Mortgage companies are more serious than ever about getting your business. Borrowers are warned to watch for hidden costs that can increase the overall cost of a mortgage.
Leading mortgage broker John Charcol is advising borrowers to be ever cautious when considering a mortgage. Lenders are purely in the business to make money. Some will do this through hidden extra fees.
"Buyers tend to get caught up in the excitement of choosing a new home and run the risk of paying the price financially by not ensuring they get the best value from their mortgage," said Drew Wotherspoon of John Charcol.
"If you're willing to bargain over fixtures and fittings, it also makes sense to look at the other ways you can get a better deal when you move," he continues.
What are some of the hidden costs you should specifically look for in a mortgage agreement?
The first item to watch out for is prepayment penalties. These may also be called early repayment charges. Prepayment penalties are most often found in subprime mortgages. They make it costly for you to pay off your mortgage ahead of schedule.
With many mortgages that include prepayment penalties, you may find that you are unable to sell your home before the mortgage is due -- it will cost you too much. Make sure you read the fine print. In general, you want to find a mortgage with no prepayment penalties.
One of the best keys to protecting yourself from hidden fees is to compare the Good Faith Estimates from several lenders. You don't want to choose the lender that is charging much more, but you also don't want the lender that is charging way below everyone else. That could be a signal of hidden costs.
You can also protect yourself from hidden fees by having an attorney read everything over. The attorney should be present at closing. Both you and the attorney should double check that all numbers are what were quoted to you. Remember, you have every right to walk away from closing if something isn't correct. You aren't walking away from the home purchase, simply the financing.
