How much will it all cost?
Whilst you can use the equity you have in your current home, you may also need to use some of your own money to put towards a deposit on your next one. There are many factors on affordability, but you typically need to stump up at least 10% of the purchase price, preferably more if you can.
As well as your deposit, there are other costs associated with buying a property and taking out a mortgage. Typical ones that apply to most buyers include:
Conveyancing fees, typically between £850 – £1500
Stamp Duty Land Tax/Land, which is upwards of 2% of a property valued above £125,000
Valuation fees, which are often between £200 – £600
Land Registry fees, which are between £20 – £900 depending on the value of your property.
If you hire removal men, the typical cost is £50 – 60/hr.
There are often unexpected costs that crop up in buying a property so it makes sense to have some money aside as a contingency.
How much can I borrow?
You can use our online calculator to get an idea of how much you could borrow. Or to get a better indication, we can simply have a chat with you to discuss your circumstances, your income, basic salary and any regular overtime and bonuses, to gain a better understanding of your affordability.
We’ll chat to you about your regular outgoings, like credit cards or personal loan repayments and we’ll deduct these from your income. This allows us to see how much you can afford for your mortgage payment each month.
Lenders also use credit scoring to help them decide whether to lend you money, they also use it to set interest rates for some products.
The Risks You Should Be Aware Of
A mortgage has one significant difference in comparison to other loans, its secured against your home. In the event that you can’t keep up with your monthly repayments or you get into financial difficulties during the duration of your mortgage, you should contact your mortgage lender straight away.
What insurance will I need?
It’s a requirement of your mortgage to have buildings insurance. This covers the bricks and mortar, fixtures and fittings. It’s also a good idea to take out contents insurance as well – this protects all your possessions in your home, from furniture to jewellery.
You may want to look into insurance to protect your mortgage with Life Cover and Critical Illness Cover, which we can help provide.
Things to consider before your move
There are many different types of mortgage product nowadays, but the most common are fixed rate, tracker and Standard Variable Rate (SVR). Fixed rate locks you in for a rate over 2-6 years (sometimes more) and doesn’t fluctuate, regardless of the Bank of England base rate.
Tracker rates literally track the BoE base rate, with the lender applying a set % on top. So if the base rate was 0.75%, the lender may add 1.25% so you pay 2% on your mortgage. Should the base rate go up to 1%, your rate would increase in line to 2.25%.
SVR changes on the lender’s discretion. It doesn’t track the base rate like a Tracker mortgage, but it is a factor, amongst other things, in determining the rate.
You will also have to consider the mortgage term too. There are mortgage terms of up to 40 years available:
A longer term reduces your monthly payments, but increases the cost of credit as interest is applied over time, so you pay more overall.
A shorter term increases your monthly payments, but as you’re paying over a shorter period, you pay less overall on your cost of credit.
Loan to Value.
Loan to Value – (LTV) is expressed as a percentage of the purchase price being covered by a mortgage. Assuming you’re moving to a £200,000 house and have £50,000 to put down, that’s a 25% deposit and 75% LTV. LTV is important as the lower it is, the better the interest rate you will be offered. If you’re unsure what mortgage options are best for you don’t worry, we can help establish that. We’ll discuss all of these factors with you before we recommend the best mortgage for you.