Mon 1st Sep, 2008
Beware of hidden catches in your home loan
In these days of the credit crunch many lenders are looking to ways to recoup on losses incurred in the last year. If you are looking to get a mortgage look out for the following catches that many lenders slap on in an effort to boost profits.
First of all many mortgages come with exit fees. If you decide to switch loans to another lender or even if you try to pay your home loan off early your lender will charge you an exit fee in order to cover the administrative costs of the mortgage.
These fees have been traditionally around £50 to £100 however many lenders have been including small print in the mortgage agreement which state that exit fees are variable. If you find you have been charged what seems an excessive fee, it is worth checking out. Use the documentation you have to make sure you are being charged the stated amount and if your lender refuses to co-operate go directly to the Financial Services Authority (FSA).
Another thing to consider when agreeing to a mortgage is the standard variable rate (SVR). The SVR is the lenders’ fluctuating rate for borrowing and in general is around 2% higher than the Bank of England base rate. If you are on a fixed rate mortgage for instance, once the deal expires you will automatically be moved onto the SVR.
It is always wise to be aware of when your loan rate is due to change well in advance to give yourself time to shop around. Although your lender should notify you to discuss your options, it is better for you if you are aware of the market, rather than accepting the first rate you are offered.
The financial climate is rather rocky right now, so it is better to have all your facts than to stumble along and find that you have switched from a great deal to one that leaves you considerably worse off each month.