Mortgage Advice. The Complete Guide

Affordability

There are a lot of considerations to take into account when you come to make the decision to take a mortgage over x amount of years. You have to be realistic to yourself! Let's face it all lenders what to give you a mortgage, why? Because they make a fortune from you! Trust your feelings when you come to make the decision, be true to yourself and remember how you want to live after you have signed for your mortgage. Do try to leave yourself with some spending money.

Affordability

As mentioned before the main factor is affordability. Think of borrowing around three times your gross annual salary. Couples can generally borrow three times the larger salary plus one times the smaller, or two and a half times the joint salary. Some of the lenders today will allow you to borrow up to six-time your salary. This is all good for you to buy the house of your dreams. However, if the interest moves up by 1-2% you could find yourself in a spot of trouble with regard to repayments.

You should look at the family or household circumstances regarding how much you can afford to spend. The house of your dreams could slowly become the house of horror. It is nice to be able to go out with your wife or partner for a meal or drinks, and not have to worry about paying the mortgage.

The repayment of your mortgage should not be greater than 40% of your net monthly income. If it is more than this, then you could be borrowing too much and payback and money problems can arise.

More cost implications

Getting a mortgage is not the end of the financial side of things. You also need to have enough cash to pay for all the extras that come with buying a house e.g. stamp duty, solicitor's fees, removal costs, surveys, estate agents fee’s. A list of all the extra’s can be obtained from your mortgage lender.

Surveys Fees and Searches

• Mortgage valuation survey - from £170

• Homebuyer's survey - from £250

• Full building structural survey - from £350

• Arranging the mortgage £200

• Legal Fees £400

• Land registry fee £100

• Other searches from £70

Stamp duty

Stamp duty must be paid on all property transactions over £60,000. There are exceptions in some disadvantaged areas of the UK where the level is £150,000. Also some stamp duty exempt places around Britain. The Inland Revenue website lists all the areas that qualify.

£60,000 0%
£60,001-250,000 1%
Over £250,000 3%
Over £500,000 4%

The amount of duty paid on the house purchase is for the full amount of the purchase, not the amount over the Taxable amount. As you can see from the fees above, getting a mortgage is just the tip of the iceberg. With all the arrangement fees, building fees, search fees, legal fees and stamp duty, your mortgage and expenditure have just gone up over £1000, this is without adding on the stamp duty for your potential home. If you decided to buy a home for £200,000, you will have pushed your moving expenses into the region of £3000, before you have even received the keys to your property.

You should take all these hurdles into consideration when looking for a new home and try to save a little to help pay for these extra expenses. Not only do you have the legal side of things, but there is also the moving side and decorating to consider. All these factors should be taken into account when deciding to buy your new dream home.

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