The cost of purchasing a home goes much beyond the usual deposit and mortgage repayments. Before arranging mortgages over £400,000, ensure that you have taken into consideration all the fees and costs that come to the forefront while buying a property.
A majority of the fees vary significantly based on the lender and your present circumstances. In most cases, you need not pay every fee; however, it is always good to possess the knowledge, especially if you are a first-time home buyer.
- The amount of deposit needed: The first step in obtaining a mortgage is determining the amount of deposit you need.
- Mortgage repayments: These will depend on the mortgage amount and tenure
- Stamp duty: This fee is mandatorily levied on all properties whose worth exceeds £125,000.
- Upfront mortgage fees: Before arranging a mortgage, you must calculate your mortgage fees.
- Legal and estate agent fees: There are some additional costs while arranging a mortgage, such as legal fees, estate agent fees, and costs related to conveyance.
- Home moving costs: Obtaining a mortgage is not the end; moving home can generate further costs that you need to consider.
The Amount of Deposit Needed
One of the eligibility criteria to obtain a mortgage is the need for a cash deposit, which could be anywhere between 15% and 30% of the value of the property. For instance, while arranging mortgages over £400,000, you may need an upfront deposit ranging from £30,000 to £60,000. The lender’s mortgage amount is additionally dependent on your personal details, including credit history, annual income, and your savings. That being said, some lenders may ask for a deposit not exceeding 15% for first-time homebuyers.
The mortgage repayment amount that you need to shell out each month depends on the amount of deposit, the total amount borrowed, as well as tenure of the mortgage, and personal circumstances. It is highly advisable to keep these factors in mind while finalising the mortgage size.
Unless you have paid a deposit that eventually exceeds 50% of the value of the property, you should be mentally prepared to be paying for your mortgage for several years. Your monthly repayments will generally be lower as the tenure of the mortgage increases; however, the total amount that you owe will still be higher.
SDLT (Stamp Duty Land Tax) is applicable to all residential properties that are valued over £125,000. If the amount exceeds that value, you will be charged anywhere between 1% and 7% SDLT. This means that if you buy a property worth approximately £400,000, you would have to pay an additional tax of £12,000.
Upfront Mortgage Fees
Besides the deposit, monthly mortgage repayment fees, and land tax, you may have to shell out money for miscellaneous fees, which vary based on the personal circumstances of the homebuyer and terms and conditions of the lender. Some of these fees include mortgage setup fee, mortgage arrangement fee, mortgage account fee, valuation fee, a higher lending charge, and telegraphic transfer fee.
Other fees may include legal fees, real estate agent commissions, and costs with regard to conveyancing. Thus, take into consideration these fees while you plan to arrange a mortgage.