Additional Remortgage Costs

Most people look on their monthly payments as being the cost of their mortgage.

25 Years at €500 a month comes to €210,000 as the cost of their mortgage. Not so! There are several costs on top of that to consider, and you have to be aware of them if the budget available for your house purchase is limited. Some are pretty straightforward, but others are more hidden and cab surface to bite you if you aren’t ready for them.

Property Valuation Fees

The property valuation is insisted upon by the mortgage lender.

They have to know that the house is worth what they are lending (not what you are paying) so that they will recoup their money if things go ape-shit. An evaluation can cost around 250 - 400 Euros depending on the cost of the house. You might be able to negotiate a free evaluation if you are remortgaging, so be aware of that.

You might need a structural survey and perhaps even a geological survey if your home is built in a mining area or an area prone to settlement. These surveys are optional, but will satisfy you that your investment is sound, and not prone to settlement or sliding down a hill! They might also be mandatory if the lender feels they are necessary.If these are needed, you could save money if they are carried out by the valuation surveyor.

Solicitors' fees

Everybody should expect to pay these, so they should not come as a surprise. You need a lawyer if you are purchasing a home, but not for a remortgage of the same home.

The cost could be anything from €1000 upwards and is usually based on the price of the property. You will have to pay for this even of the transaction doesn’t proceed to completion, so if you can find a solicitor that offers in free in that event, jump at it.

Stamp Duty

This is unavoidable, but can change between budgets from increasing to being abolished altogether.

HLC – the Higher Lending Charge

This is otherwise referred to as the mortgage indemnity guarantee (MIG) or the mortgage indemnity premium (MIP).

It is basically to cover the mortgage lender in the event that you fail to meet the payment; the house is sold to recover the loan and fails to realize a price that covers it. The HLC covers the shortfall.

Not all lenders charge this fee, and you should seek one that does not. It is only relevant if your deposit is so low that the house is liable to sell for less than your mortgage. The charge is based broadly on your deposit: the lower the deposit, the higher the HLC.

Mortgage exit Fee

A mortgage exit fee may be charged when your mortgage is paid off.

This need only be paid if it is contained in the original contract, and you should try to avoid lenders that include it. It applies if you remortgage, or when you have made your final regular payment. It is hard to justify charging a borrower for paying off the loan at the agreed time. However, if it applies to you, expect to pay €300 - €400.

Early Repayment Charges

This is charged if you pay off your mortgage earlier than agreed.

If you get a mortgage with a special deal, such as a reduced interest rate for a number of years, they could then find yourself locked into a further period at a higher rate, such as their regular variable rate. If you repay your mortgage before or during that period, you are likely to be charged an early repayment fee.

They are normally charged at a percentage of your mortgage amount – either the original mortgage borrowed, or the outstanding sum left on it, and that percentage frequently reduces each year. Such charges being applied during the period of your special deal are fair enough, but those applied afterwards are not. You should steer clear of any lender that applies early repayment charges after your deal period is over.

You might also be offered a cashback deal, whereby you get cash back after a certain time or when you have completed your repayments. Be careful with these, because some of this can be claimed buy the lender if you remortgage within a certain period of taking out the mortgage.

Insurance: Home and Contents

The mortgage lender will insist that you have an insurance policy that covers damage to the building. This is fair since they have to make sure that it retains its value in the event of it being damaged, and rebuilt or repaired in the event of a fire, flood, hurricane, etc.

Contents insurance is different, and is up to you. If you don’t take out such insurance, the contents of your home would not be covered in the event of fire or your house falling down. Many people believe contents insurance to be needed only to cover against theft, and their house insurance covers the content in the event of a natural catastrophe. Not so, and you are advised to have both.

However, do not do that through the lender because they and insurers are often in cahoots, and the lenders can get a good commission by persuading you to use them for your insurance needs. In fact, some will apply a penalty to you if you don’t insure through them, all because of the attraction of this commission. Work it out: get a number of quotes, because it could be worthwhile paying the penalty and getting a cheaper insurance deal.

Insurance: Life Assurance

Mortgage providers are split between insisting on life assurance to the value of your mortgage and not.

They can claim the value of the mortgage from your estate, or failing that simply repossess the house and sell it. If it is necessary you can again save money by getting a number of quotes: it is often cheaper online than through an agent or insurance salesperson. However, it should be considered in your home-buying budget.

Mortgage Protection Insurance

Mortgage Payment Protection Insurance (MPPI) covers your mortgage payments for a period of time following redundancy, an accident or illness, when your ability to pay might be impaired.

The more of these you want to cover, the more the policy will cost. Once again, the monthly premiums charged by mortgage lenders will be higher than you can negotiate yourself. This is a monthly cost that certainly will add a reasonable amount to your monthly outgoings.