Pitfalls of Having a UK Home Loan
We hope in this section to guide and inform you of the pitfalls of getting a UK home loan. Which lender will give you the best deal and who will charge you the most. Here are our top five concerns that you need to look out for when making the decision of who lends you your home loan.
Arrangement Fees
You will be charged an arrangement fee no matter which lender you go to but some are worse offenders than others when it comes to hidden charges. The cost of an average arrangement fee went from #339 to #480 in the last half of 2004, that’s an increase of 42%. One company, Northern Rock, has increased their arrangement fee from £495 in June 2004 to £695 in February this year. That is a staggering £200 increase in eight months. If you already have a mortgage and you are at the end of your discounted or fixed rate then switching to another deal with the same lender will be difficult as most lenders decline in giving their best offers to existing customers. Some companies charge a non refundable arrangement fee. These companies are Abbey and Nationwide. It is a lot of money to lose if your deal does not go through.
Exit Fees
Comparing exit fees of different lenders is a good idea if you are thinking of switching your mortgage. More and more companies are increasing their fees with Abbey setting their fee at £225 from £99 and Alliance & Leicester going up to £295 from £195. Some companies don’t charge you anything to switch mortgage so it is becoming seemingly hard for companies to justify their actions in increasing their fees if charging them at all. Nationwide was one of the companies that didn’t charge but in May from this year they have started charging £90 which is relatively cheap compared to some companies.
Higher Lending Charges
First time buyers beware. Being a first time buyer you are probably going to borrow a larger percentage of the property value therefore incurring the higher lending charge. Typically it is around the 90% mark where companies will start these charges. Newcastle Building Society start charging at 85% and Lambeth, Darlington and Cheshire building societies start charging at 80%. The companies which don’t charge you for borrowing a higher percentage are Northern Rock, intelligent Finance, Standard life, Co-operative Bank, Woolwich, Nationwide and Standard life.
Insurance Tie-In
Many companies charge you if you don’t take their buildings insurance. Northern Rock, Alliance & Leicester and Bristol & West all charge you £25 if you do not take out this insurance knowing that you can get better insurance elsewhere.
- - article about payment protection insurance
- - calculating the true cost of this insurance.
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Annual Interest
It is more expensive to go to a lender which calculates your interest annually as you will be paying interest on payments that you paid months ago. The companies which still charge you annual interest are Portman and Alliance and Leicester. Most companies now however calculate your interest daily lowering your interest and debt.
Why are Banks and Building Societies incurring such charges? With the way in which customers are looking for the best rates companies have to find new ways in which to make a profit. There are many more hidden charges to look out for when looking for a home loan and it is researching on your behalf that will ultimately give you the best deal out there.
