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This section outlines the various fees that lenders charge to bump up their profits.
It is important to know what these are and how much you should expect to pay before making a decision. The section covers fees at the beginning of the mortgage, including the mortgage set-up fee (which is charged on nearly all mortgages) and the higher lending fee (which is only charged if you borrow a high loan-to-value percentage) as well as fees at the end of a mortgage, such as the mortgage exit fee.
Perhaps the most important type of charge to understand is the early redemption penalty, which can keep you trapped on an uncompetitive rate of interest and result in much higher mortgage payments than are necessary.
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In addition to the basic cost of the loan, which is determined by the interest rate, mortgage providers have devised a number of different fees to help bump up their profits.
However, the size of these fees can vary significantly while some are actually completely avoidable. It is therefore very important to check exactly what fees you are being asked to pay before selecting a mortgage.
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What?
Also known as a mortgage reservation fee or mortgage arrangement fee.
This is to cover the administration costs involved in setting up your mortgage.
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What?
Also known as an additional security fee, a mortgage advance premium or a mortgage indemnity guarantee (MIG)
This is a type of insurance. It covers the mortgage-lender should your property be repossessed and the sale of the property is not enough to cover the value of the loan.
It is therefore for the lender's benefit (not yours) – if you default on your loan the lender will still want their money back. However, some mortgage offers will not be open to you unless you are willing to pay for this cover.
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What?
Also known as discharge fee, a redemption fee, a deeds fee or a sealing fee.
You may want to pay off your loan because you want to switch to a different mortgage provider or because you now have the money to pay off your loan in its entirety.
However, when you want to get out of your loan within a predefined period your mortgage lender may charge an early redemption penalty.
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What?
Also known as a sealing fee, a discharge fee, a redemption fee or a deeds fee.
This comes at the end of your mortgage and is to cover the administration costs associated with clearing your loan.
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Mortgage providers are very ingenious when it comes to making money and have devised numerous other fees that they can charge you during the life of your mortgage.
Anything that results in a tiny bit of extra work for your mortgage provide is likely to incur a fee. Some to watch out for are:
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