Count the cost of mortgage fees ñ or pay the price

Having recently spent the equivalent of an average annual salary on moving home, I am aware of the growing costs associated with buying a property and the need to budget carefully.

It will certainly be some time before I decide to up sticks again as the move cost me a staggering five figure sum – and that’s not including the purchase price of the actual flat.
This is an alarming amount of money to spend on moving home, but the reality is that estate agency fees, Stamp Duty, and mortgage costs soon add up.

Perhaps my one saving grace is that I budgeted carefully before I took the plunge and so at least I did not experience any nasty financial shocks along the way. The hard work paid off and I moved into my new abode in London, just moments away from my job at The Daily Telegraph.

With this expense in mind, I would advise anyone who is thinking about moving to sit down with an excel spreadsheet and draw up a list of all possible costs. An exciting night in it may not be, but this approach will pay dividends as you get closer to your moving date.

It is important to include all non-mortgage related costs in your budget, such as the cost of removal men, as well as your mortgage-related costs.

The costs associated with getting a mortgage are on the increase and so borrowers should do their financial homework or risk become unstuck along the way.

It may be tempting to overlook relatively small amounts of money, such as an average minimum cost of £200 for valuation fees, when spending several hundred thousand pounds on a new home. But you need to be aware of the costs, at what point in the house moving process you need to pay then, and where the money is going to come from to cover them.

As the table shows, there are a host of different costs from a lender’s administration fee to a so-called telegraphic transfer fee, which covers the cost of transferring funds electronically if you requested this type of transaction upon completion of your mortgage.
Exit fees, which are charged for ending your mortgage and moving to another lender, are another fee for borrowers to watch out for. However, a clampdown by the Financial Services Authority means exit fees are not as high as they used to be.

Mortgage fees to watch out for

1. Valuation fees – average minimum cost £191 – charge for a formal valuation of your property. Costs rise on the size (and therefore value) of your home
2. Homebuyer fees – average cost £345 – fee for completion of a more through survey than mandatory basic valuation survey. Recommended by the Royal Institute of Chartered Surveyors
3. Reinspection fees – average cost £585 – charge for a revaluation of your property, normally takes place if you refurbish your home or make small, basic extensions.
4. Administration fees – average cost £108 – fee for associated admin works (eg.filling in forms, compiling documents, research, financial transactions, etc) that can be added to a variety of functions performed by the lender
5. Deeds release fee – average cost £72 – charge for returning your deeds forms (documents declaring ownership of a property) to your solicitor. Can be known as a discharge fee
6. Porting fee – average cost £118 – quite rare, especially if you don’t borrow additional funds. Charge for transferring your mortgage to a new property in the process of moving home
7. Telegraphic transfer fee – average cost £300 – electronic funds transfer fee if you request this form of transaction upon completion of your mortgage

Unfortunately, the same cannot be said for arrangement fees, which have soared in recent years – many of which are now more than £1,000 each.

The worrying trend is that there seems to be no stopping how far lenders are prepared to increase their arrangement fees.

For example, last year Abbey launched a fixed arrangement fee of just one penny short of £10,000.

How can it possibly cost a lender this amount of money to arrange a mortgage?
Abbey said at the time that the product was launched that it was "acceptable", saying that the money is used to offset the cost of arranging a mortgage and to allow it to offer customers a choice. The product was later withdrawn.

Borrowers should be aware of these costs and determine for themselves whether they are acceptable or not. It is only by borrowers voting with their feet that they will encourage lenders to provide the most competitive deals.

By Myra Butterworth

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