When working out the true cost of your mortgage these hidden charges are less obvious. They may apply when you choose to take your buildings insurance with a company other than your mortgage provider, or when you change your mortgage whilst remaining with the same provider. These are things you really might not expect to have to pay for, but some lenders charge all of these.
Watch Out for Mortgage Indemnity Guarantees
These are another way of getting even more money from mortgage borrowers and home buyers. They are of no benefit to you but are solely to cover the lender in case you have problems repaying the mortgage.
Costs vary dramatically, but you can expect to pay roughly £1,500 per £100,000 of purchase price.
So the MIG for a £150,000 property might be £2,250.
Read more about Mortgage Indemnity Insurance
All mortgage lenders will insist on your having buildings insurance in case there’s a fire etc, to protect their interest – don’t forget they in effect own “your” home until you have paid off the mortgage.
As part of your mortgage deal they will offer you a ready made insurance policy they have, which is usually includes contents insurance – ie for your posessions, which is always a good idea to have.
You will also need mortgage payment protection insurance ie in case of illness etc to insure your regular mortgage payments are paid.
The golden rule is never automatically get your home and mortgage insurance from your mortgage lender.
They make big money on overcharging for buildings and contents cover.You can very likely get the same insurance for less elsewhere.
It is not actually illegal for your lender to insist that you take out their insurance policy as part of your mortgage. This is called insurance tying in. Thankfully it is becoming less common mainly owing to greater consumer awareness of good insurance deals available online.
If you get your insurance from another, cheaper provider, don’t be surprised if your lender adds a little ‘admin fee’ by way of punishment. This can be around £35 but will depend on the lender.
Other Real Costs to Bear in Mind
Unfortunately, even after everything has been signed and sealed there are still costs to consider, mainly concerning your move and new property… Renovations, repairs, decorating, carpets, furniture, appliances etc.
Read more about the other costs involved in buying a home.