CeMAP training covers all the different types of mortgages available, how they work and the fees associated with them.
If you have been keeping up with our articles in the last few weeks, you will no doubt be aware of the publicity recently given to the size of mortgage arrangement fees.
A mortgage arrangement fee used to be an administration fee to cover administrative costs of arranging your mortgage. Years ago, it used to be around the level of £300.
From about 2004, lenders started to get a little clever when they discovered that if they lowered their headline interest rates and craftily increased their arrangement fees to cover the difference, they would appear higher in the mortgage best buy tables.
According to mortgage brokers John Charcol, average arrangement fees increased by about 40 per cent in a few months from £339 to £480 and have increased ever since.
Recently, the HSBC set an arrangement fee of £7,699 for the lowest interest rate on a £250,000 mortgage. That is £3,850 per year or £321 per month for the two year fixed deal!
If a buyer only has a small deposit, they are likely to be stung with an arrangement fee. For example, the Abbey offers only one mortgage for those wanting a 95 per cent mortgage – and that has a £2,499 arrangement fee.
Many lenders will let borrowers add the arrangement fee to the mortgage – hence paying interest on that too, but at least it means borrowers do not need to find the money upfront. Unusually, the Abbey and the HSBC want the money upfront.
An even more expensive arrangement fee is arranged as a percentage of the money borrowed, so that can cost even more if you are taking on a larger mortgage. For example. the Alliance & Leicester offers a two year fixed deal with a 2 per cent “product fee”. On a £200,000 mortgage, even with a 25 per cent deposit, that would be a harsh £4,000. That is tough, meaning you could pay £4,000 every two years for the privilege of having a fixed mortgage interest rate.
Over the next few days, we will talk about the FSA’s role and what borrowers can do.
Sometimes, people take CeMAP training just so that they can understand for themselves the intricacies of mortgages and they don’t even take the CeMAP exams. Many landlords have taken our CeMAP training courses for this purpose.