Applying for a mortgage is a complex process, with so many different types of mortgage available and various interest rates payable. Although it makes sense to choose the product with the lowest interest rate, this may be the more expensive option if there are mortgage fees payable, or early redemption fees. There are other costs that a buyer must take into account when applying for a mortgage.
Stamp duty is one cost which many buyers forget to factor in when buying a house. This is chargeable on properties above £125,000. At a rate of 2%, this can add a significant amount to a house price.
A valuation and a survey are also necessary, but can vary in price depending on the type of survey and the house value. Rather than cut back on the survey, it is worth spending a little more and having a comprehensive property survey, which will reveal any hidden problems.
Mortgage arrangement fees are another cost which you will have to find, varying from a couple of hundred pounds to thousands, which you may have to pay upfront. As lenders want to ensure that they get their money back, you may also have to pay a mortgage indemnity fee if the property has a high loan to value ratio. This covers the cost of insurance taken out by the lender to cover the mortgage costs.
Prior to buying a home, it is advisable to consult with a CeMAP qualified mortgage adviser, who can inform you of all the costs involved.