Mortgages and what to consider

When you’re looking to move house, it’s very easy to focus on the obvious items that will come in as bills for you to pay, such as the survey on the property, the fees for the legal considerations by your conveyancing solicitor, the removals company and a number of other factors that all add up to make moving home an expensive project.

But there are other aspects of buying a new home that you need to consider that are not always immediately obvious. And particularly so if you are looking to purchase the property with the help of a mortgage loan.

When you are searching around for a mortgage, it is always very easy to be seduced by the headline interest rate of the loan that the provider is offering. But you also need to look closely under the covers to see what will be the total cost at the end of the process.

According to an investigation by consumer association Which?, they found that around 60% of the fixed-rate mortgages they investigated come with upfront fees, sometimes meaning that what looks like an exceptional deal can end up costing you thousands of pounds more than you realised.

Mortgage fees, says Which?, are often given benign names such as arrangement, completion or booking fees, with the average amount being charged coming in at £1,000. Some lenders, the organisation goes on to say, charge a percentage of the amount of the loan borrowed as the fee, rather than what others do which is to opt for a flat fee across the board. This means that the more you borrow the more you are going to pay in fees.

Therefore, it makes great sense to do a bit of homework and research what you’ll actually be paying when it comes to mortgage repayments so that you won’t have any unpleasant surprises further down the line.

As for comparing what mortgages are available, Which? offers this advice:

• Consider a mortgage broker – while doing your homework on what mortgage product – and its associated cost – is the best fit for your purposes is an important part of moving home, there is a huge investment in your time needed to do the job properly and do the process justice. 

There are over 2,000 products, say Which?, some of which can be immediately discarded but still leaving a large number to wade through. 

A mortgage broker will have the up-to-date information and knowledge of the mortgage market and will therefore be able to advise you on the best option for your needs. 

Bear in mind that a broker will charge for the service so this needs to be balanced against the time and effort you’ll be putting in otherwise.

• Repayment charges – sometimes it’s nice to have the satisfaction of paying a little bit extra from the mortgage with a long-term view of paying the total mortgage off early.

However, with many fixed-rate mortgages, there is likely to be a repayment charge, which means that you’ll have to pay extra in the event of completing your mortgage early – even if you move house and decide not to transfer the mortgage product to the new property.

Therefore, Which? recommends considering taking out a shorter-term mortgage loan if you are planning to finish early or are likely to be moving again in the next few years.

• Lenders and customer service – Which? thoroughly recommends choosing a lender with an acknowledged high level of customer service.

Because of the huge financial commitment, in the event of anything going wrong, you’ll want the problem to resolved as quickly and as efficiently as possible. If they have a reputable customer service record, it is highly likely that they will solve your issues with minimum fuss as they occur.

Finally, organisations such as Which? regularly survey mortgage holders and analyse the offerings from each company, so that there is clarity on what products there are and what they will mean and cost to the consumer. 

To this end, you might want to check through Which?’s findings on the best mortgage lenders.