Saving up for a mortgage is at the top of the list of expenses for anyone who has their heart set on purchasing a house for the first time. Prospective buyers, however, are not usually aware of the many other costs associated with mortgages. These costs need to be carefully thought out before taking out a mortgage to help the buyer work out the fraction of savings that can be used as deposit for the house.
Mortgage providers require you to save at least 5 percent of the total cost of the house you want to acquire. As a prospective buyer, you ought to save as much as possible for the deposit. This is because the more deposit you are able to pay, the better the rate you get from the mortgage provider. For instance, a buyer who pays a 10 per cent deposit on a mortgage gets a better rate compared to one who pays 5 per cent.
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Mortgage booking fees
Some lenders charge mortgage set up fees to set aside funds on either a fixed or a tracker deal. In most cases, this fee is refundable if the mortgage falls through prior to completion. A prospective house owner ought to check the lenders’ terms and conditions before deciding whether to take out a mortgage.
Mortgage arrangement fees
Some mortgage products incur an additional upfront fee, the “arrangement fee”. This fee is usually set by your lender and can be paid upfront or added to your mortgage amount. It is vital to check your options with your lender before you take out the mortgage and decide on the best time to pay the arrangement fees so as not to inflate your mortgage payments.
Mortgage account fee
This fee is usually charged by your lender to cover the set up, close down and maintenance costs of your account. Failure to pay this fee means you have to pay an exit administration fee when you repay your mortgage. If possible, it is advisable to settle this fee with your lender as you take out the mortgage to avoid additional costs in the latter stages of mortgage payment.
Mortgage loan insurance
If you are putting down a deposit less than 20 per cent of the house value, you will need a mortgage insurance loan. Depending on the lender, the premiums can be added to your mortgage payments. Ensure you consult your mortgage provider on loan insurance before taking out the mortgage.
With all these in mind, it is important to know that fees vary by mortgage size, lender and the value of property. Prospective buyers need to check all of the above before they decide to take out a mortgage. It is advisable to pay these fees upfront to avoid mortgage payment inflation.