Getting mortgage-ready

Stipendium, the platform that simplifies life’s complex events, has released a number of top tips to help the nation’s homebuyers, and first-time buyers in particular, when it comes to getting mortgage ready ahead of a potential purchase. 

Stipendiums has broken down the homebuying process into 12 essential steps via their first product release, Merge, and will be releasing a series of essential guides to help the nation’s homebuyers based on these 12 steps. 

1. Get mortgage ready
2. Book mortgage appointment
3. Find a property
4. Make an offer and get accepted
5. Instruct a conveyancer 
6. Understand property surveys
7. Offer and exchange
8. Get new home ready
9. Get utility ready
10. Exchange contracts
11. Moving day checklist
12. Completion day

This week, it’s all about getting mortgage-ready. 

Preparation is essential 

The home buying process can take a long time, but one way of helping it move more quickly is to be proactive and well-prepared when it comes to your mortgage. Rather than wait to find a home they want to make an offer on before starting the mortgage process, and certainly before making an offer, buyers need to get a mortgage agreed in principle as soon as they possibly can. Not only will this reduce buying timelines, it could also be the difference-maker in a bidding war with another buyer - sellers love buyers who are well-prepared and can move quickly.

Understanding mortgage costs

Buyers need to budget for the cost of securing a mortgage. The biggest of these is the mortgage arrangement fee, sometimes called a product or completion fee. Mortgage lenders often use these fees to enable them to offer very low interest rates. Some lenders require upfront payment of the fee, some allow customers to add the fee onto their repayment plan, but in such instances, interest will be applied.  

Buyers should expect to pay an arrangement fee of at least £1,000 to secure an attractive mortgage rate and, in some cases, must also agree to a mortgage booking fee of up to £200 to secure a fixed-rate, tracker, or discount mortgage deal.

And then there’s the valuation fee, averaging £300, which lenders charge to double check how much the property being purchased is worth - which can often be a different amount to that being offered for it. 

For buyers who are using the services of a mortgage broker, there can be an additional broker fee of around £300, though some brokers will take this money from the lender rather than the customer. 

FInally, there’s the conveyancing fee - money paid to a solicitor to cover the cost of the legal work associated with buying a home. This can cost around £1,500, though the precise amount will be dictated by the price being paid for the property.

The cost of remortgaging 

It’s not just the cost of securing an initial mortgage that homebuyers will need to consider and while it will seem like a lifetime away when first buying, it’s also important to know that remortgaging your home will also require additional funds. 

Remortgaging is the process of moving a mortgage from one lender to another, often done to reduce the size of the loan and perhaps secure a better mortgage rate. Over the course of a 25-year mortgage, many people will remortgage roughly every five years. 

This means that during the lifetime of the mortgage, they will be required to pay a significant sum to cover the remortgaging costs. These include £4,000 in mortgage arrangement fees; £400 in mortgage booking fees; £600 for valuation fees; and £1,200 in broker fees, not to mention the additional conveyancing fees required each time the mortgage needs to be registered with a new lender. 

Reducing mortgage costs

All of these fees combine to mean that the average person pays at least £1,550 in initial mortgage fees and a further £6,200 when remortgaging over a 25-year mortgage lifespan. 

However, utilising the Merge platform from Stipendium can dramatically reduce these costs. 

Merge membership costs £395 and not only includes mortgage arrangement fees, booking fees, and broker fees, but subscribers also receive a lifetime of free remortgaging with no hidden costs or small print clauses. 

This means the homebuyers can save as much as £1,155 on their initial mortgage fees and then a further £5,805 everytime they look to remortgage - and that’s just step 1. Merge offers a wealth of help, advice and cost cutting benefits for every step of the homebuying process. 

Christina Melling, CEO of Stipendium, commented:

“We know how daunting the whole home buying process is, especially for first-time buyers, and sorting your mortgage is just the first step in this journey. 

With the cost of living increasing and interest rates also climbing, many will be understandably worried about the cost associated with their mortgage and so it really does pay to arm yourself with all of the information you can. 

We’ve designed Merge to empower buyers with this information, eliminating the chance of hidden or surprise costs, to provide greater confidence and clarity. At the same time, we’ve also partnered with a wealth of industry suppliers to reduce the cost of everything from mortgage fees to your home utilities.”