It is easy to forget when considering the cost of monthly mortgage repayments that additional mortgage fees may also arise. It is vital to take into account potential mortgage fees that may need to be paid before, during or after the term of the mortgage as they can significantly increase the cost of the debt being incurred.
Mortgage Fees Explained
Most mortgage brokers charge a fee for their services in helping a borrower find a mortgage. These financial professionals can charge high mortgage broker fees when assessing a person’s income, property, employment, and credit report to determine which mortgage type will be most appropriate for the borrower. Charges can vary, but a mortgage broker fee is usually paid on either an hourly or flat fee basis.
Mortgage Advisor Fees
Many financial advisers nowadays operate on a combination of fees and commission. Mortgage advisor fees could still be high, but these financial experts will also take a commission from a mortgage lender when they arrange a deal, which may result in discounted costs.
Mortgage Arrangement Fees
Although a borrower may have sourced a mortgage deal with low interest payments, mortgage arrangement fees are designed so lenders can make some money back on low rate offerings. Not simply to cover the cost of setting up a loan, a mortgage arrangement fee is linked to interest rates, in which the lower the interest rate, the higher the arrangement fee. These costs can be very high, so a borrower should see arrangement fees as part of the overall cost of any mortgage.
Mortgage Solicitors’ Fees
Before deciding upon a particular mortgage offer, any mortgage solicitors’ fees should be considered. Mortgage legal fees are payable to a solicitor for undertaking any legal work or advice given to the borrower during the mortgage process. A mortgage solicitor’s fee will vary depending on the firm and how much of their time is taken, and even if mortgage proceedings don’t go any further, borrowers may have to pay upfront costs from any work already carried out.
Mortgage Valuation Fees
Mortgage valuation fees will also be incurred when assessing the property a mortgage is being taken out for, which is done to make sure the house provides enough security for the loan. Such a mortgage valuation fee is paid to the surveyor, the cost of which depends on the price of the property, but will also differ between lenders.
Mortgage Redemption Fees
Mortgage redemption fees are levied onto homeowners who want to make an early repayment on their mortgage. A mortgage redemption fee is a penalty enforced by the lender if the borrower redeems the mortgage before the end of its term, and is usually set at a percentage of the outstanding mortgage amount.
Mortgage Exit Fees
Mortgage exit fees are similar in that a borrower is charged for not carrying on monthly payments until the end of the mortgage term. However, a mortgage exit fee differs in that a homeowner might not want to pay off the remaining sum, but may want switch to another lender. The current lender will therefore try and deter the borrower from leaving by imposing an exit fee, so it is unsurprising that these costs have quadrupled over the past decade.
No Fee Mortgages
However, to accommodate buyers in all financial situations, lenders are now offering more competitive property loans on a no fee mortgage. No fee mortgages are appealing to first time buyers with few savings; therefore they are often available with first time buyer mortgages, though they usually incur high interest rates as mortgage lenders do not give anything away for free. All borrowers are therefore advised work out whether paying no upfront fees for larger monthly payments is better suited to their mortgage needs, or vice versa.