What's in a mortgage?

More is involved in moving house than the average first-time buyer might think. A mortgage isn't just a large loan which you happen to spend on a place to live; there are many different fees and charges which need to be taken into account when looking for a new home.

Some people decide to use a mortgage broker to help them find their best deal; these will usually charge a fee for their services. You may be able to avoid this cost by looking online; most mortgage lenders will have their current deals on the internet.

The mortgage booking fee is charged by the lender, and covers the administration costs of setting up your mortgage. Average costs can be between £300 - £600, but if you go for a special low-rate interest mortgage deal the admin fee can be as high as £3000. If you add this fee to the overall mortgage and pay monthly, you'll substantially increase the repayments. Better, if you can, to save up and pay this fee outright at the start.

A valuation fee is also payable to the mortgage lender, and is used to pay for an independent surveyor to assess the property and determine if it is worth the asking price. The price of this can vary between lenders and will also depend on the value and asking price of the property. You can commission a more in-depth survey yourself if you have concerns, as the one done by the lender only covers the basics.

Although they're quite hard to obtain, high-percentage mortgages can be subject to a higher lending charge. If you're borrowing a large percentage of the property value – around 95% or more – the lender may add this charge as added insurance in case you later struggle to pay off your loan and they have to sell your house at a loss. This may be avoided by either finding a lender who doesn't apply HLC, or by taking the time to save up a larger deposit, thus reducing the amount you need to borrow. The HLC will depend on the lender, the amount of your deposit and how much you want to borrow.

If for some reason you need your mortgage to go through quickly, you can pay your lender something called a 'telegraphic transfer fee'. This is charged by some lenders for transferring your mortgage funds to your solicitor within a day. The charge is typically in the region of £40 - £50. Naturally, this can be avoided if you are prepared to be patient.

You are also subject to a fee when you pay off your mortgage. If you are in a position to pay off the balance early, you could be charged a substantial amount to compensate the lender for the loss of interest they would otherwise have gained throughout the term. Typically this is the equivalent to one or two month's interest, but it can vary and some lenders don’t charge this fee. If your mortgage goes to term you may be charged exit admin fees – usually between £75 - £300 – after your last payment. This covers administration costs to your lender when your mortgage is complete.

Finally, don't forget about all the costs incurred in the actual moving; things like estate agents fees, stamp duty and other legal fees all need to be paid. You can save money with your move by packing and transporting your belongings yourself, or finding a few kind friends with vehicles!

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The actual total mortgage charges will vary, but make sure you are aware of all applicable fees before finalising a mortgage or remortgage. With the credit crunch, mortgages are becoming more costly, so don't be stuck paying more than you can afford.

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