How much should I set aside in addition to the deposit amount when taking out a mortgage?
I hear that there are a million and one things you need to pay for when taking out a mortgage. I have a £40k deposit and the arrangement fee is £999. What else am I going to have to budget for?
you should allow for stamp duty, on properties over £125000 its 1% of the purchase price, over £250000 its 3% of the purchase price and over £500000 its 4%.
you will also need to allow for a survey, i would always recommend at least a homebuyers report as this will give the valuation that your lender will insist on but also it will look into the condition of the property and given an indication as to whether you are paying a fair price/if remedial work is needed and other useful information.
in addition the basic mortgage valuation is only for the lenders benefit. you state that you have a 40k deposit. if the purchase price is £100000 the property might be valued at £90000 but the lender will probably still be happy to lend you £60000 to cover the purchase as they will still have lots of equity for security but how would you feel at buying over value?
when you take a survey above the basic level, the surveyor is then working for you and is liable to you for his/her opinion which means if they miss a vital flaw in the property which later surfaces like severe rot or subsidence found 6 months on, you then have the right to legal and financial redress from them so they will tend to be much more careful with the work they do.
fortunately most surveyors are good at what they do but overvaluations are a part cause for the state the housing market is in now.
expect to pay between £250 and £750 extra on top of the basic valuation for this peace of mind - well worth it when you are putting down £40000!
finally you will need to allow for your legal bill, your solicitor will probably want £300 on account to cover searches when you commence the purchase (assuming there is no HIP in place - some properties still have them) but in all you can expect to pay approx £1200 to the solicitor for the sundry costs and their fees, they will also deal with paying the stamp duty so you should add that in too.
a lot of these fees are dependent on the purchase price but some solicitors charge more for their fees on higher value purchases, which seems odd as the amount of work involved in buying a £100000 property isnt that much different to a £500000 property.
i have been able to source good deals for clients, sometimes half of the normal cost on the high street!
you will possibly find that most lenders will automatically add the arrangement fee to the new mortgage but most will allow you to pay it back on completion by sending them a cheque in the post - check your mortgage offer or key facts illustration, it will confirm what your lender does.
i hope this helps you...... | 01.05.11 @ 13:12