We all want to save money by getting a remortgage, but lenders are increasing mortgage arrangement fees. Here are the charges that you may have to pay.
The amount of money saved when you get a remortgage may not be as much as you might think. In the current low interest rate climate, all of the major banks are looking for innovative ways to boost their profits. High mortgage fees look like they're set to stay.You may think that you're saving hundreds of pounds each month, but how much is it going to cost you to set up the new agreement? Mortgage charges are always clearly specified, but do you look at more than just the rate of interest and monthly repayments?
We live in a low interest environment, so it's not surprising to discover that the banks are looking for fresh ways to increase profit margins. Well, they've achieved this goal is by bumping up the fees for mortgage arrangement. There's no effective way of avoiding them at the moment.
In an article in the on 11 April 2011, Emma Wall said that: "Mortgage arrangement fees have increased 25pc to an average of £1,502 in just three years." She went on to say that "Providers have raised their fees by an average of £321." And they're continuing to go up.The headline rate of interest can be very enticing, but the charges are inflated. You'll normally find that the higher the initial mortgage fee, the lower the rate of interest you'll be asked to pay. Divide the charge by the number of months to find out how much extra you'll be paying.
If you're finding it difficult to get approval for credit on your own, you may decide to turn to an expert for help and assistance. This could be beneficial to you if you have an adverse credit rating, are a first-time property buyer or you're a self employed person.In return for paying up to a 1% fee, a mortgage broker will help you to get the best deal. Aside from finding the right lender, they're also an invaluable source of help. You won't have to talk with the lender yourself, and all of the paperwork will be completed for you as a part of the service.
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Although this type of mortgage arrangement fee can normally be added to the principal, it's yet another expense incurred when remortgaging or getting on the property ladder. If you don't have any equity in your home, you'll have to meet this cost from your own savings.
Before a lender will approve your application, a survey will need to be performed on your property. The cost is approximately £400, but some lenders will provide financial assistance. You'll be able to ascertain whether this applies by checking the terms of the offer.
This premium is used by the lender to pay for cover in the event that you're unable to make the monthly repayments. The insurance does not help you in any way, it's purely for the protection of the lender. The cost will vary based upon how much equity you have in your property.
If you take out a new loan at a fixed or variable rate of interest, you're agreeing to stay with that lender until a specific date in the future. It's not a problem if you wish to leave early, but you'll have to pay a penalty for the early redemption of a mortgage.You may be able to secure a very favourable deal, especially as base rates are set at such a competitive level, but there's a price to pay. Although it depends upon how much time is left to run on the current agreement, you'll have to pay thousands of pounds to leave early.You'll often find that the penalty will render remortgaging a waste of both time and money. If you're unsure, order an early redemption statement from the lender. Unless you expect base rates to rise sharply, it's better to wait until you're free to move your loan without penalty.If you're unsure whether you can make the switch, ask the lender or check the original contract. You're free to move your mortgage without penalty if you've been switched to Standard Variable Rate (SVR). This is where you track the Bank of England base rate, albeit at a higher margin.Most mortgage fees cannot be avoided, but you don't have to pay an exit fee if you stay with the same lender until the end of the term. Before you sign the agreement, check the small print and remember to quantify all of the charges that apply before signing the dotted line.
Wall, Emma. (11 April, 2011). "Mortgage fees increase by 25pc in just 3 years." .