Taking out a mortgage is widely seen to be the biggest financial commitment that many of us will make. But how hard is it? After all, it is just a loan that normally lasts 25 years. Unfortunately, traps await borrowers who fail to check terms at the outset. Many of these traps relate to extra charges that lenders sneak in or to restrictions on moving your mortgage between houses. Here we list eight of the worst such problems:
* Charging higher rates for borrowing the arrangement fee. Most lenders charge an arrangement fee on top of the interest when you set up a new mortgage. Many lenders will allow you to roll the arrangement fee up with the original loan. When they do this, most will charge the borrower the rate at which the main body of the mortgage is set. Halifax, Britain's biggest mortgage lender, does not, however. If you wish to roll up the arrangement fee - which with this lender is up to Pounds 499 - Halifax will charge its standard variable rate (SVR), currently 6.75 per cent. This can be several percentage points higher than the rate you agreed for the main body of the loan, and can add more than a few extra pounds to the monthly repayments.
* Title deeds release. Lenders hang on to the title deeds of the house as a form of security, and when you remortgage or pay off the loan they send the deeds on. Many will charge for someone to search the vaults and send the document to the new lender. The typical amount is Pounds 25, though it is not uncommon to charge about Pounds 40. Co-operative bank charges Pounds 50.
* Penalties for moving a buy-to-let mortgage. Mortgage Express, one of the largest providers of buy-to-let mortgages, will not let you move your mortgage if you sell your property and buy a new one. In some instances, they will even penalise you. For example, if you took out a five-year fixed-rate mortgage, you will be liable for paying a redemption penalty if you sold the property within that period, as it is seen that you are getting out of the mortgage early, even if you want to use the mortgage on a new property.
* Large arrangement fees with good deals. Beware of tempting rates from lenders. Some of the best rates come with onerous arrangement fees, with Birmingham Midshires being one of the worst. Although the rate on one of their products is 76 basis points below base rate for two years, the lender charges an arrangement fee - which can be rolled up with the mortgage - of Pounds 1,500.
* Buying insurance from the lender. Many lenders will offer accident, sickness and unemployment insurance with the home loan but few brokers advise taking it. Instead, they suggest going to an insurer, where it is usually cheaper. For example, most lenders will charge Pounds 5 or Pounds 6 a month for every Pounds 100 of the mortgage covered, whereas the better insurers will charge Pounds 3.95 or Pounds 4.50.
* Trying to raise a mortgage when made redundant. If you have lost your job, and you want to reduce your mortgage by moving house and trading down, you will not be able to raise a home loan on the new property. This is because most lenders are adamant that you must have a job if you are going to have a mortgage. Trading down only works if you pay off your mortgage in its entirety.
* Redemption penalty overhangs. In spite of a vociferous consumer campaign for four years to get lenders to drop their redemption penalty overhangs - charges that extend beyond the fixed or discounted period - they appear to be making a comeback. Many lenders will claim that they are offering an exceptionally good deal, with the Mortgage Works and West Bromwich building society providing some of the best fixed-rate deals on the market. However, on certain products, they are also charging penalties of up to 3 per cent, three years beyond the end of the fixed period, during which time the borrower has to go onto the SVR.
* Gifts. Beware mortgages with gifts - the best known one being a free Rover 25 car that came with a mortgage from West Bromwich building society. Although they sound tempting, the rates are high - either staying with the SVR, currently 6.79 per cent, for five years or fixing for five years at 7.65 per cent.
There are high redemption penalties attached to these products even if you go for the SVR option. They extend for five years and start at 7 per cent.
* Charging higher rates for borrowing the arrangement fee. Most lenders charge an arrangement fee on top of the interest when you set up a new mortgage. Many lenders will allow you to roll the arrangement fee up with the original loan. When they do this, most will charge the borrower the rate at which the main body of the mortgage is set. Halifax, Britain's biggest mortgage lender, does not, however. If you wish to roll up the arrangement fee - which with this lender is up to Pounds 499 - Halifax will charge its standard variable rate (SVR), currently 6.75 per cent. This can be several percentage points higher than the rate you agreed for the main body of the loan, and can add more than a few extra pounds to the monthly repayments.
* Title deeds release. Lenders hang on to the title deeds of the house as a form of security, and when you remortgage or pay off the loan they send the deeds on. Many will charge for someone to search the vaults and send the document to the new lender. The typical amount is Pounds 25, though it is not uncommon to charge about Pounds 40. Co-operative bank charges Pounds 50.
* Penalties for moving a buy-to-let mortgage. Mortgage Express, one of the largest providers of buy-to-let mortgages, will not let you move your mortgage if you sell your property and buy a new one. In some instances, they will even penalise you. For example, if you took out a five-year fixed-rate mortgage, you will be liable for paying a redemption penalty if you sold the property within that period, as it is seen that you are getting out of the mortgage early, even if you want to use the mortgage on a new property.
* Large arrangement fees with good deals. Beware of tempting rates from lenders. Some of the best rates come with onerous arrangement fees, with Birmingham Midshires being one of the worst. Although the rate on one of their products is 76 basis points below base rate for two years, the lender charges an arrangement fee - which can be rolled up with the mortgage - of Pounds 1,500.
* Buying insurance from the lender. Many lenders will offer accident, sickness and unemployment insurance with the home loan but few brokers advise taking it. Instead, they suggest going to an insurer, where it is usually cheaper. For example, most lenders will charge Pounds 5 or Pounds 6 a month for every Pounds 100 of the mortgage covered, whereas the better insurers will charge Pounds 3.95 or Pounds 4.50.
* Trying to raise a mortgage when made redundant. If you have lost your job, and you want to reduce your mortgage by moving house and trading down, you will not be able to raise a home loan on the new property. This is because most lenders are adamant that you must have a job if you are going to have a mortgage. Trading down only works if you pay off your mortgage in its entirety.
* Redemption penalty overhangs. In spite of a vociferous consumer campaign for four years to get lenders to drop their redemption penalty overhangs - charges that extend beyond the fixed or discounted period - they appear to be making a comeback. Many lenders will claim that they are offering an exceptionally good deal, with the Mortgage Works and West Bromwich building society providing some of the best fixed-rate deals on the market. However, on certain products, they are also charging penalties of up to 3 per cent, three years beyond the end of the fixed period, during which time the borrower has to go onto the SVR.
* Gifts. Beware mortgages with gifts - the best known one being a free Rover 25 car that came with a mortgage from West Bromwich building society. Although they sound tempting, the rates are high - either staying with the SVR, currently 6.79 per cent, for five years or fixing for five years at 7.65 per cent.
There are high redemption penalties attached to these products even if you go for the SVR option. They extend for five years and start at 7 per cent.
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