The excitement of buying a home should not divert your attention from the costs involved. On top of your monthly mortgage commitment, you may encounter some or all of these costs, depending on the route you choose to take:
Fee for mortgage advice
High-street lenders will tend to only advise on their own mortgage deals and explain the options. However, there are many advantages to be gained by seeking specialist advice from a financial adviser. Financial advisers can trawl the market and often access the best deals too. The cost of this service is covered in various ways. An adviser may charge you a fee as a percentage of your mortgage value, or as a set fee amount. Alternatively, commission is paid by the lender directly to the mortgage adviser. Often, an adviser is paid by a combination of the two.
Lenders arrangement fee
Lenders will usually charge an administration fee to cover the cost of setting up your mortgage or to reserve a fixed rate or fixed term deal. The amount will vary between lenders. If money is tight, you may be able to add this fee to your mortgage. Do bear in mind, however, that you will be charged interest on this fee amount for the entire term of the loan.
Lenders also need some degree of security when putting up large sums of money. To check the property you are buying is worth what you say it is, they will insist upon a basic independent valuation of the property. This is known as a mortgage valuation. Expect to pay for the cost of this valuation at the very beginning of the mortgage application process.
Higher lending charge
Rising house prices means that borrowers increasingly need to stretch their finances even more, often with little equity to put down as a deposit. If you wish to borrow more than 70% to 75% of the property value, the lender usually applies an additional charge above the advertised rate.
Early repayment charge
Mortgage lenders would ideally like you to stick with them for the long haul. If you manage to repay your mortgage early, or want to switch mortgages before the end of a special rate term, such as five year fixed rate, they will be losing out on forecast revenue. Consequently, they will apply an early repayment charge.
Early repayment charges are common with mortgages that offer a special rate or deal, such as fixed rates, capped rates or discounted rates. The early repayment charge usually applies during the set special rate or deal term. But be careful. Some lenders may lock you in, even after the deal has expired. The small print could tie you to a lenders standard variable rate for a specific period of time. A switch could result in a hefty early repayment charge.
Your home may be repossessed if you do not keep up repayments on your mortgage.
For mortgage advice you can choose how we are paid: pay a fee, usually 1% of the loan amount, or we can accept commission from the lender.