Some lenders are charging extortionate fees to first time buyers if they don’t have a sufficient deposit.
Buying a home with only a small deposit will attract higher lending charges, especially if the deposit is worth less than 10% of the property value. The fee is charged on the amount of the loan above 80%, minus the deposit. So, if a buyer has less than 20% deposit to pay, they will face a charge, although it is generally payable at the end of the transaction.
The percentage charged on the amount above 80% will vary according to the lender. For instance, the Loughborough Building Society charges 6.02%. This will be charged against any amount above 80% which you can’t cover with a deposit. On a home costing £150,000 with a 5% deposit, the charges would be £1,355. According to Moneyfacts, the data company, these charges are being applied by other lenders, including Ipswich BS, Airdrie Savings Bank and Darlington BS.
Experts have issued a warning to buyers, stating that the fees may become more commonly charged by lenders, especially when the Help To Buy scheme ends this year. With first time buyers finding it difficult to save a large deposit, especially as property prices continue to soar, the charges may make it even harder to get on the property ladder. Mortgage advisers spend time studying on a CeMAP course, so that they have knowledge of this type of problem for first time buyers.
