Don’t Forget The Cost Of Buying Or Moving

So many people come to me with a deposit but they haven’t thought about how much it is going to cost to buy a property.

Buying a home could be possible with a 5% deposit, there are a limited number of lenders who will consider this, especially if you are self-employed with a growing business.  Personally I prefer a 10% because not only do more mortgage lenders become available to you, the credit scoring process they use I have been advised by my contacts does become a little easier, which could increase your chances of mortgage success.

Deposits can be gifted and I’m seeing more of this coming from grandparents, family and even abroad, but that’s for another post.

So let’s say you want to buy a house to live in at £300,000 for example and you have a deposit saved of 10%.

Let’s break down how much it is going to cost you to buy or move home:

  1. Stamp Duty. Now this is quite a tricky calculation so I use a couple of quick website links
    1. https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/
    2. http://www.stampdutycalculator.org.uk/
    3. Stamp Duty cost may be £5,000
  2. Solicitor. Has to be involved in the process to handle the finances and carry out the legal side of purchase a property. The cost can vary depending on location, property value, if the property is freehold or leasehold.  I have a panel of 26 solicitors of which we use about 5/6. The advantage of using mine is you get one point of contact for your whole application, we will do all your chasing for you.  Our self-employed clients love it because nothing more annoying than waiting on hold or chasing people, we are experts at it. 
    1. As a rough guide total cost for purchase £1,300 for example
    2. If selling you will have that same cost again i.e. total £2,600 for example.
    3. Ask us for an exact quote if you need to
  3. Survey and valuation.  There are 3 types of survey you can have on your property.  I am a mortgage adviser not a surveyor so this isn’t something I can advise you on, however:
    1. Mortgage Valuation – is mostly for the mortgage lender to confirm purchase price. The cost of all 3 is dependent on the property value so for this estimate £300-£500 (estimate).
    2. Homebuyers report – I had this done on my 1940’s with a extension, it gave me some extra security and about a 60 page document on the visual concerns of the property. This would be roughly £500 – £800 (estimate).
    3. Full structural survey – this is a full service / MOT of the property and comes with written warranties and guarantees. This could be £800+ (estimate).
    4. http://activebrokers.co.uk/a-short-guide-to-valuations-and-surveys/
  4. Lenders arrangement fees.  The general rule of thumb when it comes to mortgage interest rates is the lower the interest rate the higher the lenders fee. Now some lenders do offer free mortgage valuations or even some cash back. So my job as a broker is to calculate not just the cheapest / lowest interest rate, but I factor in how much the fees and costs are going to be.  So for example I may recommend a marginally higher interest rate, but it might save you £1000 in fees. This is all part of personalised advice I provide.
    1. Some lenders allow you to add the arrangement fee to the mortgage, however consider that the fee will accrue interest over the mortgage term, so by paying ut up front you save that interest accruing.  
    2. So for the purposes of this process allow £1000 (estimate).
  5. Moving home (if applicable), when my family and I moved in 2015, probably the best part was having movers.  The company we used were awesome, so much so I wrote a blog about it http://activebrokers.co.uk/moving-home-in-chelmsford/
    1. Allow £1,500 for moving costs.
  6. Finally broker fee. These can vary, some brokers do not charge you, however my philosophy is “cheap isn’t good and good isn’t cheap”  so for me and my team:
    1. We charge a fee of up to 2% of the amount borrowed.  Up to £995.00 is payable on application and the rest is payable on offer of the mortgage.
    2. The more complex i.e. the more time it will take us the higher our fee.
    3. This is confirmed after my initial strategy call to understand your circumstances and prior to advice being given.

So that just about does it, now let’s breakdown:

 

Deposit £30,000 (ideally)
Stamp Duty £5,000
Solicitors for purchase £1,300 estimate
If applicable, solicitors for sale £1,300 estimate
Survey & Valuation £1,000 estimate
Lender Arrangement fee £1,000 estimate
Movers £1,500 estimate
Broker fee example £495.00 upfront and £500.00 on offer. Estimate
TOTAL £38,595
TOTAL without solicitors for sale and movers £35,795

 

Make sure you have enough money.

  • This blog does not constitute advice, it is for information purposes only.
  • You should contact a mortgage broker for personalised advice for your specific circumstances.  Please ask us for a personalised illustration.
  • Active Brokers Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (http://www.fca.org.uk/register) under reference 488342.
  • Your home may be repossessed if you do not keep up repayments on your mortgage.
  • The mortgage industry does change over time but everything I have said is correct as of 12/03/2017.

 

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