The hidden costs of moving home

According to mortgage broker John Charcol, these potential pitfalls could cost blinkered borrowers thousands.

Drew Wotherspoon, of John Charcol, said: “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.

“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.”

Early repayment charges

Early repayment charges (ERCs) are a part of most mortgages, but some have more favourable terms than others.

Some only have ERCs during the initial competitive rate, while others have overhanging ERCs which lock a borrower in while still paying a lender’s standard variable rate (SVR).

Wotherspoon said: “Taking a mortgage where there are only ERCs within the initial, favourable term makes sense for most borrowers but it may be a good idea for some to have no ERCs at any time.

“You are likely to pay a little more in interest for the privilege, but it can be the right decision for those who need the flexibility of not being tied in.”

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Leaving your mortgage will cost you

Exit fees have come under fire recently for unfairly penalising consumers and as such have become a vital part of the decision making process.

They tend to be around £195 – £295 but this figure is set to rise as lenders look to recoup lost revenue.

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Lower ‘higher lending charges‘

higher lending charges (HLCs) apply to borrowers who do not have a large deposit. They are applied by lenders, usually on loans over 90 per cent loan to value (LTV), who view these borrowers as a greater risk because they haven’t shored up their borrowings with a down payment.

John Charcol believe that first-time buyers shouldn’t have to put up with HLCs anymore with more lenders now offering great products with the option to borrow 100 per cent.

Wotherspoon said: “The industry is acknowledging that whilst first-time buyers may find it hard to scrape together a deposit, they are still more than capable of meeting monthly mortgage repayments.”

Stamp duty

This is more than likely to be the biggest individual cost to home movers outside of the actual purchase.

During this year’s budget speech, Gordon Brown altered the starting point for stamp duty for the second year running, but this increase was only £5,000, taking it up to £125,000.

With stamp duty set out in tiers, it is important to know what the stamp duty charge is on a property before buying.

Many properties are priced just above different thresholds with the view they will be bargained down, if you’re not aware of these cut off points then it can end up costing you dear.

Wotherspoon said: “The variations in stamp duty costs can be dramatic depending on the location of the property. An average priced home in the UK now costs £184,924, which would therefore cost £1,849 in stamp duty whereas an average home in London, £306,664, would cost over £9,000.”

Use our stamp duty calculator to find out how much you will pay.