Don’t Forget The Extra Hidden Costs Of Getting A UK Mortgage
For most of us, buying a new home is both one of the most exciting and stressful times of our lives. It goes without saying then that this is not a particularly good time to find out that you may be facing a bill of thousands of pounds in extra hidden costs for getting the mortgage to buy the UK property. Unfortunately, however, that’s exactly what might happen. The following is an outline of some of the hidden costs you might be expected to face when getting a UK mortgage.
Many UK mortgage lenders charge their customers an application fee for applying for a mortgage. Most of these mortgage lenders will make the fee conditional on your UK home mortgage loan being approved, but you should be aware that this fee can eat up more than £500 out of your home buying budget. So make sure you account for this.
Mortgage Indemnity Premium
If you’re looking to put down a relatively small down-payment on your new home (less than 25%), you should expect to find that your UK mortgage lender wants you to pay a mortgage indemnity premium. Basically, a mortgage indemnity premium insures the home mortgage lender in case you fail to keep up with your monthly mortgage payments. Keep in mind, however, that this mortgage indemnity premium is not a compulsory fee, it is basically an additional insurance premium charged by your UK home loan provider simply to give them ease of mind. So if you don’t want to pay this additional fee, shopping around for a UK home mortgage provider who’ll agree not to charge this.
Redemption and exit fees
Most UK home loan providers offer fantastic 2 or 3 year fixed interest deals that help convenience us that we can afford to buy our new home today. Unfortunately, however, these deals don’t last forever and before you have finished painting the new bathroom you’ll find that you home loan account has become a standard variable rate mortgage – subject to such nasty fluctuations as interest rate rises! You may well be tempted to either re-mortgage your home on more favorable terms or look to increase your monthly repayments to try and repay the home loan faster.
Well, hold that thought, because most UK home mortgage providers are well ahead of you and will invoke a penalty charge if you do either of these. The biggest and nastiest shock with this fee is that it is usually indexed as a percentage of your mortgage amount – so the amount can be considerable indeed. The lesson here: when looking at promotional offers being advertised by UK home loan providers, read the small print to see how much it’ll cost you to get out of the deal if a better one comes along.
When your UK mortgage loan is approved you’ll likely find that there are a string of insurance premiums that you’ll be expected to pay. First there is life insurance, so that the mortgage can be repaid in the event of your debt, then there is building insurance, so that the home loan can be repaid in the case of a natural disaster and your home falls down, then there may well be home content insurance, to insure the contents of your home in case anything gets stolen. Some of these you’ll not be able to avoid – but check to see you are getting the best deal for you as most UK home mortgage lenders will use this opportunity to cross sell other products they offer.
Finally, keep in mind that in addition to all of the above fees, if the value of the house you end up buying is over £125,000, you will also have to pay the government stamp duty. Although stamp duty is progressive, depending on the value of the home being bought, this sum can be considerable.