What does LTV mean? How much might I be able to borrow and what deposit do I need? These might be some of the things you ask yourself when you are looking to buy a home for the first time. Here, we cover some mortgage basics around deposit and fees that are good to know before you start the process.
How much deposit do I need?
You can get a mortgage with as little as a 5% deposit – so on a property worth £200,000, you would need £10,000 saved (excluding any fees you will also need to pay). These mortgages are also known as 95% LTV mortgages (LTV stands for Loan-to Value, and in this case would be 95% as you would be borrowing 95% of the value of the property).
The bigger deposit you have, the wider range of mortgages will be available to you.
How much can you afford to borrow?
You can find this out by speaking to a mortgage lender, but if you just want a ballpark figure, you can try our online mortgage calculator to find out.
To determine how much you can borrow, a mortgage lender will look at your income (and the income of your partner, if buying jointly) as well as all of your outgoings e.g. credit card balances, bills, insurances, living costs and childcare costs if applicable. Once the lender has all of this information, they can present you with an amount you can borrow.
What other fees might there be?
There are various fees that are payable in respect of getting a mortgage, including possible arrangement fees and application fees. There will also be solicitor fees, as you will need a solicitor to handle the purchase. According to Money Supermarket*, you will need to budget between £500 and £750 for solicitor costs to buy a home (plus stamp duty).
If you use a mortgage advisor, they should confirm any fees payable by you before proceeding.
Stamp Duty Land Tax (SDLT)
This is a tax payable by homebuyers on the purchase price of your property. Even if you buy your first home, you will have to pay SDLT if the property is worth more than £125,000.
Currently, if you buy a home worth £200,000 for residential purposes, you will need to pay £1,500 in SDLT. Visit www.gov.uk for more information on SDLT. This amount increases depending on the purchase price of the property.
If you would like to apply for a mortgage, contact our friendly team on 0800 378 669 or contact us online here.
You can also request a copy of our Mortgage Guide, which is packed with useful information on the full mortgage process – here.
Read all the other article in our ‘Mortgage Basics’ series:
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.