account for any reason, then you may be charged an exit fee. This may happen if you want to move from one fixed rate deal to another or when you pay your mortgage in full. The amount paid shouldn’t be higher than the fee stated in your original

mortgage contract.

You can contact the Financial Ombudsman Service if you have any queries over the details of your exit fee. Those who have paid an exit fee that was higher than the amount in their contracts in the last six years may be able to query the case with their lender.

Higher-lending charge

This charge is sometimes applied to loans that surpass the 90% mark or when the loan-to-value ratio is higher than average rates.

The use of the HLC may now be somewhat restricted since the 2008 market crash, as very few lenders offer mortgages over the 75% level.

      

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