Making Sure You are Aware of All Costs of Running a House and Getting a Mortgage
Buying a home is a thrilling adventure, but you need to be cautious about getting caught up in the emotional side of home buying. Not paying attention to the overall costs incurred when obtaining a mortgage and then running a household can damage your financial situation. Take time to determine the total cost of purchasing your “castle” before you finalize the deal.
The cost of running the average UK household recently rose to 6,366 pounds per year and will likely continue to rise. Over the past several years, these costs have risen faster than the rate of inflation. The majority of yearly household costs consist of mortgage payments, but there are also other costs to take into account when figuring out whether or not you can afford a home.
Heating and air conditioning bills can be quite a surprise to the new home owner. If you are buying a home from the current owner, ask to see past heating and air conditioning bills so you can get an idea of what to expect. If you are buying a new home, ask your estate agent to help you determine an average cost to heat and air condition a home of comparable size and insulation type.
Utility rates have also increased rapidly during recent years. Gas, electricity, and water bills need to be added into your monthly budget when deciding if you should buy a home. Although you will have the power to control these bills to an extent by conserving as much as possible, make sure you determine a realistic amount for the monthly costs of these utilities. It is much better to overestimate the cost than to come up short because you tried to make the payments fit your budget instead of the other way around.
Depending on the age of the home, repairs and maintenance can take a large part of your monthly household budget. You will probably not need to worry about these costs with a newer home, but be prepared for potentially large repair bills if you are interested in an older home. Make sure that you can afford to put aside a certain amount of money each month to save for unexpected maintenance and repairs. Repairs can be quite costly and can easily damage even the most carefully thought out budget.
You may need to buy appliances when you move into your home. These are sometimes included in the sale price of the home, and it is up to you to make sure you fully understand whether you will be need to purchase appliances separately for your house. Energy efficient appliances may cost more upfront, but they will benefit you in the long run with lower utility bills.
Mortgage lenders require that both you and your property are covered by insurance policies. Your home as well as your belongings can be covered under a homeowner’s insurance policy. To reduce a lender’s risk in loaning you money to buy a home, you will need to purchase life insurance for yourself. Your family would receive the benefits of this policy in the event of your death. The insurance benefits would allow your family to pay for the house, satisfying both your commitment to the lender and your family’s need for continued and secure housing. You are not bound to any insurance policy and are able to shop for the best insurance deals every year.
Mortgage costs include more than the scheduled monthly payments. There are numerous fees associated with a mortgage, and you will need to factor these in to your total cost of securing a mortgage. Lenders sometimes pay one or more of these fees in order to offer an attractive deal to the consumer. Check with your lender for a comprehensive list of fees you will be responsible for paying.
Lenders typically charge an arrangement fee. This fee covers the cost of originating the mortgage loan. Some lenders increase the arrangement fee for mortgages that are particularly appealing to the public.
A valuation of the home is required by the lender, but the borrower is the one responsible for the valuation fee. Lenders want to ensure that a property is actually worth the sale price before agreeing to lend money for the purchase. Valuation costs vary with the cost of the home.
A survey of the home is not necessary but is usually a wise investment for the home buyer. A survey is more detailed than a valuation and can uncover current or potential problems. For homes fifty to seventy-five years old, a Homebuyer’s Report is recommended, and homes older than seventy-five years will need the more extensive Building Survey. Expect to pay between 250 and 500 pounds for a Homebuyer’s Report and at least 1,000 pounds for a Building Survey.
Most home buyers will choose to hire a solicitor or licensed conveyancer to take care of all the legal matters of buying a home. Fees for solicitors and conveyancers vary, so you will need to research the rates in your area before you know how much money to set aside for this. Remember that you will also be responsible for payment of the lender’s solicitor. Your solicitor or conveyancer will be responsible for any searches done on your home, and you will be expected to pay the cost of these searches.
If your home is valued at £125,000 or more, you will be responsible for paying the Stamp Duty once the sale is complete. The Stamp Duty is a government tax and is assigned according to the price of the home. Another fee assessed on your home is the Land Registry Fee. This fee also varies according to the price of the home and covers the cost of changing the register of the home from the seller to the buyer.
Sometimes lenders will charge a mortgage indemnity guarantee, or MIG, fee if the amount of your mortgage loan is 75% or more of the value of the home. This fee will vary by lender and also the loan to value (LTV) percentage.