Owning a home can be a very exciting time so the chances of you sitting reading the small print carefully are slim. A recent study found that over 60% of mortgage applicants did not understand the terms and conditions they were signing for.

A very worrying figure bearing in mind the credit crunch and mortgage studies showing debt and repossessions are rapidly on the increase.

We take a look at charges and points to consider before signing on the dotted line.

Early repayment charge also known as redemption penalty, this is a usual one amongst mortgage lenders, basically if you wish to move your mortgage elsewhere (remortgage) or pay the mortgage in full early your chosen lender will charge you. 

They usual charge 6 months worth of interest which can actually work out to be a hefty fee, most providers have a set period of time where they will charge you the early repayment charge, this can vary from the first 3 – 7 years. The length will be determined at the start of your mortgage dependant upon which mortgage product you chose to take out.

No early repayment charge this means that the mortgage product you have chosen allows you to repay the loan early without being charged a fee.  Whilst this sounds great there is usual a clause which stipulates you must stay at least a set period of time with your provider before being able to repay the loan free of charge.

Higher lending charge previously called mortgage indemnity charge. This applies when the amount being borrowed is higher than a specific percentage of the property’s value. The percentage is set by the lender.

When this happens you will be charged this fee because in agreeing to accept your application the provider is taking a risk. If you fail to make repayments and they have to take legal proceedings resulting in repossession they will make a loss as you have borrowed more than the property is worth.

By adding this charge the lender takes out insurance to protect themselves from the losses involved in this action, by having this insurance it means the lender can continue to pursue the borrower for money owed on the account after the property has been sold at auction.

A booking fee is charged at the start of the mortgage, it is paid by the hopeful borrower to reserve funds for their chosen mortgage product, if at a later time the mortgage fails to complete getting the booking fee refunded is unlikely to happen, majority of lenders do not reimburse this.

Arrangement fee again like the booking fee is an unavoidable charge, it is charged on completion of a mortgage, but sometimes is added to the loan repayable amount meaning you pay for it over the term of your mortgage.

Legal fees again another unavoidable expense, you need a solicitor or licensed conveyancer to note ownership of the property on the title deeds, they are heavily involved in contacting the local land registry and ensuring there are no boundary issues, subsidence problems and generally insuring the land the property is on is safe and available for sale.

Building insurance without which your mortgage will not complete, this insurance covers the property for storm damage, subsidence, floods and fire.

If you have any questions about your mortgage terms and conditions your chosen lender will be able to assist you, don’t be scared to ask questions no matter how small they may seem to you its better to ask now than kick yourself later.