Can anyone help me understand?!

starrybear

Hello,


Had a meeting with a broker re: getting a mortgage.


My understanding was that, if we had £40k equity in our house and wanted to buy a £240k house, we'd need a mortgage for £200k. I then asked how much we needed to have on top of the £40k equity figure (in savings, for example), to make sure that we had the funds for the necessary and inevitable fees (solicitors/stamp duty/EA fees etc).


She told me I wouldn't need to have a separate fund, as, if I wanted to, all of that could be sort of tied in with the mortgage dealings.


I sort of pretended to understand (more fool me), but I don't. Does this make sense to anyone?!


Many thanks from stupidstarrybear

ACG

Some lenders include free legals and valuation costs.
It seems odd that the broker has just assumed you want them however.

AnotherJoe

I think it's more likely she was explaining that if for example all the other costs came to another £10k you would add that to your mortage and get a mortage for £210k.

And that's fine if you want or need to do that but it's in general I'd say it's not a good idea as you are paying 25 years worth of interest on top of that £10k.

getmore4less

How many lenders let you add stamp duty and retain the LTV of the cash you have?

Anyone that says pay the fees up front it saves you money fails to understand basic finance.

starrybear

So I can't add all of my extra costs into my mortgage, yet retain the LTV ratio? I reckon my valuation isn't going to give me much, if any, wiggle room.

kingstreet

No. You can't.

You either pay your one-offs from the equity in your current home reducing your deposit, or you add savings to cover them and keep the equity/deposit intact.

rtho782

On the other hand, even 90% mortgages are available at decent APRs right now. If you don't have more money for legals etc, you can easily go "I'll put down a 24k deposit, and have 16k for costs".

AnotherJoe

If it's a question of timing, eg you really fancy this house but don't have the savings just yet for the extra costs, add it into the mortgage but pay it off via overpayments as soon as you can.