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Mortgage Fee Guide

Written by David Collins

Thursday, 20 December 2007

Buying a home can be a long and laborious process. With the country in the midst of a credit crunch, the housing market faces an uncertain period.

After finding the property you want, sorting out the mortgage can be a confusing process, with lots of jargon involved.

It's always best to research as much as possible before committing to mortgages. But with so much jargon associated with the buying process it can be rather confusing.

Here's a quick guide to every mortgage-related fee you may encounter during your research:

Product Fee - this fee covers the lender's costs for arranging your mortgage. As the cost can be over £1000, you'll usually be given the option of adding such a fee to your mortgage loan.

Higher Lending Charge

- these fees are supposed to compensate lenders for the added risk associated with advancing a loan to a borrower with a small deposit. The fee may be used to purchase an insurance policy which protects the lender from loss should you fall behind on payments. Most lenders, however, don't apply HLCs if you don't put down a deposit of less than 5%

Insurance Penalty

- these fees give lenders peace-of-mind until you pay off your mortgage. Although you're free to take out policies with any company, you may find yourself penalised for not buying cover from the lender, so it pays to shop around when it comes to both home insurance and mortgage lenders.

Money Transfer Fee

- usually charged to cover costs to transfer money from your lender to your solicitor.

Early Redemption Charge

- this charge will apply if you wish to remortgage early or redeem your loan, and usually applies for the same period as your fixed-rate deal. The charge reduces gradually each year, and could be as low as 1% in year five, however be wary of mortgages which extend the ERC beyond the length of your discounted deal, for the charge could still apply even if you've moved to a higher rate or want to remortgage to a more competitive deal.

Mortgage Exit Administration Fee

- this charge will apply should you want to pay off or switch your mortgage to a new lender, helping to cover costs such as legal, staff and administration costs - such as registration changes at the Land Registry. Be wary of paying an excessively high MEAF, it should never be more than the rate stated in your contract.

Valuation Fee

- lenders will usually instruct a surveyor to value your property to ensure it's worth the amount they're prepared to lend, and the price varies depending on how much you borrow. The standard fee will usually only provide a very basic valuation, with more in-depth surveys usually costing more.

Buying a home can be an expensive business, however not all lenders will charge all the fees listed above, it's advisable to research all factors involved in a mortgage contract in order to gain a better understanding of the financial commitment involved.
Article Source: http://www.ArticleBlast.com

About The Author:

David is an experienced writer based in the UK, currently working in the dotcom industry

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