UK Mortgage Fees Rise

UK mortgage fees have risen considerably in the past few years despite low interest rates and high levels of mortgage market competitiveness. The rising UK mortgage costs include both the fees applied to the mortgage upon application and upon redemption.



The cost of applying for a UK mortgage has risen considerably in the past three years alone - in addition to a steady increase prior to this period. The hike in application fees has occurred despite UK mortgage lenders cashing in on increased earnings via interest collected thanks to soaring property prices and increasing average mortgage balances.



In addition to the increase in UK mortgage arrangement fees - the cost of exiting a mortgage - has risen considerably within the same three year period.



The cost of redeeming a UK mortgage during a fixed interest rate period can be as high as 5% of the balance of the mortgage. A UK mortgage that is redeemed without an early repayment charge can still cost the borrower several hundred pounds, particularly if there is a remortgage involved.



Lenders seem to be attempting to find as many different avenues as possible to add extra fees on to mortgage products. When one set of fees decreases, application fees for example, another set of fees such as redemptions penalties will increase. It is clear that fees are a necessary income stream for lenders so it is difficult to foresee a time when they will stop increasing.



This is particularly the case because a more competitive UK mortgage market has lead to a situation in which lenders must compete on the interest rates they offer.



This means that they are no longer deriving all their income from the interest they charge. Home owners have benefited from the increased competition through lower interest rates, however, this has not translates into lower mortgage fees.



Because fees now comprise a significant expense to borrowers it is important to include them in any mortgage comparison when assessing which UK mortgage is the best for their particular circumstances. It is no longer good enough to simply compare the headline interest rate.



The true cost of a UK mortgage is demonstrated by the Annual Percentage Rate (APR). The APR presents a truer representation of the true cost of a UK mortgage than the headline interest rate meaning that the lower the APR, the more cost-effective the mortgage is.



However, it is still not good enough to base a decision solely on comparing APRs of competing UK mortgage products. Other factors, such as the service levels of the lender and the flexibility of the UK mortgage, should also be taken into account.



Selecting the right UK mortgage product can be a confusing task so it is a good idea to speak to an independent mortgage broker for impartial advice if required. An independent mortgage broker will have specialist software that can scan the entire UK mortgage market to help select the right product to suit an individual's personal financial circumstances. Remember - the APR will not tell the whole story so pay attention to the fees that are charged when selecting your next mortgage.

How To Obtain The Best Offset Mortgage

This article will briefly discuss what an offset mortgage is; and how an independent mortgage advisor can help you buy the best offset mortgage.



An offset mortgage links your main current account and/or savings accounts to your mortgage. Every day or month, the amount owed on your mortgage is reduced by the amount in these accounts, before the interest is calculated on the loan. When the money in your savings/current account increases, you pay less on your mortgage.



If the money in your savings/current account decreases, you pay more on your mortgage.



When it comes to finding the best offset mortgage, it pays to have expert advice because there is more to a mortgage deal than meets the eye. Your mortgage will probably be the largest financial commitment in your life, and it pays to take time to look at the different options available to you.



There are different types of offset mortgages available on the market.



You could look at 'best buy mortgage tables' to find the best offset mortgage, but that only gives you superficial information. It doesn't show you the mortgage's flexibility; i.e. the ability to underpay, take payment holidays, or overpay, or what the fees and charges are. In the last couple of years, fees for mortgages have increased. Fees can be in excess of ฃ1000, and several mortgage providers are now charging fees as a percentage of the sum being borrowed, for example: a 2% fee on someone borrowing ฃ120,000 on a new low two-year fixed rate deal would pay ฃ2,400.



Once fees are taken into account, the best offset mortgage deal may not be the one with the lowest interest rate.



Recent research has shown that the best offset mortgage is not necessarily offered by the top 10 biggest mortgage lenders. The top 10 mortgage lenders offered only 11% of the best 250 mortgage deals available on the market, despite the top 10 having more than a 60% share of the mortgage market.



To guide you through this myriad amount of information available, an independent mortgage broker will give you impartial advice about the best offset mortgage, as they have comprehensive knowledge of the mortgage market. A mortgage broker is fully authorized by the Financial Services Authority (FSA) and they have the necessary qualifications to advise you.



Your mortgage broker will perform a 'factfind' to learn about your financial situation and circumstances, and your wants and needs.



Your broker will assess your ability to repay the mortgage, your credit history and credit scoring profile. Offset mortgages are usually calculated on an affordability basis and not on a simple income multiplier, which allows people with ad hoc financial income, such as a self-employed person, to possibly obtain a larger mortgage than with a standard, more traditional mortgage. All of the information you provide will help your broker obtain the best offset mortgage available for you on the market.



After the best offset mortgage has been sourced for you, your independent mortgage broker will provide you with written details about the mortgage, which will include:



- How much you want to borrow

- The type of offset mortgage you're interested in

- A description of the mortgage; who the lender is and the interest rate

- Overall cost of the mortgage including the fees

- How much your payment would be if the interest rates increased

- The flexibility of your offset mortgage



An independent mortgage adviser will answer any questions you have and ensure you have all the necessary information about the mortgage market.



It is worth spending time with them, as they are there to help you find the best offset mortgage.Resources

A Guide to UK Buy to Let Mortgages

Essentially there is little difference between the process that one follows for a buy to let mortgage in the UK than there is for any other type of mortgage. The lender still has to consider your credit worthiness, the value of the property, how much down payment you can afford and all of the other usual considerations. However, in addition, the lender will usually be interested in what the market is for letting properties in the same area as the one that you are thinking of investing in.



The lender will look at property taxes and average rents for similar properties. Other than those particulars, however, the process moves along nearly the same.



A buy to let mortgage can be arranged for either commercial or residential property. Terms can range from between five to forty-five years. There are fixed and variable interest schemes available, and the lender takes an interest in your property just like with any other mortgage so your property is still at risk if you fall into arrears.



One difference is that a lender will consider your potential cash flow from rental income as part of your available money to repay the loan under some circumstances.



Because not all lenders view buy to let mortgages as a risk that they are willing to take, your best route is to choose a mortgage broker who specializes in buy to let schemes. This way you have the best opportunity of getting you application reviewed by the largest number of lenders who are likely to make a decision in your favor.



Since you do not have to pay a fee to engage the broker there is no reason not to take advantage of their services.



Before you buy



You should work with either a commercial or residential real state broker, depending upon the type of property you are looking to invest in, who understands the buy to let market in the area that you are considering. Choose an agent who is bonded and who has a large portfolio of potential properties for you to review.



Have your broker help you choose areas that are compatible with the type of property that you want to buy.



Choose property that matches the needs of the area. For example, you might find it hard to fully let an office building in an area that is used primarily for light manufacturing. Likewise, a warehouse might not go over well if it is surrounded by an office park complex. If you are thinking about purchasing residential property with your buy to let mortgage then make sure that you look in neighborhoods where there are already properties for let. It may be very hard to let a home in a neighborhood populated exclusively by high-income home owners.



Planning your cash needs



You should also determine the maximum that you are willing to spend to buy property. Besides considering the purchase price you will need to determine your available down payment and other expenses such as the services of a solicitor, stamp duty, survey/valuation fees, broker fees etc. You should also consider after-purchase expenses including remodeling to make the building fit for its intended usage, utility deposits and agent's fees if you plan to use a letting agent to attract and vet tenants.



Other expenses are sure to include insurance, routine property maintenance plus ground rents (if applicable) and property taxes. Usually your tenant is responsible for utilities after they move in as well as any Council Tax, TV licence fees, and the like.



Consult with your accountant



In many cases there are tax allowances and deductions which can be taken against rent that you receive. Your usual and customary expenses, including maintenance, insurance, cleaning and landscaping, as well as other recurring expenses likely apply.



While you may not deduct the actual cost of your initial improvements, subsequent repair and replacement of those improvements likely will be deductible. In some cases you can take a flat 10% of the rent as a deduction against normal wear and tear. The tax maze can be very complicated so be sure to let your accountant help you navigate it.



During the buy to let mortgage loan process



If you are using a mortgage broker then you will not have to jump at the first approval that you receive.



The chances are you will be presented with multiple offers. Read each one over and set aside the ones that are so far away from your expectations that even intense negotiations could not make the offer better. Re-read the remaining offers and make a list that details the good and bad points of each one. Send the offers and your list to your solicitor and have him review the contract and your concerns.



Once you are through with that step its time to negotiate. Depending upon the level of service that your broker provides you can either have them handle the negotiations, or you can hire your solicitor, or you can do it yourself.



What can/should be negotiated? Anything from the term of the loan to interest rates, pre-payment or early cancellation fees, payment due dates, lender's fees, fixed and variable interest rates, items of concern found by your solicitor and anything else that doesn't strike your fancy the first time out. There is no risk to attempting to negotiate and you can always be sure that you will NEVER get what you want if you don't ask for it.



Buy to let mortgages used to be very hard to obtain and only people who didn't really need the money were able to get approval.



This is no longer the case. Competitive lenders, especially those lenders who work with buy to let mortgage brokers, realize that the market for residential and commercial property letting is on the rise again. Now is the right time to find a broker and get busy building your investment portfolio of properties.



About the Author



Commercial Lifeline are independent Commercial Mortgage brokers saving you money on your Commercial Mortgage and Bridging Finance through lender choice.



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