Have You Read The Small Print?

There are more to mortgages than affording your repayments once a month. Many leading lenders have now introduced an array of new charges – safely hidden away within the small print - which the majority of property owners are completely unaware about.

Similarly old charges too have undergone dramatic changes over the last year, increasing significantly in price.

If you are unsure of all the charges applicable to your mortgage, then property advisors strongly recommend that you bear in mind the following:

Moving From Interest-Only To Repayment Terms (Vice Versa)

Previously free, most lenders now charge administrative costs. Lloyds TSB and Cheltenham & Gloucester charge £77, Abbey and Northern Rock charge £75, whilst others offer average charges of £50-£75.

Modifying Your Mortgage Term

Whilst shortening the length of your mortgage can dramatically cut the cost of your total repayments, changing the length of your mortgage from 25 years to 21 years for example is no longer free. Most banks and building societies for example now charge on average £50+.

Needing Extra Paperwork

Should you wish to duplicate your statements, Abbey for example charge £25 to duplicate and £35 to retrieve and copy documents. Others will charge at least £15, although some lenders will give you the option to access your account online so you can print them off for free.

Letting Your Property Investment

The recent rise in accidental landlords has prompted many lenders to introduce fees such as ‘consent to let’ and increased interest rates for those leasing their own homes. The lowest you’ll find is Skipton Building Society who offers a consent fee of £100 and interest rate increases of only 0.5%-1% depending on the size of your loan.

Changing Your Home Insurance

It may be easier to take out home insurance with your lender, but these are often 33% more expensive than those on the open market. For example if you buy a policy independently, many lenders will charge you £25, whilst the likes of Barclays, NatWest and Tesco will offer a £25 bonus to anyone who becomes a new insurance customer.

Going Into Arrears

Lenders are currently under investigation by the Financial Services about how they handle property owners who fall into arrears with their mortgage. However, until a conclusion is found these additional penalties will continue:

• First letters about arrears start from £10 (C&G)
• Unpaid direct debits cost £30 (Northern Rock)
• Costs for instructing external debt Counsellors start from £100
• Penalties for borrowers in arrears cost £40 a month
• Similarly, most lenders will add several hundred pounds to a property owner’s bill once repossession takes place.

Original Article

More About the Author

Peter Franklin, Property Mentor Delegate

I used to believe stocks and shares were the only way forward, yet after 15 years of property investing, neither of these can compare with the sheer velocity or impact that property investment can have on your bank account. Only with property can you truly experience the power of being in control of immediate cash flow AND capital appreciation. Stocks and shares simply cannot compete. Read more