11 Kasım 2007 Pazar

Fees and charges

Lenders expect borrowers to pay higher fees and charges for adverse credit loans. Often you can roll these into the mortgage loan, although you will pay far more over time after the extra interest charges. Application fees, for example, can cost thousands compared to average application fees of £5-600 for a standard mortgage.
Another question to ask your mortgage adviser
Is my mortgage large enough to make it worth paying a higher fee?
If you plan to borrow over £82,000 it is probably worth paying a higher mortgage application fee to save money on a lower mortgage interest rate.
This is because the break-even point, or the size of your mortgage where neither the cost of the interest rate or upfront fee outweigh the other is £82,000, say mortgage adviser John Charcol. Put simply, if you take an £82,000 mortgage with a three year fixed rate deal over 25 years at an interest rate of 4.99 per cent, you pay £485 a month which is £17,460 over three years. Add the £495 arrangement fee and the total is £17.959.
The same amount on a rate of 5.29 per cent, with an arrangement fee of £499 costs just £5 more over three years.
Watch out for loans with overhanging redemption penalties that lock you into the mortgage after the initial deal ends. Tie-ins cost borrowers thousands of pounds in penalty payments each year.
Mortgage deals with a low initial repayment may be tempting. But you can find yourself between a rock and a hard place if you lock yourself into a rate which leaps £300 a month after a year and the only way out is to pay a £4,000 penalty.
On a final note, be wary of mortgage advisers charging what feels like extortionate fees to arrange your mortgage.
Some advisers charge no fee at all for the same service, because in most cases, mortgage advisers receive payment from the mortgage lender for putting your business their way.
So always shop around before you commit to an adviser or a loan, no matter how desperate you are to sort out your finances.

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