MORTGAGES FOR HOME MOVERS

Moving home is exciting but you should also be aware of the costs so you can budget for them. Some significant costs are described below as a reminder.

It's never too early to start talking to us about your mortgage

If you plan to move home you need to know how much you can borrow. We can work this out for you, allowing you to find out what you can afford to buy. We will need to look in detail at your income, your expenditure, any debt you have, and any plans you have for the future which might affect the affordability of your next mortgage.

Another reason to speak sooner rather than later is that the mortgage process can take some time and you might as well get started so that everything doesn’t become a last-minute rush, which can be hugely stressful. 

With your borrowing capacity understood, you can search for properties knowing that they are within your budget.

Once you’ve found a property and you’re ready to make an offer make sure you speak to us again so we can confirm more details for your mortgage.

Once you’ve found a property

You’ll need to organise a solicitor – easy if a friend or family member has recently used somebody they can recommend – or we can suggest one to you.

A survey is a necessity, even for new build properties, as you need to know that you are buying a sound property. Any defects identified could be used to negotiate a better price.

Once the purchase price is agreed we have some work to do to get your mortgage offer. After this we hand the baton to your solicitor.

Your solicitor will advise you when you are able to exchange, where both you and the seller are committing to the transaction. Once you’ve exchanged contracts you’ll need buildings insurance in place to cover the structure of the property.

The stage after exchange is completion – this can be on the same day but is often agreed to take place on a specific date shortly afterwards. Completions are often on a Friday so that people can move home over the weekend.

Stamp duty

Stamp duty (more properly Stamp Duty Land Tax) is a government tax paid when you purchase a new property. Housing is a hot topic for politicians of all flavours so rates are subject to the winds of political change. At the time of writing (September 2018) it is payable on homes costing £125,001 or more.

First-time-buyers currently pay no Stamp Duty on the first £300,000 for properties worth up to £500,000.

As of April 2016, there is a 3% increase on top of current rates if you’re buying an additional residential property above £40,000 such as a second home or buy-to-let property.

Not only are the rules fairly complex but there are different taxes in different parts of the UK. In Wales you will need to pay Land Transaction Tax. In Scotland you will pay Land and Buildings Transaction Tax.

There are government calculators to demonstrate the amounts payable for different situations but your adviser can also guide you in this.

Deposit

This is the amount you put towards the cost of the property when you buy your home. On average, you need between 5% and 20% of the purchase price.

As a general rule, the bigger the deposit you can put down, the more likely you are to be qualify for a mortgage, and the lower your interest rate is likely to be.

Valuation fee

The mortgage lender will assess the value of the property to establish how much they are prepared to lend you. Costs usually vary based on the property value and can be £150-£1,500. Costs also vary by lender and type of product.

The lender’s valuation is there purely for their benefit to determine if the property is worth lending money against. It is not like a Homebuyer’s report or a full structural survey so it might not identify all the repairs or maintenance that might be needed.

Surveyor’s fee

Before you buy a property, you really should get it checked thoroughly by a surveyor.

If you discover problems with the property after you buy it there could be substantial costs. Identifying these things prior to purchase allows you to walk away if they are too much for you or negotiate a fair price based on the true condition of the property.

Paying for a good survey could save you money in the long run.

Legal fees

You’ll generally need a solicitor to carry out all the legal work when buying and selling your home. Legal fees generally vary depending on the value of the property, whether it’s leasehold or freehold and a range of other factors but you should get an estimate before you instruct them.

They will also do local searches, which will cost you £250-£300, to check whether there are any local plans or problems.

Estate agent fees

You only pay estate agent fees on the property you are selling, not the one you are buying. Of course you may be retaining your existing property in which case you won’t have to worry about this fee.

You negotiate the fee with the agent before they put it on the market for you. These days some agencies charge fixed fees whilst others are based on a percentage of the sale price – often 1% to 3% plus VAT.

Mortgage fees

Mortgage fees vary widely and your adviser will be able to discuss these in detail with you. There are often booking fees, arrangement fees, and the valuation fees mentioned above. Often you can add them to the loan but in the long term that will cost you more since you’ll be paying interest on them for the life of the mortgage.

Insurance

The lender will require you to take out buildings insurance to protect your new home against damage from fire, floods, subsidence and anything else. It may also be wise to have contents insurance for your possessions, and life insurance to pay off your mortgage should you die before you’ve repaid the entire amount.

If you already have life cover to protect your mortgage remember that if you are borrowing more or changing the end date of the mortgage then you should review this protection. Your adviser will discuss this with you at the time.

Other costs

There are many other costs you should be aware of – the move itself, the repairs you might need to carry out when you first move in (hopefully identified in your survey), changes to your Council Tax bill, additional running costs of a larger home (or lower if you are downsizing or moving to a more energy efficient property). It’s a good idea to think about these changes as you budget for your future.

Stamp duty (more properly Stamp Duty Land Tax) is a government tax paid when you purchase a new property. Housing is a hot topic for politicians of all flavours so rates are subject to the winds of political change. At the time of writing (September 2018) it is payable on homes costing £125,001 or more.

First-time-buyers currently pay no Stamp Duty on the first £300,000 for properties worth up to £500,000.

As of April 2016, there is a 3% increase on top of current rates if you’re buying an additional residential property above £40,000 such as a second home or buy-to-let property.

Not only are the rules fairly complex but there are different taxes in different parts of the UK. In Wales you will need to pay Land Transaction Tax. In Scotland you will pay Land and Buildings Transaction Tax.

There are government calculators to demonstrate the amounts payable for different situations but your adviser can also guide you in this.

This is the amount you put towards the cost of the property when you buy your home. On average, you need between 5% and 20% of the purchase price.

As a general rule, the bigger the deposit you can put down, the more likely you are to be qualify for a mortgage, and the lower your interest rate is likely to be.

The mortgage lender will assess the value of the property to establish how much they are prepared to lend you. Costs usually vary based on the property value and can be £150-£1,500. Costs also vary by lender and type of product.

The lender’s valuation is there purely for their benefit to determine if the property is worth lending money against. It is not like a Homebuyer’s report or a full structural survey so it might not identify all the repairs or maintenance that might be needed.

Before you buy a property, you really should get it checked thoroughly by a surveyor.

If you discover problems with the property after you buy it there could be substantial costs. Identifying these things prior to purchase allows you to walk away if they are too much for you or negotiate a fair price based on the true condition of the property.

Paying for a good survey could save you money in the long run.

You’ll generally need a solicitor to carry out all the legal work when buying and selling your home. Legal fees generally vary depending on the value of the property, whether it’s leasehold or freehold and a range of other factors but you should get an estimate before you instruct them.

They will also do local searches, which will cost you £250-£300, to check whether there are any local plans or problems.

You only pay estate agent fees on the property you are selling, not the one you are buying. Of course you may be retaining your existing property in which case you won’t have to worry about this fee.

You negotiate the fee with the agent before they put it on the market for you. These days some agencies charge fixed fees whilst others are based on a percentage of the sale price – often 1% to 3% plus VAT.

Mortgage fees vary widely and your adviser will be able to discuss these in detail with you. There are often booking fees, arrangement fees, and the valuation fees mentioned above. Often you can add them to the loan but in the long term that will cost you more since you’ll be paying interest on them for the life of the mortgage.

The lender will require you to take out buildings insurance to protect your new home against damage from fire, floods, subsidence and anything else. It may also be wise to have contents insurance for your possessions, and life insurance to pay off your mortgage should you die before you’ve repaid the entire amount.

If you already have life cover to protect your mortgage remember that if you are borrowing more or changing the end date of the mortgage then you should review this protection. Your adviser will discuss this with you at the time.

There are many other costs you should be aware of – the move itself, the repairs you might need to carry out when you first move in (hopefully identified in your survey), changes to your Council Tax bill, additional running costs of a larger home (or lower if you are downsizing or moving to a more energy efficient property). It’s a good idea to think about these changes as you budget for your future.

A Mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

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