Record Money: Check Small Print On The Fee-Free Deals

Oct 2 2008 Daily Record

THE Government's decisions to raise the price threshold at which Stamp Duty becomes payable on property from £125,000 to £175,000 is good news for Scots buyers.

For the next year, the rates have been frozen at one per cent on purchases costing £175,000 to £250,000; three per cent up to £500,000 and four per cent above this.

But you will still have to budget for mortgage arrangement, legal and survey fees - and these can add up to several thousand pounds.

Some home loans are advertised as "fee-free" and lenders may offer to cover basic legal and valuation costs. However, these deals often come with a higher interest rate, so it is vital to take this into account before committing yourself.

If you find one willing to lend 90 per cent or more of your property's valuation, you may also face a substantial "higher lending charge" or "mortgage indemnity guarantee".

Nationwide Building Society is one of the few lenders not to add this type of fee.

Lenders will often try to sweeten the pill by encouraging you to add fees to your loan.

But they aren't doing this to be kind - it's a way to make more money.

While it will reduce your initial bill, you will be paying interest on this extra borrowing for your entire mortgage term, increasing the long-term cost dramatically.