Mortgages things to watch out for

Things to Watch Out For
There are a number of important things to watch out for when comparing or buying your mortgage. Here’s the guide to these:

Headline-grabbing interest rates

If it’s too good to be true then it probably is. Remember, mortgage lenders want to make money, so wont give something away for nothing. Watch out for hidden catches and other strings attached

Don’t just look at the interest rate. Look at all of the associated fees too. This will help you work out the true cost of the mortgage. There are a whole range of fees which you may have to pay, for different things:

House Buying Process Fees

Legal / conveyance fees
Conveyancing is the legal process for transferring the title to property. You’ll probably need to pay a solicitor or conveyancer for this, although you can do it yourself if you know what you’re doing. If you’re buying and selling a house, you have to pay for both deals. The solicitor usually also deals with any stamp duty that is payable.

Survey Fees
You should always consider whether to have your own survey done, which will highlight any shortcomings in the new property, like damp or dry-rot in the roof. The price of the survey could save you a fortune on unforeseen repairs in the future.

The seller of the property in England or Wales must provide a Home Information Pack. This may contain a Home Condition report, which is effectively a survey report. This may save you time and money as a buyer.

Brokers’ fees
If you are arranging a mortgage through a broker, they may also charge you a fee for their service either before or after you mortgage application has been completed. All brokers are required by law to show you how much commission they will earn from the lender in a Key Facts document, so make sure you get this up front. The mortgage broker business is extremely competitive, so get some quotes from a variety of brokers before you sign on the dotted line

Up Front Lenders Fees

Valuation fees
A lender has to be sure that their mortgage offer is based on a sound property. For this they will require a valuation of the property, which will usually be paid for by you. The cost depends on what type of valuation they do, which can vary from a simple drive-past to a full survey.

Arrangement fee
Most mortgage lenders charge an arrangement fee (also called an application fee or completion fee) when you take out a mortgage. Some mortgage lenders will let you add the cost of this to the mortgage. The fee depends on the mortgage lender and the mortgage offer

Booking Fee
Usually with a fixed rate mortgage there will be a fee for the lender ‘booking’ the funds they use to lend to you. This is usually non-refundable if you withdraw your application.

Higher Lending Charges
This is an insurance premium that protects the lender if you are unable to pay back the mortgage. Charges range between 7 and 12% over and above the mortgage threshold (this is typically anything above 75% of the total mortgage amount). You can filter these out in the mortgage best buys. If you can avoid them then do. That’s because if you fail to keep up with your mortgage payments and your home is repossessed, you’ll still be liable to pay any shortfall once it is sold

Other fees
Early Repayment Fees

If you have a fixed rate mortgage or discounted rate mortgage, you may have to pay an early repayment (or redemption penalty) if you pay back your mortgage early or switch lenders before your deal has expired. You can filter this out in the mortgage best buys.

Extended tie-ins
Extended (or overhanging) tie-ins are early repayment fees that apply even after your deal period ends. They may force you to stay with the lender for a longer period of time than you want to, and should be avoided if possible.