Mortgage

For the vast majority of us, buying a house is the most expensive thing we will ever buy. It should, therefore, be the one thing we spend time making sure that we’ve got it right; right? well I’m sad to say that more people find out about what they’ve gotten themselves into after the purchase than not. The questions you can ask are almost limitless, which is why I’ll cover a number of different areas over a number of different blogs. But lets start though with asking you a question. If you have a house already; How much did you pay for it? If you haven’t got one then, How much do you think it will cost to buy one?

Answer: There’s no straightforward answer!

As of February 2016, according to the Land Registry House Price Index, the average price of a property in the UK was £190,275. Now, I am happy to debate the usefulness of that figure, but for the purposes of this exercise I will run with it. I am not going to try and give details of the exact costs involved in buying a house as there are some excellent sites available that can do that in detail. I’m more interested in the ball park figures in order to make a broader point. If you were in the fortunate position to pay cash for your house and buy it outright, then the answer to the question is relatively straightforward. The cost of the property is £190,275, plus legal costs of about £1100, a survey at about £400 and stamp duty at £1300. So a very broad final answer is in the region of £193,075. If however, you are buying with a 90% mortgage with, say, 3% interest over 25 years, the final cost of that house is in the region of……

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Obviously, the overall cost can be anywhere between depending on the size of the mortgage. The point is that there is a difference, and possibly a big difference, between the purchase price of a house and the actual cost of buying the house. All lenders will give you a detailed illustration of what the overall cost of a mortgage is going to be, and even though most of us are naturally focused on the monthly repayment, it is worthwhile taking a moment to digest the overall cost and understand how big a commitment is being taken on.

In following blogs I will try and cover questions that need to be asked in various aspects of the house purchase process, but before that stage the very first question should be…

 

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Do I fully appreciate the commitment I am taking on?