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Borrowers unaware of true costs, says survey

Over three-quarters of people do not know the true cost of buying a home, according to research from Virgin One.

A survey of 700 homeowners carried out by the current account mortgage provider found few people could estimate within £50,000 how much a £200,000 mortgage would cost to repay.

Virgin One says this is all the more alarming as people clearly take a real financial interest in their homes, with 98 per cent claiming to know exactly how much their home is worth.

The survey, carried out in July, asked homeowners to estimate how much they would pay back in total if they were to buy their dream home with a £200,000 mortgage.

One in three homeowners said they thought they would pay back no more than £250,000. In reality, the lender says a £200,000 repayment mortgage could cost a total of £393,946 or up to £509,997 on an interest-only basis.

Virgin One places some responsibility on homeowners themselves as only half those surveyed said they would rather spend time looking for a good mortgage than haggling with the vendor for a better price.

Marketing manager Scott Mowbray says: “This has to be the mortgage industry&#39s best-kept secret. Many banks and building societies are falling over each other to lend out as much money as possible to homeowners, yet they are clearly not spending as much effort in explaining how much it is going to cost to repay. It is important to remember that for most people their mortgage, not their home, will be the most expensive purchase they will ever make.”

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