Mortgages.The costs of moving house
In 2005, Britons spent over £10.6 billion on moving house - and that didn't even include the property prices. So what are the hidden costs of moving house?
Buyers tend to get caught up in the excitement of choosing a new home and run the risk of paying the price financially by not ensuring they get the best value from their mortgage. If you’re willing to bargain over fixtures and fittings it also makes sense to look at the other ways you can get a better deal when you move. Borrowers should start with a mortgage as it will be, in the vast majority of cases, the most expensive commitment.
Early Repayment Charges (ERCs) are a part of most mortgages, but some have more favourable terms than others. Some only have ERCs during the initial competitive rate, whilst others have overhanging ERCs which lock a borrower in whilst still paying a lender’s Standard Variable Rate.
There is virtually no need for any borrower to have to accept overhanging ERCs with the competitive nature of the UK market and the number of deals available to consumers.
Taking a mortgage where there are only ERCs within the initial, favourable term makes sense for most borrowers but it may be a good idea for some to have no ERCs at any time. You are likely to pay a little more in interest for the privilege, but it can be the right decision for those who need the flexibility of not being tied in.
However, it is all too easy to get caught up in the now and forget about what might happen later down the line. Leaving your mortgage will incur exit fees. These have recently come under fire for unfairly penalising consumers and as a result, have become a vital part of the decision making process. Exit fees come under a variety of names including, administration charges, sealing fees or deeds-release fees. They tend to be around £195-£295 but this figure is rising as lenders look to recoup lost revenue from competitive rate pricing. It may not seem like a huge sum of money in the scheme of things, but these charges have seen an unnatural rise over the last three years and are a clear sign of lenders simply making money out of the consumer. At the very least, you should be aware of what the fees are on your deal in the first place.
Lower ‘Higher Lending Charges’ (HLCs) will apply to borrowers who do not have a large deposit. They are applied by lenders, usually on loans over 90% loan to value, who view these borrowers as a greater risk because they haven’t shored up their borrowings with a down payment.
However, first time buyers ma not need to put up with HLCs anymore as lenders are now coming out with more products for those wanting to borrow as much as 100%. The industry is beginning to realise that whilst first time buyers may find it hard to get a deposit together, they are still more than capable of meeting monthly mortgage repayments.
Stamp Duty is more often than not more than likely to be the biggest individual cost to home movers outside of the actual purchase, costing Britons £5 million pounds a year.
Although the initial stamp duty charge of £125,000 is heavily publicised because of the potential burden to first time buyers, those moving or sometimes purchasing their first property need to be aware of the second and third bracket. Once a property reaches £250,000 the stamp duty charge jumps from 1% to 3%. The variations in stamp duty costs can be dramatic depending on the location of the property. It is vital that homeowners look at the tiers before they make their move or even start looking. Many properties are priced just above different thresholds with the view they will be bargained down. If you’re not aware of these cut off points then it can end up costing you more than you originally expected.
Home movers should also look at solicitor and survey fees. The key with both of these is to choose suppliers that are reasonable in their charges but give you the peace of mind that they are doing a good, accurate and speedy job. They are both essential in the home buying process but some people often forget to add them into the cost of moving and receive both a surprise and very unwelcome bill when they can least afford it. The average homeowner needs to factor in £500 in solicitor’s fees and as much as £900 in surveys costs if you want a full structural survey.
Moving home can be stressful, time consuming and expensive but there are ways you can cut the cost and the time it takes, it just takes a little research and awareness of what you are getting in the first place.
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