by Mark Johnston
Many people just focus on the current mortgage interest rates when shopping around for a home loan, but whilst the interest rate is important, it is also important to consider the bigger picture in getting a mortgage, such as the fees. Therefore buyers should watch out for hidden charges behind headline rates, often the most attractive rates come with the biggest fees.
In the past lenders would charge a fee to cover the cost they incurred administering the mortgage, now however many lenders rely on these fees to bring in extra revenue and so have now added new fees and also increased the cost of their old fees.
The mortgage fee associated with taking out, changing deals or paying off a mortgage has tripled in the last decade.
Mortgage fees are an important part of the home financing industry.
The important thing to remember is that not all the fees apply to every mortgage.
Most home buyers are now required to put down a deposit in order to be considered for a mortgage. Typically deposits range from 5 to 20 percent of the property’s purchase price.
These fees are often charged if buyers wish to reserve a particular mortgage deal, they are common but lenders can be found who do not charge this. The average fee is around £99 to £199.
These fees cover the upfront costs of setting up the mortgage. They come in a huge range with cost of up to £6,075.
VALUATION AND ADMINISTRATION
This has become more widely applied recently, although not all lenders charge this, it covers the cost of the lender receiving the valuation report and considering its contents, usually around £90.
Solicitors or licensed conveyances charge this to cover the cost of drawing up contracts, ensuring existing loans have been repaid and also for checking on planning records for futures developments. In general these costs are around £350.
The clearing house automated payment system (CHAPS) fee can also be known as a telegraphic transfer fee and is supposed to cover the cost of administration for transferring the lenders money to the buyer’s solicitor.
REDEMPTION ADMINISTRATION FEES
When a buyer pays off their existing mortgage either to become mortgage free or to move to a different lender this fee becomes payable. It can also be called a deeds release fee. This can vary from £25 to £150.
EARLY REPAYMENT FEE
Also known as ERC’s and are usually payable if a buyer wishes to leave a discounted deal before the end of the fixed or discounted period. These are charged at around 3% of the total mortgage sum payable at the time of leaving. This fee does not apply once the rate coverts to the standard variable rate.
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