The Hidden Costs of Mortgages
So you've found your dream home and you now start to consider your mortgage to pay for it.
Of course you will be over-whelmed with lots of options from where to get your mortgage.
You'll need to work out how much you'll be paying each month and as part of this calculation you will also need to consider other 'hidden' costs.
What are these costs? To be competitive and to entice you to take out a mortgage with them some lenders will offer to pay for some of the following costs.
This list is pretty exhaustive and even if you don't have to pay all these costs when you purchase your first house you will come across them at some stage in your house buying years.
Valuation and Survey Costs Most mortgage lenders require you to get a valuation of your preferred property and in a lot of cases the valuation and survey needs to be carried out by one of their suggested surveyors.
Some lenders pay this cost as part of a 'sweetener' for certain mortgage deals.
Solicitor Costs This is a cost which you can't escape.
You can normally expect to pay in the region of £400 to £1,000+ depending on the complexity of the sale.
You will have to bear this cost yourself so it's worthwhile getting a few quotes from local solicitors.
Mortgage Indemnity Guarantee Costs This is an insurance, which the lender may ask you to take out if you only pay a small deposit on your house.
It's a policy that protects the lender should you fail to keep up repayments.
Exit fees This is fast becoming a normal cost as a lot of lenders try to discourage people from remortgaging in order to get a better deal.
The exit fee can be anything from £200 upwards.
Redemption Penalties These are pretty standard in the mortgage industry.
When you take out a mortgage based on an incentive the lender offered you in the first place they normally have a redemption penalty if you move your mortgage within that period.
For example a lender may offer you a Fixed Rate for the first 2 years and if you decide to pay off the mortgage during those 2 years then you could end up paying 1 or 2% redemption penalty.
Stamp Duty This is one of the biggest costs and you cannot avoid it.
The duty is based on the value of your home and ranges from 1% for house in the £125-£250k range and 3% from £250-£500k and 4% from £500k upwards.
Life Assurance This is another cost which some lenders insist you take out.
Although if you do have to take out this cover then make sure and not take that offered by the lender.
This is normally more expensive than the Life Assurance plans from specialist insurance companies.
Conclusion A mortgage is likely to be the biggest expense in your life but as outlined in this article it doesn't just stop at the cost of the house and the interest payments.
Do your homework on all the associated costs and if possible seek out lenders who will pay for some of the costs.
But a final word of warning! You never get something for nothing from lenders so make sure and do all your calculations before making that life changing decision.
Of course you will be over-whelmed with lots of options from where to get your mortgage.
You'll need to work out how much you'll be paying each month and as part of this calculation you will also need to consider other 'hidden' costs.
What are these costs? To be competitive and to entice you to take out a mortgage with them some lenders will offer to pay for some of the following costs.
This list is pretty exhaustive and even if you don't have to pay all these costs when you purchase your first house you will come across them at some stage in your house buying years.
Valuation and Survey Costs Most mortgage lenders require you to get a valuation of your preferred property and in a lot of cases the valuation and survey needs to be carried out by one of their suggested surveyors.
Some lenders pay this cost as part of a 'sweetener' for certain mortgage deals.
Solicitor Costs This is a cost which you can't escape.
You can normally expect to pay in the region of £400 to £1,000+ depending on the complexity of the sale.
You will have to bear this cost yourself so it's worthwhile getting a few quotes from local solicitors.
Mortgage Indemnity Guarantee Costs This is an insurance, which the lender may ask you to take out if you only pay a small deposit on your house.
It's a policy that protects the lender should you fail to keep up repayments.
Exit fees This is fast becoming a normal cost as a lot of lenders try to discourage people from remortgaging in order to get a better deal.
The exit fee can be anything from £200 upwards.
Redemption Penalties These are pretty standard in the mortgage industry.
When you take out a mortgage based on an incentive the lender offered you in the first place they normally have a redemption penalty if you move your mortgage within that period.
For example a lender may offer you a Fixed Rate for the first 2 years and if you decide to pay off the mortgage during those 2 years then you could end up paying 1 or 2% redemption penalty.
Stamp Duty This is one of the biggest costs and you cannot avoid it.
The duty is based on the value of your home and ranges from 1% for house in the £125-£250k range and 3% from £250-£500k and 4% from £500k upwards.
Life Assurance This is another cost which some lenders insist you take out.
Although if you do have to take out this cover then make sure and not take that offered by the lender.
This is normally more expensive than the Life Assurance plans from specialist insurance companies.
Conclusion A mortgage is likely to be the biggest expense in your life but as outlined in this article it doesn't just stop at the cost of the house and the interest payments.
Do your homework on all the associated costs and if possible seek out lenders who will pay for some of the costs.
But a final word of warning! You never get something for nothing from lenders so make sure and do all your calculations before making that life changing decision.
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