Homebuyers should consider the cost of valuation fees - a fee that is often forgotten amongst the myriad of home buying costs - when choosing a mortgage, according to Moneyfacts.co.uk.
Julia Harris, mortgage analyst at Moneyfacts.co.uk, says: “As we move away from a totally rate driven mortgage market, much focus has been placed on total cost, inclusive of rising arrangement and exit fees.
“But one fee, which perhaps we view as a service charge, has slipped through the net – the valuation fee.”
Harris says that many first time buyers struggle to afford start-up costs and lenders attempt to entice them with fee-free deals, which often result in higher rates. She also warns that those providers offering free valuation fees are often only providing basic valuations, something the lender requires to ensure they do not lend more than the property is worth, which means the homebuyer foots the bill while their lender benefits.
Research conducted by Moneyfacts.co.uk has revealed that the cost of valuation fees can vary significantly between lenders. Among the top-ten mortgage lenders, the difference in costs for a basic valuation is £360 and up to £345 for a homebuyer valuation, based on a £200,000 mortgage.
Harris adds: “Earlier this year it was reported that the Financial Services Authority may consider a review of valuation fees. This becomes even more pertinent with the rising number of mortgage cases valued by means of an Automatic Valuation Model.”
The Council of Mortgage Lenders has predicted that a third of purchase cases will use AVMs by 2011. The AVM is a much cheaper way of valuing a property and Moneyfacts.co.uk thinks these savings should be passed on to consumers.
With mortgage rates and fees rising, and stamp duty affecting more and more properties, homebuyers have been advised to shop around
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