First of all, how much is the arrangement fee? This can vary from lender to lender. Sometimes it will be a flat fee of around ?500. With others it can be a percentage of the loan amount.



With the latter, as an example, a charge of 1.5% of the loan amount as a fee equates to ?2,625 on a ?175,000 mortgage.

Also look at valuation, legal, early redemption costs and exit fees. Some providers will offer a free valuation or similar as an incentive for you to buy their product which could save you money.

Do bear in mind that overall, high charges do not necessarily mean that the mortgage product is a no-go. If you have a bigger mortgage it is more likely in the long run that you'd be better off choosing one with higher charges and a lower interest rate.

The key is to sit down and calculate the overall costs for each mortgage product for the period of time that you plan to keep the mortgage.

This will give you a solid basis when choosing the one that is the most financially attractive to you.

Why Mortgage Affordability Matters

More and more mortgage lenders are now changing their criteria when considering how much they will allow you to borrow. Rather than basing it on multiple incomes, lenders are now actually looking at affordability.

This is great news for homebuyers, particularly First Time Buyers (FTB's). According the Council of Mortgage Lenders, FTB's now get offered an average borrowing of 3.24 times their income. For most, this is not normally enough to buy where they want to live.

However, this does not need to be the case. By looking at affordability rather than straightforward income multiples, lenders can see what a potential homebuyer can realistically afford. This is a real boon for potential borrowers, especially FTB's trying to get that first foot on the property ladder.

Moneyfacts, the independent research company, revealed that five of the top 10 mortgage lenders now look at affordability (also known as ability to repay) in preference to income multiples.

The good news too is that even some of those lenders who still work on the income multiples basis have refined their criteria. This means that they may lend more where there are larger salaries or a bigger deposit involved.

If you are looking to mortgage or remortgage, the most important thing is to borrow how much you realistically think that you can afford. Just because a lender believes that you can afford x amount every month, if you feel that it would be over stretching yourself, then don't go ahead with the mortgage.

Free Yourself From Fees!

If you are looking for a new mortgage or remortgage, it is not just the interest rate that is important. While it looks like you may get a good deal initially, once fees have been added, it could be a whole different ballgame.

There are around 8,000 home loans out there, so there is a wide choice. When choosing a mortgage, most people will look at how much their monthly mortgage repayments will be and then base their decision on that.

However, while this is a valid exercise, you should not base your decision on which mortgage to take out solely on this figure. To ensure that you really are getting a good deal, you need to check out what fees you will need to pay.

These could include one or all of the following: fees for booking, administration, arrangement and application; valuation or survey fees; and mortgage indemnity premiums (also known as a mortgage indemnity guarantee).

And don't forget to look at what fees you will be charged once you come to moving your mortgage such as early redemption penalties and exit, sealing and deeds fees.

The latter, in particular, has recently come under the scrutiny of the Financial Services Authority (FSA). In June 2006, lenders were warned that massively increasing exit fees could be unfair. It has asked for justification of these hikes.

So take a bit of time to check out exactly what fees you will be charged - it could save you money in the long run.