Beware monster mortgage fees by Finance News Bulletin
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Published: 31/01/07
News Companies & markets Investing Power collection Campaigns Mortgages & homesMortgage featuresInsurance Consumer advice Broadband & phones Retirement economy & banking Credit & loans Small commerce Tax & wills Message boards Money blog gear & calculators Ask an expert Guides contrast & buyLenders are making it increasingly difficult for homebuyers to calculate which mortgages are cheapest
TAKE PART IN OUR SURVEY put on't miss your chance to tell us what you think of This is Money and assist shape our futureA ONE-MINUTE MAKEOVER If you only have one minute to study how to kind your finances, forget the rest and read this>> Our 8-step planFollowing the recent go up in the Bank of England base rate, some have increased preparations fees to a enormous £1,500 in order to keep their interest rates downMost also offer higher rates with a lower up-front cost and some even have several rates in between
This makes it almost impossible for homeowners to figure out what will be the cheapest for themThey can tell customers they have one of the lowest rates on the market, and can also boast about having fee-free mortgagesSome, such as Nationwide BS, have before offered four or five different rate and fee combinations Borrowers who do not want to plunge into their savings to disburse the fee add this to their mortgage and will be charged interest on it
The only real way to know which is best for you is to work out what the total cost of the loan will be during the term of the mortgageAs a rule of thumb, those with big mortgages are improved off paying the fee while those with lesser ones should pay the higher interest and avoid the chargeRay Boulger, from the brokers John Charcol, says: 'Some borrowers do not like high fees on code, even if they have a large mortgage and a high fee offers better value'As most mortgages let some free overpayments, if the fee is additional it is possible to pay it off quickly
' If you fail to pay off your charge early, it can end up costing you almost double if it is added to your mortgageFor example, a homeowner with a £100,000, 25day repayment mortgage at 525% would end up paying £800 extra interest in total if they additional a £1,000 fee to their loan This would initially put in £5 a month to their repayments
It is further complicated because some lenders also charge a fee that is a proportion of the amount you want to have a loan ofBM Solutions, part of Halifax, has two-year trackers following Bank of England base speed preliminary at 444% with a 125% fee, or 4
6% with a 1% fee Alternatively, it has tax starting at 474% with a £1,499 charge or 494% with a £599 charge
All these mortgages are available with a 10% put and allow you to repay 5% of the mortgage without penalty every two yearsMost lenders and some brokers have calculators on their internet sites which let you to input the size of your loan, the years remaining, the fee and the interest rate so you can contrastDavid Hollingworth, from broker London & Country, says: 'It seems that most of the mortgage lenders are infectious their breath They have a couple of options, but I think we will see them come out with more within the next month
'Mortgage providers are deliberately creation it more difficult to work out the true cost of a mortgage Legislation should be introduced so that the full yearly expenses and total costs are highlighted at the outset deteriorating this, there must be some smart software out there that calculates true expenses including the myriad of new add on fees that are being introduced© 2007 Associated Northcliffe Digital Ltd Terms Privacy policy Advertise with us LoansCardsMortgagesInsuranceCompare the most excellent deals around with This is cash
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No more cheap fixed rate mortgages - Published:20/02/07
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Beware a mortgage too far - Published:17/11/06
Concerns among debt-help groups that more unparalleled buyers are being tempted into dangerous mortgages just to get a foothold on the property ladder have reached a new high next the decision by High Street bank Abbey to loan up to five times joint incomeThese fears will have been further fuelled by last week's quarter-percentage direct rise in the base rate to five%But it is not just large-income multiples that reason concern The number of borrowers captivating out interest-only mortgages instead of repayment loans has risen by a third in recent months, according to broker Mortgages DirectDavid Hollingworth, broker at London & Country Mortgages in Bath, Somerset, says that mainstream banks and building societies will continue to be careful with their house lendingBut he adds that borrowers must ensure they take on only mortgages they can afford comfortably, particularly as interest rates are rising A further add to is likely early next year'Most lenders use affordability criteria rather than the usual three times profits multiples for deciding how much they will lend,' says Hollingworth 'It means that it is likely to get a mortgage of four times salary and more, but this only happens where circumstances are appropriate'Abbey will lend up to five times single or joint profits, but only where borrowers have a deposit of 25% or more, a household profits of at least £60,000, a near to the ground level of other debt and a good credit ratingMost other major lenders, including coalition & Leicester, Cheltenham & Gloucester, Halifax and Nationwide, use affordability as a measure of how much to lendNorthern astound has been lending up to 59 times joint profits since 2004, but only to high earners with near to the ground debt and where the borrower takes on a five-year fixed-rate mortgageWith an income-stretch mortgage, Darlington Building civilization allows professional and older borrowers with a important deposit and a fixed-rate loan to borrow six times income Alliance & Leicester, Yorkshire Building civilization and Cheltenham and Gloucester can lend in excess of five times profits for borrowers with the 'right profile'Halifax has a lending boundary of four-and-a-half times combined income while Nationwide's ceiling is 425 times joint profits'There are some people who will be comfortable borrowing five times their profits because they live a lifestyle which means they can afford it,' says beam Boulger at broker John Charcol'For others, it is not appropriate because they cannot cut back sufficiently to be able to have enough money it Borrowers require to ensure they don't overstretch themselves'A GROWING number of first-time buyers are opting for interest-only mortgages But a repayment mortgage, which pays off the capital as well as interest on the loan, is the only sure way of knowing that your debt will be empty at the end of the term, typically 25 yearsHollingworth says: 'Alarm bells circle when persons talk about interest-only mortgages, but it doesn't always have to be the wrong choice There is more risk than with a repayment mortgage, but for the right type of borrower interest-only can make intelligence'Some first-time buyers might start out with interest-only in the early years of their loan and make overpayments of capital each year at irregular intervals As long as they switch to a repayment loan within a few years there is small danger'Workers who receive large bonuses may also prefer interest-only loans, using their bonuses to disburse off chunks of the capital Most normal lenders allow payments of up to ten% of assets each year without penaltyThe danger of an interest-only loan is when a borrower makes small or no attempt to repay the capital and do not switch to a repayment loanBoulger says: 'Provided you are well-organized and know what you are doing it is fine, but interest-only is a more risky approach' Helen leak, 23, and her partner Carl Broaders, 28, from Bristol, have engaged out an interest-only mortgage on their novel flat, which they moved into last monthFor Helen, a exercise teacher, and Carl, who mechanism in sales, the interest-only route was the only way they could afford to buy a homeThey have taken a two-year repair with Intelligent Finance at 544%, which costs them £644 a month based on a £142,000 mortgage The same loan on a repayment basis would have price £877, currently high-priced for them'We're saving alongside the mortgage in a savings explanation, but our main plan is to switch to a refund mortgage in a couple of years when our salaries will have greater than before,' says Helen 'The interest-only mortgage has helped us get started Without it, we wouldn't have been clever to buy'university teacher't miss This is Money's mortgage tips - five ways to beat the speed rise and use our tables and calculators to create sure you've got the best ratesTHE days of taking out a mortgage over 25 years are long gone In a contemporary era of flexible loans, it is now possible to pay off a mortgage over a shorter occasion, or, if necessary, a longer termIncreasing the mortgage term brings costs down A £150,000 refund mortgage over 25 years, with a starting speed of 55%, costs £93186 a month Monthly repayments on the same loan over 30 years would be £86006, or £81218 over 35 yearsThe downside is that borrowers finish up paying a lot more interest over the period of the loanAlliance & Leicester, Nationwide and Halifax will all lend over 40 years Abbey and Northern astound offer loans over 35 natural life and specialist lender Mortgage Express, owned by Bradford & Bingley, can loan over 45 years'Most lenders will rent you extend your mortgage term provided you won't still have the money owing in retirement, although even then they will allow it if you can show you will be able to afford it,' says Melanie Bien, associate manager at broker Savills Private FinanceHundred% loans are also education their ugly skull And tomorrow, Birmingham Midshires, which is owned by HBoS, will launch a 125% mortgage This would be a dangerous option if house prices fallI think some persons are missing the point If the choice is an interest only loan assessment £500 per month or renting a flat for £500 per month, I know what I would decide At least with the loan the house is yours, the rental path is a lose lose situationchoose a loan term 12 months (1 day 24 months (2 years) 36 months (3 natural life 48 months (4 natural life 60 months (5 natural life 72 months (6 natural life 84 months (7 natural life 96 months (8 natural life 108 months (9 natural life 120 months (10 natural lifePlease select a type of cover Life cover Home and contents Car Breakdown services Health - 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