On top of the price of the house itself, there are other one-off payments involved in purchasing a property and moving there which can be a total of £2,000 up to £5,000. For you to get a decent idea of what kind of house you can hope to purchase, you must also take these additional costs into mind. To assist you in summing up your calculations, here is a guide to visualize how much cash is needed and what these charges are for. Take specific care with the stamp duty land tax with the latest increase of property rates; for properties above £250,000 this has come to be a major concern.
Computing Your Price Range
You need to think about:
- The total amount you will obtain from selling any current properties
- The total amount of how much you can loan
- How much money you have in investments or savings which you can utilize
- After contemplating the factors stated above, think about how much the other added one-off costs of purchasing and moving will combine to
- Subtract the sum (4) from the overall amount of factors 1, 2 and 3 and you can then roughly estimate the kind of price range you should be looking at
How Much Should You Borrow?
Before searching for houses you want to buy, you should first consult a mortgage adviser or lender as to how much your possible loan would be. This will be based on the amount of your deposit and how much you currently earn.
Buyers are required to deposit a certain amount on the property; mortgage lenders rarely shoulder the full price. You could try to deposit at least 5%of the price of the property, or more if still possible. The smaller amount you deposit the larger amount your lender will charge you for the added risk. If you do not have sufficient cash for the deposit, you could try getting a ‘bridging loan’ from your trusted bank.
Lenders typically let you borrow three times the amount of your yearly income, though there are some who would even lend up to four times. If you are purchasing a home as a couple, this rises to either three times the first income, plus an added one year on the second income; or two-and-a-half times your combined income. Lenders may contact your employer in order to confirm your earnings; or you may have to provide legitimate proof of your earnings if you are self-employed.
One of the main factors in successfully achieving a mortgage approval is not only ensuring an adequate deposit, but also being a low-risk in the eyes of the lenders. Make sure you did not fail to pay any credit accounts or bills, and in case you may have forgotten any of them, be sure to fix them at once.
The One-Off Costs
The Arrangement Fee
This is a fee charged by the lenders to cover the overall cost of arranging the mortgage, though some lenders do not charge this kind of fee.
Lender’s Valuation (Basic)
All lenders need a valuation of the property to confirm if it is worth the price being paid for. This may be commissioned by the lender, but you must shoulder the cost. The price of the valuation is determined by the value of the property. Some lenders do not charge you this fee, as a motivation for you to work with them.
It is strongly recommended that you have done your own thorough survey to check for any property defects. There are three types of survey: the Valuation usually carried out by the Lender as stated above; the Homebuyer’s Report which costs between £250 up to £500; and the broader aspect of Building Survey or some may call it ‘Structural Survey’ which can cost you up to £1,000 plus added VAT, still depending on the value of the property.
You should also think about surveying the newly built properties, though the condition of new properties is certified by the builders, it is wiser to check for any errors before you move in; this could save you a lot of money for any pricey renovations.
You must appoint a solicitor to deal with the legal factors in purchasing a property. There is no ‘average fee’ so it is a great idea to look around for the best and most practical rate. Some solicitors charge a fraction based from the property price while some charge a flat rate. The overall fee will depend on how much skill is needed, the quantity of paperwork involved and how complex the transactions are.
You also ought to pay for the legal work completed by your lender’s attorney. Again, the fees may vary so always ask your lender how much they charge for this kind of service. If you let the same solicitor as your lender do your conveyancing this may help you save money, but remember to compare the charges with other firms as well.
It is the tax charged for housing properties in UK with a purchasing fee of beyond £125,000. The total amount of tax to be paid increases depending on the purchase price of the property, and only relates to the amount of beyond £125,000.
A 2% tax is charged on the fraction of the property purchase price between £125,001 up to £250,000. A 5% tax is charged on prices between £250,001 up to £925,000. A 10% tax is charged for properties costing £925,000 and up to £1.5m while 12% tax for any purchase price beyond £1.5m.
Land Registry Fee
The Land Registry is part of the government which keeps the records of all registered properties in England and Wales. It charges a certain amount for shifting the register to another owner. This payment is charged rendering to the property price.
|Price (£)||Fee (£)|
|For 40,001 – 70,000||60|
|For 70,001 – 100,000||100|
|For 100,001 – 200,000||200|
|For 200,001 – 500,000||300|
|For 500,001 – 1,000,000||500|
|For 1,000,001 and over||800|
Local Authority Search Fees
Local searches will be made by your selected conveyancer/solicitor in order to guarantee that there are no impending complications such as plans for new roads nearby, or planning consents on any neighbouring properties.
Other Disbursements and Search Fees
These include the coal authority, commons, index map, company searches, land charge, and bank transfer fees. Agree to give about £70 to cover a common property purchase.
Commission of the Estate Agent
If you’re planning to sell your property to buy a new one, the amount charged by your estate agent has to be well considered. This is typically charged as a portion of the property price, which is about 1.5% up to 2% on average.
Finding the perfect home can be an expensive task. It takes a lot of money to provide your travel, food, telephone, and hotel bills if you are purchasing a property in a far off area. Always consider about these factors beforehand.
Request for quotes from at least three different removal firms and compare them side by side, for their fees may vary a lot. You can make the removal by yourself, but it is too inconvenient and time-consuming.
Mortgage Indemnity Guarantee Fees
This is an insurance premium charged by several lenders where your loan amount is beyond 75% of the property price, or in other words, where the LTV (loan to value) is more than 75%. Some lenders do not let you pay for an MIG, but some may only charge fees when the LTV is greater than 80 or 90%.
This is charged in the event that you default on your repayments and the lender cannot recover its money. Remember that this factor protects the mortgage lender, NOT you.
Fees may vary from but the usual MIG premiums are:
- 4% of the price borrowed beyond 75% on a loan of up to 90% of the purchase price
- 6% of the price borrowed beyond 75% on a loan of up to 90% to 95% of the purchase price
- 8% of the price borrowed beyond 75% on a loan of up to 95% to100% of the purchase price
More things to bear in mind:
- Buildings insurance premiums
- Additional removal insurance
- Contents insurance premiums
- Installation of new equipment
- Disconnection of services (gas, water, electricity, telephone bills)
- Reconnection of services
- Kennelling of pets
- Carpet laying
- Change of address notice
- Mail redirection
Leave a decent contingency fund in case of any emergencies. You don’t want to be left with ‘0 balance’ in case of any additional and unpredictable fees.
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