Mortgage Costs

Initial Costs

How much will you need to budget for?

There are several areas to consider:

• Your deposit

• Mortgage expenses

• Legal charges

• Existing property charges and fees

• Moving Costs

Your Deposit

Most lenders offer mortgage loans up to a percentage of the purchase price. Mortgage schemes typically require deposits in increments of 5% ie. 10% deposit (90% loan to value) or 15% deposit (85% loan to value). You may be purchasing a property of value £100,000 with a deposit of £12000. If raising a deposit of £12000 (12%) leaves you financially stretched, consider reducing your deposit to £10000 (10%).

Mortgage Expenses

These may consist of some or all of the following:

• Valuation fee            - Usually payable up front

• Arrangement fee        - Can often be added to loan      

• Booking fee                - Up front or may be added to loan

• Higher lending charge*    - Can often be added to loan

• Completion fee           - Up front or may be added to loan

• Cancellation fee            - May be charged if mortgage does not complete

All mortgage fees will be shown on the Key Facts Illustration. Please ask your broker for a Key Facts Illustration.

Some fees are not refundable. Please check with your broker when the various fees are charged and if they are refundable

* Higher lending charge : previously known as 'mortgage indemnity premium' or 'higher percentage advance fee' . This is a form of insurance to protect the lender in cases where there is a high percentage loan to value. This is normally applied as a single premium which is often added to the loan. Paying this premium does not protect you from being pursued by the lender in the event of repossession. (This fee can often be added to the loan)

Legal charges

These may consist of some or all of the following:

• Stamp Duty                - Payable on completion (see the table below)

• Search fees etc            - Your solicitor/conveyancer may require an up front payment 

• Legal fees*                   - Normally payable on completion

* Providing your solicitor is on the lenders panel, then your solicitor should be able to complete the legal tasks on behalf of you and the lender.

Stamp Duty Land Tax (SDLT generally applies to purchases*)

* Although stamp duty normally applies in purchase situations, it is possible to become liable to stamp duty if you are remortgaging and at the same time changing the ownership. The Inland Revenue will be interested in the amount of money changing hands as a result of this transaction. The rules are complicated and we recommend you discuss this aspect directly with the Inland Revenue.

Existing Property charges and fees

If you are selling a property then you will have to budget for your estate agents fees. You should discuss the sale of your property with at least 3 estate agents.

If your mortgage is not portable then you may have to pay back an early repayment charge to your current mortgage lender. Please discuss this aspect with your mortgage broker.

Moving Costs

You will need to move your possessions from your current property to the new property. You may need to hire a removal company. You should obtain quotes from a few companies

Monthly Costs

These may consist of some or all of the following:

• Mortgage Payment (compulsory)

• Investment (If you have chosen an interest only loan backed by an endowment or ISA)

• Life Assurance (may be compulsory)

• Buildings/Contents Insurance (compulsory)

• Mortgage Payment Protection (optional)

Finally

To help you in planning your finances, we have prepared a mortgage costs sheet for you to complete.

This sheet is provided for guidance in budgeting for your mortgage. We cannot be held liable for errors and omissions. We recommend you confirm the actual costs as soon as possible.

Your home is at risk if you do not keep up repayments  on a mortgage or other loan secured on it.