Search Jobs on Yahoo! HotJobs
Search Jobs by Location, Industry or Keyword
www.hotjobs.com

Mortgage costs will vary depending on the lender, the mortgage type being applied for, the total amount being borrowed and the amount you are borrowing as a percentage of the value of your home.

The additional costs charged by mortgage lenders can usually be added to the loan. However, this means you will end up paying interest on the additional costs over the full period of the mortgage, so it is best to pay the fees up front where possible.

Some fees, such as arrangement fees, usually accompany the more competitive mortgage products. When choosing a mortgage you will need to weigh up the benefits of the competitive interest rates against any additional costs that may be charged.

Keep an eye out for lenders who will reimburse you for one or more of the costs below on successful completion of the mortgage.

Unfortunately, some lenders will use different terminology to the typical terms used below. If you are unsure what a lender's fee relates to then ask them.

Below is a list of the mortgage costs you should always check when choosing a mortgage. This list relates to mortgage costs only. There are of course many other costs involved in moving or buying a new home, including legal costs, removal costs, estate agent's commission (for sellers) etc.

Arrangement Fee

Also referred to as the administration fee, the arrangement fee is charged to cover the lender's cost of setting up the mortgage. It is payable on completion of the mortgage and is usually charged when applying for a fixed, discount, capped or cashback mortgage. Arrangement fees are typically between £100 and £300.

Application Fee

An application fee is less common and is charged for just applying for a mortgage. It is payable at the time the mortgage application is made.

According to mortgage lenders, the purpose of this fee is to restrict applications to serious applicants only. The more cynical would suggest that this fee is just another means by which lenders can increase their profits.

Mortgage Indemnity Guarantee (MIG) Premium

A mortgage indemnity guarantee is a type of insurance that protects the lender from you defaulting on any mortgage debt when the sale of the property is not enough to cover the amount owed. It is for the lender's benefit, not yours.

A MIG premium is usually levied when the amount you are borrowing as a percentage of the value of your home (the LTV percentage) is fairly high, typically greater than 90%. However, some lenders will charge a MIG premium even if the LTV is as low as 75%. Other lenders will not charge a MIG premium, regardless of the LTV percentage.

Valuation Fee

Lenders will usually require your new home to be valued in order to confirm that the property is worth at least the value of the amount to be borrowed. This helps to protect the lender in the event that you default on the mortgage.

Early Redemption Penalty

An early redemption penalty is a charge that is made if you switch your mortgage to another lender within a predefined period. The charge can be as much as the value of six months mortgage repayments.

The period over which the early redemption penalty applies may be for the fixed, discounted or capped period only or may apply for several years afterwards, with penalties reducing as each year passes.

You should be aware that if you opt for a mortgage that has an early redemption penalty period that extends beyond the fixed, discounted or capped period you could be trapped in that lender's standard variable rate for a number of years, and that rate may be uncompetitive.