Interested in a mortgage? You are finally ready to make this big step. You have the deposit and you are ready to climb on the property ladder. But at the same time, if you have barely managed to save the money or your deposit, you should know that your costs will go further. There is more than that and some of the fees can actually go through the roof – therefore, take your time to educate yourself and know precisely what extra costs are involved.
Becoming familiar with fees and charges
There are numerous factors that can affect the final price of your mortgage and most of them are related to your unique situation. Plus, there are lots of different mortgage products out there and each of them comes with unique features. Lenders will often use different jargon terms to describe their fees, so try to become familiar with their meanings before proceeding.
The good news is that since 2016, lenders need to include all the associated fees in the annual interest calculation. This is the so called APRC – Annual Percentage Rate of Charge. This way, having the whole picture, people will find it less confusing to compare different mortgage products. Every cost will be outlined in the document.
Other than that, you also need to make the difference between fees and charges. Now, what do you need to pay extra?
Fees and charges associated with mortgages
The arrangement fee can be skipped, yet some lenders may charge over £2,000 for it. It is also referred to as the completion fee. You can add it to your mortgage or you can find a deal that does not include such a fee – quite rare though.
The booking fee follows the same rule – it is not always charged, but it is worth checking upfront. It is a fee for the application and it is not refundable, even if the mortgage is unsuccessful. Sometimes, it is included in the arrangement fee. It can go up to £250.
The valuation fee targets the actual property. Your lender will have to value the property to determine whether or not it is worth the money – it ranges between £150 and £1,500. Then, you have the telegraphic transfer fee (known as CHAPS too), which pays for the money transfer to your solicitors – up to £50.
The mortgage account fee is paid for the actual administration – the whole process associated with setting up the mortgage and maintaining it before closure. If you pay it (usually between £100 and £300), you can probably avoid the exit fee.
Missed payments may come with penalties too – worth considering them. Then, you should count the mortgage broker fee – you might pay for it if you seek broker advice, yet some of them get paid by banks, so they work for you for free. The higher lending charge, the fee for buildings insurance and the exit fee must be thought about too, as well as an early repayment charge and an exit fee. These extra costs are not always applied, but you should still inquire about them.
Other costs include:
- Moving expenses
- Legal fees
- Survey fees
- Stamp duty – not always applicable
Bottom line, saving for a mortgage is not all about saving the deposit and a few extra thousands for some new furniture. There are more fees to take in consideration, as well as charges that may not necessarily apply in the beginning. Different products come with different terms and many of the above mentioned fees are ditched by lenders in order to look more attractive to potential customers.