Mortgage Costs

The costs associated with a house purchase might be broken down into the initial costs - to enable you to buy the property and the monthly costs once you have moved in.

Initial Costs

There are several costs to consider:

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:

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:

* 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*)
Residential land or property SDLT rates and thresholds
Purchase price/lease premium or transfer value

 

Stamp Duty Land Tax	Up to £125,000	£125,001 to £250,000	£250,001 to £500,000	£500,001 to £1M
First Time Buyers	nil	nil	3%	4%
All other Buyers	nil	1%	3%	4%

 

If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid. For example, a house bought for £140,000 (by someone who is not a first-time buyer) is charged at 1 per cent, so £1,400 must be paid in SDLT. A house bought for £300,000 is charged at 3 per cent, so SDLT of £9,000 is payable.

Stamp duty is payable through your solicitor

First time buyers and Stamp Duty

The first time buyer’s £250,000 threshold applies from 25 March 2010 up to 24 March 2012 inclusive.

* 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: