All in the small print: all that glitters isn"t necessarily gold in the world of mortgages
When looking to secure a mortgage for that new home, there are many issues that must be considered.
Of course, it can be tempting to look purely at the rate of interest on offer from the mortgage lender, how much they are willing to lend, and then decide purely on this information alone; but to get the best deal, it's essential to look at the small print too, as there are other fees and charges to consider that can vary greatly between lenders.
Perhaps one of biggest charges to look out for is the arrangement fee. Essentially, this is an administration fee charged by the lender and can range from a couple of hundred pounds all the way up to a percentage of the value of the property. It can also be paid in a number of ways, including as an up-front charge when submitting the home loan application or it can simply be added to the mortgage, hence increasing the debt in the process.
Indeed, many mortgage providers actually reduce the amount of interest on their loans to attract customers, but then will balance this out by charging an exorbitant arrangement fee. However, this can actually work out quite well for those who are arranging a larger mortgage as they will be repaying it over a longer period and hence will reap a greater benefit from the lower interest rate. But for others, it's perhaps best looking for a mortgage with a slightly higher rate of interest but substantially less arrangement fee.
Then, there are mortgage indemnity premiums. Should a lender have to repossess a house and subsequently lose any money upon selling it, then the indemnity insurance will cover any losses made by the mortgage provider. Traditionally, this charge has been passed on to the borrower and could amount to thousands of pounds, but more and more lenders are now choosing to pay these premiums themselves or simply don't charge them at all.
One fee that tends not to vary too much between lenders is the survey/evaluation fee. An evaluation of the property must be carried out to establish the true value of a property before anyone will offer a mortgage. Again, the cost of the evaluation is usually paid up front by the borrower, but it is becoming reasonably common for mortgage providers to either refund the fee once the mortgage has been finalised, or to pay the cost of the evaluation themselves if they think it will seal the deal.
Whilst it's clear that the fees can add quite a substantial amount to the overall cost of the mortgage, it is still helpful to use a lender's advertised interest rate and other provisional home loan calculations as a starting point. Carrying out an initial mortgage comparison [http://www.moneynet.co.uk/mortgages/index.shtml] can form the basis of more in-depth research at a later point, ensuring there are no nasty surprises further down the application process.
Of course, it can be tempting to look purely at the rate of interest on offer from the mortgage lender, how much they are willing to lend, and then decide purely on this information alone; but to get the best deal, it's essential to look at the small print too, as there are other fees and charges to consider that can vary greatly between lenders.
Perhaps one of biggest charges to look out for is the arrangement fee. Essentially, this is an administration fee charged by the lender and can range from a couple of hundred pounds all the way up to a percentage of the value of the property. It can also be paid in a number of ways, including as an up-front charge when submitting the home loan application or it can simply be added to the mortgage, hence increasing the debt in the process.
Indeed, many mortgage providers actually reduce the amount of interest on their loans to attract customers, but then will balance this out by charging an exorbitant arrangement fee. However, this can actually work out quite well for those who are arranging a larger mortgage as they will be repaying it over a longer period and hence will reap a greater benefit from the lower interest rate. But for others, it's perhaps best looking for a mortgage with a slightly higher rate of interest but substantially less arrangement fee.
Then, there are mortgage indemnity premiums. Should a lender have to repossess a house and subsequently lose any money upon selling it, then the indemnity insurance will cover any losses made by the mortgage provider. Traditionally, this charge has been passed on to the borrower and could amount to thousands of pounds, but more and more lenders are now choosing to pay these premiums themselves or simply don't charge them at all.
One fee that tends not to vary too much between lenders is the survey/evaluation fee. An evaluation of the property must be carried out to establish the true value of a property before anyone will offer a mortgage. Again, the cost of the evaluation is usually paid up front by the borrower, but it is becoming reasonably common for mortgage providers to either refund the fee once the mortgage has been finalised, or to pay the cost of the evaluation themselves if they think it will seal the deal.
Whilst it's clear that the fees can add quite a substantial amount to the overall cost of the mortgage, it is still helpful to use a lender's advertised interest rate and other provisional home loan calculations as a starting point. Carrying out an initial mortgage comparison [http://www.moneynet.co.uk/mortgages/index.shtml] can form the basis of more in-depth research at a later point, ensuring there are no nasty surprises further down the application process.
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