Don't Lose Sight of Mortgage Fees

With mortgage rates at all time lows, now could not be a better time to think about your options whether you are looking to climb up the property ladder, remortgage or simply buy your first home.

Securing a cheap mortgage deal will undoubtedly result in lesser mortgage payments, however it is not just the headline rate you need to take into account. There are several other components of a mortgage you need to think about before making that all important decision, none more so than the fees you will encounter which take many by surprise.

In recent months several providers have launched some of the most competitive rates the market has ever seen, with the average two year fixed rate deal having fallen to an unprecedented 2.97%, To add to this, there are also plenty of other great deals in abundance which are making the headlines.

For example, last month saw HSBC introduce a five year deal at 1.99% and the Co-Operative Bank launched a record low two year fixed at just 1.09%, with a deposit required of 40%.

As borrowers come to the end of their fixed rate deals, many will look to remortgage to avoid moving onto their lenders standard variable rates (SVR’s), which can often see their repayments escalate.

Do your homework

It is important however to be wary that these cheap mortgage deals often bring with them hefty fees, typically around £1,500, the deals highlighted above being notable examples.

As a consequence, it could not be more paramount to take account of this and carry out some calculations which will give you an idea as to whether the amount you will save in repayments will not be overshadowed by the higher product fee. If you are thinking of adding the fee to the mortgage loan, you will need to take into account that you will also be paying the interest on the fee, adding to the overall cost of your loan.

With this being said, there is some good news. Recent figures released by the research group Moneyfacts indicate your average fees have reduced between £668 to £681 during the last month. Further to this, there are several deals out there which come with no fees whatsoever, and although these rates may not be as attractive, for some the prospect of not paying a fee may sound very appealing.

It is worth noting that the lower rate deals are usually targeted towards borrowers who are able to put down a large deposit, so the importance of seeking impartial mortgage advice is crucial in finding you the right deal tailored towards your own financial circumstances, as well as providing a “true cost” rather than simply being drawn in by the market leading headline rates on offer.

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