There is no doubt that buying your first home is an exciting step in life. In this current economy, simply the achievement of having saved your deposit seems like a weight off your mind but the costs don’t stop there. Whether you’re a first time buyer or simply haven’t done it for a decade or two there are many additional costs involved that need to be considered to ensure a stress-free process.
Booking or application fee
This is the fee that is paid when you complete the mortgage application and is generally paid upfront. This fee varies from lender to lender but is small in comparison with other fees incurred during the buying process.
Completion or arrangement fee
This is the fee the lender charges for setting up the mortgage and can be paid any time before the mortgage actually starts. If your application is declined or you decide not to proceed then usually you can get it refunded. The amount you might pay can vary from a cash amount or a percentage of the mortgage you have applied for.
When you apply for a mortgage the lender has to commission a mortgage valuation which involves a basic inspection of the property to confirm whether it’s secure to lend on. It’s paid when you apply for your mortgage and the cost will vary from lender to lender. There is also a small valuation administration fee that you will need to pay at the same time but it’s a small charge similar to the application fee.
CHAPS fee can also be called a telegraphic transfer fee and is charged by the mortgage lender for sending the mortgage monies to your solicitor. It’s usually paid on completion or can be added to the mortgage and once again is a small amount.
Stamp duty land tax is a lump sum tax you have to pay when buying land or a property over a set cost. How much you pay is dependent on the value of your land or property and the type. You only have 30 days to pay after completion and although various lenders are currently offering certain cash back deals to help with stamp duty costs, be sure to research and be mindful of current rates and deals that are available.
Building insurance is not a legal requirement but the majority of lenders will make it a stipulation therefore you will need to take out a policy before they lend to you. It covers for unexpected events such as fire, water and subsidence. The cost of your insurance will be based on variables including the location, size and age of your property. If you don’t take a policy with your lender then they will charge you a small Freedom of Agency Fee for checking into your insurance policy to see if it’s sufficient to protect them if your house ever needed to be re-built.
Getting the basics right
Being aware of the hidden costs of house buying will certainly help your budgeting process but make sure you get the obvious things right. Get the best mortgage deal that is open to you and ensure you budget for the unexpected. So don’t forget to:
Understand your Mortgage
OK so this is an obvious cost but as your home is the most expensive item you will buy you’ve got to select your mortgage with knowledge on your side. As with all big decisions in life, you must do your research to ensure you are aware of all the products available in this competitive market place. You could consider using services of a mortgage advisor or broker to help you review your options. Usually independent and offering free impartial advice, their experience and therefore the number of options open to you will often outweigh those from your local bank. Ensure you cover all bases, after all this will be the largest debt you will incur in life so you will need to get it right.
Create a Contingency Plan
Even when you think you have everything covered and you are ready for your move, you will always discover there are more costs to consider. Urgent repair costs such as door or window locks, issues with the heating and water system, the chimney or fireplace, electric or plumbing issues, the list could go on. Then there is the cost of the removal itself, postal redirection, carpet cleaning or purchasing, the list can seem endless. Ensuring you have a contingency set aside for extras in your budget is essential and will give you peace of mind throughout the whole process.