Elementary mortgage questions

cyder_drinker

Sorry if these seem like really stupid questions, but I can't find the answers in the mortgage guide.

Basically, we are looking to buy our first house. We have been saving for a few years and now have enough for a 10% deposit and a few thousand extra to cover the fees, stamp duty etc. The sort of houses we are interested in seem to be priced around the £250k mark. According to the various online calculators, with our combined income, we should be able to borrow anywhere from £300k -£350k, so hopefully we won't have any problems there.

What I am not sure about is the mechanics of the process. Having looked on various comparison websites, I have found a whole host of mortgages, which are well within our affordability range. My preference is most likely going to be for some sort of fixed rate mortgage (for the first few years at least), of which there are plenty of products available, all of which we could afford. But what do we do next? Do we contact the relevant bank/building society, or do we need some sort of broker? The advice guides I have read seem to differ on this and the article on this website dates from 2006 which seems a long time ago.

The next question is relating to fees. Most of the mortgages have application fees. This isn’t a problem as we can budget for that, but when do you pay them? Is it literally when you apply? I would hate to pay out a 4 figure sum only to be told by the bank that they don’t want to lend us the money. Is there some way to find out the odds of being successful in an application before paying the fees?

tomatoandcheese

We're ftb as well so can only answer from our experience but if it helps whilst you wait for someone with more experience to come along...

You can apply direct but we went through a broker and I really recommend it - they compare lots of products and also know different lenders criteria so can save you a lot of legwork. Ours got us a decision in principle first so we know roughly what our budget is - lots of estate agents want to see this as part of putting in an offer anyway so they know you have your finances in place. And it go rs you some reassurance that your application will be accepted. Until you have had an offer accepted you can't apply for the actual mortgage since it will be dependent on a valuation survey.

We didn't have to pay any fees to apply. There's an arrangement fee once the actual mortgage is approved but ours the payment is tagged onto the first mortgage repayment so is only paid if the sale goes through. Our broker also only charges a fee if we complete, although I feel he'd have every right to ask to be paid for the successful mortgage apication he did for us even though the sale then fell through (gazumped )

ACG

You can use a broker or you can apply directly to the lender. There is no right or wrong way, it is personal preference. A broker will run through the options with you, narrow it down and find you a competitive deal for your requirements, make the application on you rbehalf and effectivley hold your hand and do it all for you.

You may need to pay for that, you may not. It really depends on you and the broker. Obviously not paying sounds better, but having been a fee free broker in the past, I can honestly say that I would never do it again. I had to run around like a headless chicken in order to earn a wage.

The arrangement fee from the lender can sometimes be added to the mortgage. It is important to not get caught up by the rate but the overall deal. Having a low rate is great, but if the fee outweighs the savings of a lower rate it is not worth it.

Best of luck.

Lilla_D

In relation to your last set of questions, there are a number of cost items to budget for dependent on the circumstances:
- when your offer is accepted:
1. reservation fee, if it's a new build property
2. search fees payable to your solicitor, so they can pay for the appropriate searches
- when a full mortgage application is submitted:
1. valuation fee (if applicable) - the amount is dependent on the lender and the purchase price
2. broker fee (it might be at this stage, might be once you get the offer or when the case completes)
- during the purchase transaction:
1. any surveys you wish to carry out, if it's not a new build property and you didn't pay for it at application stage to the lender
2. any potential fees the freeholder or the management company charges for information / documents / consent in relation to a flat and if it's not paid by the seller and can't be covered from the upfront pot of money you gave to the solicitors for searches
- on exchange of contracts:
1. solicitor fee (unless they asked for payment upfront)
2. solicitor admin fees / disbursements
3. Land Registry fee
4. money transfer fee
5. building insurance (unless you buy a flat)
6. Chancel Repair Liability insurance fee (if applicable)
7. Stamp Duty Land Tax
8. your deposit

Dependent on the circumstances and the mortgage deal, some of the above may not be applicable or you may find additional cost items (e.g. the lender has an insurance admin fee, if you don't take building insurance from them).

The arrangement fee for the mortgage deal can normally be paid upfront or in some cases later during the process or be added to the mortgage.

Please note that this is not an exhaustive list, because the exact costs will depend on the case details, but your broker will guide you through it all.

elverson

Have you read the PDF advice guide? This is updated to 2017.

http://www.moneysavingexpert.com/mortgages/mortgage-guide