Is the deposit on a mortgage just that or?
November 12th, 2009 by admin
should i save some for the other costs such as:
Conveyancing Costs
Stamp Duty
The Valuation and Survey Costs
Mortgage Lender’s Application Fee
Land Registry / Local Authority Search Fees
Insurance Costs
Mortgage Indemnity Insurance
Buildings and Contents Insurance
Mortgage Payment Protection Insurance
Moving In Costs
Furnishing, Re decorating etc
Moving in / Removal
Do some of the above get included in the price of a mortgage?
Many thanks.
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None of the above are included in the mortgage – the mortgage includes only the cost of the house and interest. You may also have an escrow payment that will save future payments towards homeowners insurance and taxes, but you still need to have the homeowners insurance paid for when you sit down at closing.
When you apply for the mortgage, the loan officer/lender should give you a good faith estimate which will include all the “extras” (btw, you forgot home inspection and appraisal).
As a rough estimate, in addition to your down payment, figure 3 to 5% of the purchase price for closing costs. Then moving costs/redecoration costs extra.
Yes I think that would be a good plan
Hard to say exactly what you are referring to by “deposit”. Do you mean earnest money? The initial down-payment on the loan?
The first group of costs that you list are referred to as closing costs (in the U.S.) These are costs that are above and beyond the price you are paying for the home.
So, if you have a greed to buy a 100,000 home and you are putting down 20,000 and you are going to have 5,000 of closing costs, on the day of your close you would need to have the 20,000 down plus the 5,000 in closing costs for a total fo 25,000.
Prior to closing you should receive a statement that tells you exactly how much cash you will need on that day, because sometimes some of your closing costs can be negotiated to be paid by the seller (or vice versa)
(Earnest money is sort of good faith money that you may be required to deposit up front, to show you are actually serious about buying the house. Any earnest money paid would be applied as part of your total cash available when you come to close)
The second group of costs you list are personal / incidental and have nothing to do with the purchase of the home. They are simply an expense of moving. They are not included in the price of the mortgage or closing costs.
(However, as part of the negotiation, it is possible you may have asked the seller to convey some of the existing furnishings as part of the sale of the home. If this is the case, those furnishings would need to remain in the home)
The deposit on a mortgage does not cover any of the things you list.
If the bank or building society want a 20% deposit then on say a £100,000 house you would have to find £20,000 which you hand over when contracts are exchanged. If you do not complete you lose your £20k.
I assume from the terminology that you are in the UK, so;
Conveyancing Costs – you’ll need to pay your solicitor after you have completed (some ask for a deposit upfront). Their bill will include their fee plus all of the searches and registration costs.
Stamp Duty – is a separate payment to your solicitor after completion, which he/she in turn will pay to HMRC.
The Valuation and Survey Costs – some remortgage deals will include the cost of a mortgage valuation (which of course you ultimately pay for through the higher interest rate), but you will more than likely have to pay the cost of the valuation if you are purchasing a property. If you want a Homebuyers Report or full Structural Survey, you’ll need to pay for that separately. You will usually pay the fee to the mortgage lender, or you can instruct your own surveyor but make sure that the company you use is acceptable to the lender first, or you could end up paying twice.
Mortgage Lender’s Application Fee – most lenders will allow you to add all or most of the fee to the mortgage, although it’s advisable to save up for it and pay it upfront so you won’t be paying interest on the fees.
Land Registry / Local Authority Search Fees – will be included in your solicitor’s bill and will have to be paid separately.
Insurance Costs – you’ll need to have buildings insurance in place when you exchange contracts as you assume the liability for purchasing the property from that point onwards. Most people will take out buildings & contents insurance (although the contents part is not obligatory). You will need to find this yourself – or your mortgage broker can – and pay the premium direct to the insurance company.
Whether you need life insurance, critical illness cover or income protection depends on your own circumstances, but you will need to pay the premiums separate to the mortgage.
Mortgage Indemnity Insurance – most mortgage lenders don’t charge indemnity insurance any more (mainly because they won’t lend a sufficiently high loan-to-value to warrant its inclusion). If it is charged, you can usually add to the mortgage although, again, it’s advisable to pay it upfront. Better still, get a deposit of at least 20% and you won’t need to worry about it.
Buildings and Contents Insurance – see insurance costs.
Mortgage Payment Protection Insurance – not a compulsory insurance and in any event only pays out 12-24 months mortgage benefit if you fall ill or have an accident and can’t work. You’d be better off, in my opinion, with Income Protection which insures your salary and ensures that you can continue to pay the mortgage until you either return to work, retire or die.
All the other costs you mentioned are incidental to the mortgage and you will need to find the costs yourself.
I hope this helps. A good mortgage broker should talk you through all of this and be able to give you an idea of the costs and how much you could afford to borrow.
Good luck.