Unexpected costs of buying
If you thought that all you needed was a mortgage, think again.
You need cash upfront to qualify for most mortgages - and since the credit crunch, the minimum required will be 10% of the property value. Generally, the more you can put down, the better your choice of deals and the cheaper lending rate you will qualify for.
Higher lending fee
If you can only manage to put down the minimum 10% deposit this will put you into a 'higher risk' borrowing category in the eyes of the lender. In this case, some banks and building societies may levy a higher lending charge, formerly known as a mortgage indemnity guarantee (MIG).
This is usually charged as a percentage of the chunk of the loan taken from 75% loan to value (LTV) upwards. For example, if you borrowed 90% it would be a percentage of the money that 15% of the property value represents. This may sound a little complicated, but ultimately, a higher lending charge can run into thousands of pounds. However, it's easily avoided by using one of the many lenders that no longer employ it - so shop around, ask questions and keep your wits about you.
A mortgage arrangement fee will also be charged - although a handful of variable rate mortgages - such as lifetime trackers - may be fee-free. An arrangement fee will usually be in the region of £1000 and can be added onto the mortgage.
Not many people will be able to carry out their own legal work when buying a property so you'll have to appoint a solicitor. Their job will be to do the conveyancing, which includes checking title deeds, notifying Land Registry, carrying out a local search to find out more about the property, and drawing up contracts. You can agree a fixed price upfront, though be prepared for this to change if the solicitor encounters some unforeseen complexities.
A chartered surveyor will charge you to report on the condition of the property. The most popular form of survey is a Home Condition Report (HCR), though a full buildings survey is a more thorough version for older properties. These surveys - which are for your benefit alone - should not be confused with the lender's own valuation survey. Although you will typically still pay for this, its only purpose is to verify that the property is adequate security for the loan.
Stamp duty land tax (SDLT)
This is a government tax on the purchase price of the building. Buyers of homes costing between £125,000 and £250,000 will be charged 1% of their value payable. If you're going for something that's worth £250,000 to £500,000 (we wish) you'll get stung for 3%, and anything over this is charged between 4 and 15%.
"If you can only manage to put down the minimum 10% deposit this will put you into a higher risk borrowing category."
Land registry fee
This is payable every time you complete a home purchase and literally pays for changing the name on the ownership of the land.
This is needed to protect the structure of your home (not your personal possessions), and must be in place by the time you exchange contracts.
Contents insurance offers cover for your personal possessions, carpets, curtains, and so on.
This is mortgage payment protection insurance, which sits under a wider umbrella of payment protection insurance. It covers mortgage repayments should you fall ill or lose your job - but usually only pays out for a period of 12 months.
Check carefully before buying MPPI, however, as the insurance comes with deferment periods before it starts to pay out, so you will need to find those month's mortgage payments at least. A cheaper alternative is to save up a contingency fund and look after unforeseen eventualities yourself.
And the rest
Factor in the cost of the removal itself, as well as hidden extras once you've moved in; renovations, repairs, decorating, furniture, carpets, curtains and appliances, for example.
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