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The Forgotten Costs of Property Buying
Getting on the housing ladder may well be a seriously daunting task. While
you might be saying goodbye to that absentee landlord who has never fixed the
central heating, getting a mortgage may well be the biggest single expense of
your life. Before getting one it’s very important that you do a large amount
of research, and scout around for the best deal. Getting the wrong type of
mortgage could well land you in a lot of trouble.
The cost of a mortgage is not just on the loan you take out in order to
afford a property. To begin with, you’re likely to need a lump sum in order to
put up a deposit. It is possible to get a 100% mortgage from a number of banks
on the high street, but they often have high interest rates because the bank
will more than likely assess you as a higher risk than someone who is prepared
to pay more up front. Normally a mortgage lender will be prepared to loan you
around 95% of the value of your house, so you’ll have to come up with the rest
yourself. The basic premise for a deposit is: the more you can raise, the
better, because in the long term it will cut the interest repayments.
Painfully, there are plenty of other costs in buying a house that aren’t
directly about the purchase. What about moving costs, surveys, and legal fees?
They’ve all got to be taken into consideration when you get a mortgage. Each
of these things could cost up to £1,500, and having already paid a deposit, it
may not be easy finding the extra cash required.
Additional to these fees is the dreaded stamp duty. It’s unlikely that 1st
time buyers will be purchasing property of over £250,000, but if they are, they
will have to pay a rate of 3% tax, which can be another massive cost. It must be
noted, however, that properties under £125,000 can have no stamp duty connected
to them, while houses £125,000 - £250,000 have 1%. Please see the HM
Revenue and Customs website for more details.
Finally, many mortgages come with a set up fee. Be careful when looking at
online comparison tables, because low initial rates can be masked by high set up
fees. Quite often set up fees can come around the £1,000 mark, as shown from
the table below:
Provider |
Product
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Initial Rate
|
Overall Cost for Comparison
|
Fee
|
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A&L
|
Mortgages
|
5.73%
|
7.8%
|
£999
|
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Natwest
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Mortgages
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5.69%
|
7.9%
|
£1299
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Britannia
|
Mortgages
|
5.69%
|
7.4%
|
£999
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|
Nationwide
|
Mortgages
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5.72%
|
7.2%
|
£999
|
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