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Step 3
Watch for the fees. Taking out a good value discount mortgage won’t necessarily be cheap. Financial researcher Moneyfacts says that application fees on almost every mortgage have soared in recent years. Some lenders have actually doubled their charges since 2003 and typical arrangement fees can be as high as £799 for the best deals. Some lenders have also introduced percentage based fees – you pay, say, 1 per cent of your mortgage value instead of a fixed fee which can work out far more expensive. ‘The challenge for borrowers is to work out which deals offer the best overall value,’ says mortgage expert Sean Gardner of Money Expert. ‘A higher fee may be worth paying if you get a much lower rate. But on lower mortgage balances your total payments over, say, two years may be lower if you pick a deal with a lower set-up fee even if the monthly payments are slightly higher.’ The trick is to add up the total cost of your mortgage over the length of the discount to find the best deal. Include all the set-up costs, from application or booking fees to valuation and legal costs. Plus, of course, 24 monthly payments for a two year deal and so on.
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