A Guide to Mortgage Fees for Wembley Home Buyers
In this three-minute read, we give you the lowdown on mortgage fees.
When it comes to finding the best mortgage deal, thereâs one question savvy home buyers should ask themselves.
And itâs not: âWhich deal is offering the lowest interest rate?â.
While interest rates are obviously important, mortgage hunters should ask: âWhich deal represents the best value overall?â.
Thatâs because many of the ultra-low interest rate deals available right now come with fees.
For some home buyers, a zero-fee product with a slightly higher interest rate will represent better value in the long term. (It all depends on the size of your deposit and the amount you wish to borrow.)
So, before you sign on the dotted line, weigh up all your options and seek independent advice.
Hereâs a handy guide to the different types of mortgage fees to help you with your research.
The Big Ones (If youâre not careful, these fees can set you back thousands)
Arrangement Fee or Product Fee
This fee covers the setting up of the mortgage and usually ranges from ÂŁ399 to ÂŁ1,500 â although weâve seen it hit ÂŁ1,999.
Most lenders will let you roll this fee into your mortgage, which is handy if youâre cash-strapped after covering the rest of your moving costs.
However, doing this means you pay interest on the fee, increasing the overall amount you pay in the long run.
Higher Lending Charge (HLC)
In the old days, this was called a Mortgage Indemnity Guarantee. Lenders apply HLCs to high loan to value mortgages (i.e. those where the deposit is small, in comparison to the size of the loan).
The way lenders calculate HLCs can vary, but the crux of the matter is if youâre borrowing a more significant sum, this fee can be thousands.
Smaller Fees (these can range from ÂŁ50 up to several hundred quid)
Booking Fee
You pay this when you complete and submit your mortgage application. It shows the lender that youâre committed to the deal as itâs non-refundable (even if the mortgage doesnât go ahead).
Valuation Fee
This covers the checks carried out by your lender to ensure that youâre not paying over the odds for your property.
Itâs not a detailed search for structural, safety, or boundary-related issues. You need to instruct your own surveyor to do this.
CHAPS Fee
Also known by the rather quaint term âTelegraphic Transfer Feeâ, this covers the cost of your lender sending funds to your solicitor.
Buildings Insurance Fee
Buildings insurance is a condition of all mortgages, and your lender will encourage you to go with their recommended provider. If you opt to go with a different insurer, expect to pay a small fee.
Donât let this fee deter you from shopping around as thereâs a huge variation in buildings insurance premiums.
Early Repayment Fee
If you repay the entire balance of your mortgage early, you could incur a fee.
Exit Fee
Even when youâve paid your mortgage off, there could be a little surprise waiting in the form of a fee to close the mortgage account.
For more advice about mortgages, get in touch with us here at Grey & Co.