As mortgage advisers, we know that purchasing a home is a major financial commitment. While a mortgage can help you achieve your dream of homeownership, it's important to understand the costs involved. In this blog, we will outline the various costs associated with purchasing a home with a mortgage.
Deposit
The first cost to consider is the deposit. This is the amount of money you'll need to put down upfront when buying a property. In the UK, most mortgage lenders require a deposit of at least 5% of the property's value. However, if you can afford to put down a larger deposit, you may be able to secure a better mortgage deal with a lower interest rate.
Mortgage Fees
Mortgage fees are charges that are levied by mortgage lenders for setting up and administering your mortgage. These fees can vary from lender to lender and can include:
Arrangement fee: This is a fee charged by the lender for setting up your mortgage.
Valuation fee: This is a fee charged by the lender for valuing the property you want to buy.
Legal fees: You'll need to pay for the services of a conveyancing solicitor to handle the legal aspects of buying a property.
Broker fee: If you use a mortgage broker to find a mortgage, they may charge you a fee for their services.
Stamp Duty
Stamp Duty Land Tax (SDLT) is a tax that you'll need to pay when you buy a property in the UK. The amount of SDLT you'll need to pay depends on the purchase price of the property. In England and Northern Ireland, the threshold for paying SDLT is £125,000. In Scotland, the threshold is £145,000, and in Wales, it's £180,000. The SDLT rates also vary depending on whether you're a first-time buyer or not.
Survey Fees
A survey is an inspection of a property to identify any potential issues that may affect its value or safety. There are three types of survey: a basic valuation survey, a homebuyer report, and a full building survey. The cost of a survey can vary depending on the type of survey you choose and the size and location of the property.
Moving Costs
Once you've completed the purchase of your property, you'll need to factor in the cost of moving. This can include the cost of hiring a removal company, purchasing packing materials, and any associated travel costs.
Ongoing Costs
Finally, it's important to consider the ongoing costs of owning a property. This can include:
Mortgage repayments: Your mortgage repayments will be your biggest ongoing cost.
Council Tax: You'll need to pay council tax on your property, which is based on the property's value and location.
Utility bills: You'll need to pay for gas, electricity, and water, as well as any other utility bills.
Maintenance and repairs: You'll need to budget for ongoing maintenance and repairs, such as replacing a boiler or fixing a leaky roof.
In conclusion, buying a home with a mortgage can be a costly process. It's important to carefully consider all of the costs involved, including the deposit, mortgage fees, stamp duty, survey fees, moving costs, and ongoing costs.
As mortgage advisers, we can help you understand these costs and find a mortgage that's right for you.
The Mortgage Lodge
May 2023