Mortgage costs and fees
If you’re a First Time Buyer or climbing the Property Ladder, our Advice will help you understand the new requirement for mortgage lending.
How much can you borrow?
A safe calculation is 4 times income; however some lenders will let you borrow 5 times income. This is dependent on age, term, outgoing’s and how your income is made.
I earn £18,000 per annum + my wife earns £22,000 so the total income is £40,000
The maximum we could borrow is £40,000 x 4 = £160,000 (some lenders will increase this to £200,000 or 5 times total income)
The term of a mortgage can be between 5 and 35 years.
What affects your borrowing?
DEBT: if you have loans, credit cards or Hire Purchase payments, benefits, child minding or child maintenance costs your maximum loan amount may be reduced.
I have a personal loan with a monthly repayment of £180 and a Credit card with a minimum monthly payment of £60, therefore my current outgoing’s total £240 before paying a mortgage or any household bills.
These outgoing’s will have the effect of reducing my income by £2,880 = £240 x 12 months.
This effectively brings our joint income down to £37,120 and reduces the amount we can borrow by £11,520
How much deposit do you need?
large deposit (relative to the value of the property) will increase your choice of mortgages and lower interest rates as the risk to the lender is low. Since the “2008 mortgage crisis” banks will lend a maximum of 95% but these loans will be at a much higher interest rate.
If you wish to buy a house valued at £240,000 you would require a minimum deposit of £12,000 (5%).
Mortgage Rates vs Deposit:
5% Deposit = interest rate circa 4% – 6%
10% Deposit = interest rate circa 3.5% – 4%
20% Deposit = interest rate circa 2.5% – 3.5%
40% Deposit = interest rate circa 1.3%
You can buy a brand new home with just 5% deposit, the Government will then assist with a further 20% (see Help to Buy) therefore giving you a deposit of 25% to get a better interest rate.
Other Costs to Consider
Mortgage application fee / arrangement fee
Stamp duty – New rules introduced 1st April 2016
Mortgage Valuation Fee
Solicitor Fees (conveyance)
£0 – £1000 Typical mortgage application fee / arrangement fee
Stamp duty – New rules Introduced 1st April 2016
£0 – £500 Typical valuation fee
Typical Solicitor Fees (conveyance) TO BUY = £500 – £700
Typical Solicitor Fees (conveyance) TO SELL & BUY = £850 – £1000
Agreement in Principle
Before you look into buying a home, our mortgage advisors will assess your individual circumstances and advise the best mortgage product based on your circumstances and maximum loan amount.
We can arrange for a decision in principle within hours which clients use to demonstrate a serious offer to estate agents.
How to Proceed
Our advice is Free and non-obligation. If you speak to us early in your house buying process we will be in a better position to proceed once you find your new home.
Please prepare your figures for income and outgoing and how much you’re looking to spend. We suggest getting an Experian Credit Report to ensure you have a good credit history especially with a high loan to value mortgage.
We will then compare and source the best deals for you by searching the whole of market with the aim of saving you time and money.
Call our team on 01844 390910