Easy Guide to Understanding Mortgage Charges - Part 2

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Part 1 of the guide on mortgage charges covered the fact that on top of the capital credit you borrow plus the interest your lender adds onto that sum, there are further costs involved in financing a property. The fees covered previously were insurance, the early repayment charge or redemption penalty and the overhang.

The following Part 2 guide will further discuss the costs involved in either first time buyer mortgages or refinancing your existing loan.

Booking Fee

This will normally be required when submitting your mortgage application form. A booking fee is levied to reserve funds for a mortgage package that has limited funds available, such as for a fixed rate deal. The fee is often non-refundable, so be aware that if you cancel your application for any reason before completion the cost will not be refundable.

Arrangement Charge

While this fee is typically levied on completion of your mortgage term, it is generally charged as part of your mortgage so will not come as an added expense. Arrangement fees are common when taking out a capped or fixed rate loan.

Legal Fees

You will be required to hire a licensed conveyance agent or solicitor to act on your behalf with your chosen loan provider. It will be their role to lawfully list ownership of the property on the title deeds; register with the Land Registry, note your lenders interest in the property and carry out searches to ascertain if there will be any major factors which could affect the property, such as whether there are planned major road developments that will go through the back garden or doing a coal mining search to check for subsidence issues. A good solicitor will help protect your interests so they can be highly worth the cost. You will pay more for this service however when buying a house for the first time compared to a remortgage.

Valuation

This amounts to the fee charged by a specialist to conduct a valuation of the property on behalf of your lender. This valuation will not entail a detailed inspection, it is really designed to cover any major concerns which will affect your loan provider. For your own peace of mind that the property you're buying is completely sound, you can obtain a more comprehensive 'Housebuyers Report' or 'Full Structural Survey'. This will cost more than the lenders valuation but could save you trouble in the long run. Some lenders may also charge an extra administration fee in addition to the valuation fee to cover their arrangement of the valuation.

Higher Lending Charge

Previously known as a Mortgage Indemnity Charge, this applies where the capital amount you borrow exceeds the percentage of the property's value set by your lender. They use this fee to cover themselves with insurance that protects them against any losses that could arise if the property needs to be repossessed because of major defaults in repayment. Unfortunately for you the borrower, loan providers tend to pass this charge your way and under different titles. Whatever this fee is cloaked as it can add up to a pretty penny, so be sure to enquire about this with your lender.

Whether you're interested in first time buyer mortgages or a refinance of your existing home, it's crucial to comprehensively understand the charges involved to avoid any nasty shocks. Make sure your lender explains them to you thoroughly before moving ahead with your application.

Article Source: http://depositarticles.com/

Sean Raston is an economics student and expert in first time buyer mortgages.

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