Mortgage Costs - Final Payments / Exit Fees / Early Repayment
Charges / Redemption Fees
Final
Fees - The Sting in the Tail
Many
lenders approach the end of the mortgage
term believing that once the final month's payment has been
made, they won't owe anything else.
Unfortunately,
this is not true. In fact, the ramping up of so-called exit
fees over the last few years has become something of a scandal,
and is currently under investigation by the FSA (Financial
Services Authority), the body responsible for regulating finance
products. Exit fees are also known as redemption fees.
Some
examples of exit fees:
* Deed Release Fee
* Sealing Fee
* Final Administration Fee
* Final Redemption Fee
In
addition to exit fees, there are a few other terminal
fees you may have to pay, particularly if you end
the mortgage before the end of its term, or during a deal
period, when the interest rate is fixed or guaranteed in some
way. These fees are known as early
repayment fees.
Ending
your mortgage during a fixed/tracker/discounted interest rate
period can incur costly early repayment fees, with many lenders
charging a percentage fee based on the amount outstanding
on the mortgage - for example, 1% for each year still left
to run, on a fixed or discounted rate deal.
If
you are not confident that you will keep the mortgage for
the length of such a period, it can be cheaper to opt for
a higher interest rate mortgage with no tie-ins - get your
advisor to do the sums and see which will be cheaper.
Some
lenders apply Early Repayment Fees throughout the life of
the mortgage, in an attempt to tie you to them for 25 years.
These fees are known as overhanging
lock in or early repayment charges. Make sure you
know if these apply to your mortgage.
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