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.

Mortgage Tips For The Frantic

It is a curious fact of human nature that people will haggle over the price of an umbrella, but buy a house on a whim.



We understand small amounts of money; we know what they can buy. �200,000 is harder to grasp; you can't fit it in your pocket. The desire to acquire, combined with the stress of the purchase, can make people do funny things. With this in mind, here are a few tips to review when getting a mortgage.



Watch out for the 'Deal Of A Lifetime', the deal that seems too good to be true.



The company may be saving money by cutting back on their level of service.



When getting a fixed rate: get a written statement which details the interest rate, how long the rate is fixed for, and the conditions attached.



When interest rates fall: try and leave your repayments as they are. You will therefore be paying more than the minimum each month. You'll repay your loan much earlier. When rates rise again you may not have to change your payment.



Consider a fifteen or twenty year term. Try to pay off your mortgage quickly.



Use a mortgage calculator with an amortization function, and see what's possible.



Keep your mortgage as small as possible. Aim for *comfortable* affordability.



You will find mortgage lenders who will stretch your qualification ratios. They aren't doing you a favour. The qualification ratio is the ratio of your total mortgage payment to your total income.



The traditional ratios are: The mortgage payment as 28% of your income; the total of your mortgage payment plus your monthly debt payments as 36% of your income.



Try not to 'churn' your mortgage. Each time you refinance you'll probably incur completion costs and non-refundable fees.



Beware of prepayment penalties. Many 'no fee' credit lines have a pre-payment penalty. This can be very expensive if you are planning to refinance or sell your house in a few years time.



You don't need to sign a mortgage agreement which contains any significant prepayment penalty, if you have good credit. One of the smartest things you can do with a mortgage is to prepay it.



Don't look for a home without being pre-approved. You will have much more negotiating power with the vendor, and may be able to save thousands of pounds.



Get a full, professional survey. Human beings can be perverse; happy to spend �150,000 on a house after a half-hour viewing, but be-grudge spending �500 finding out whether it's worth buying in the first place!



Find out the true value of your home. Get more than one independent appraisal. Compare it with the prices of similar-sized houses for sale in the same area.



Start gathering documents. Provide your mortgage company with documents in good time; don't let your rate lock expire!



Verbal (oral) agreements are worthless. When buying or selling property, always get it in writing.



When you do get your mortgage, check your payments are correct - do the mathematics. There's a one in ten chance you could be paying more than you should.



Review your mortgage regularly - this, and possibly remortgaging, will ensure you pay as little as possible in interest.



Finally, consider the following advice from the U.S. Department of Housing and Urban Development:



Be sure to read and understand everything before you sign;



Refuse to sign any blank documents;



Do not buy property for someone else;



Do not overstate your income;



Do not overstate how long you have been employed;



Do not overstate your assets;



Accurately report your debts;



Do not change your income tax returns for any reason;



Tell the whole truth about gifts;



Do not list fake co-borrowers on your loan application;



Be truthful about your credit problems, past and present;



Be honest about your intention to occupy the house;



Do not provide false supporting documents.



A mortgage is the biggest financial committment most of us will ever make; worth spending a little time on, to get it right!