Property investment; Tips on how to finance your property

This is my short advice on property finance. Most of the times you will need to arrange a mortgage before you are able to buy a house, however there is another option for this which is unless you are a cash buyer. A mortgage is basically a loan against the property and there is a variety of such loans that are available from building societies, banks and other lenders. It is best recommended that you look around and do your research first as the mortgage rates can vary and your objective is find the best deal you can. The primary concern here is; what can you afford? So it is wise to consult this matter with your financial advisor before you take any action.
When you consult your finances over with the mortgage lender, they will be able to help you work out how much you are able to spend on your future property based on your income level. In most cases the lender will give you what is known as an offer in principle which is basically the amount that they are prepared to lend you. Before you start looking for any particular home it is best that you get the offer in principle first, also there are other expenses that you need to be aware of such as the legal fess and moving costs.

The following is a list which you may need to budget for such as the deposit which is 5%-10% of the property value and if you take out a substantial mortgage, you may be asked to pay a mortgage guarantee premium, the cost of a building survey or homebuyer survey and valuation, the lender charges and mortgage repayment as well as the solicitor’s fees, including stamp duty, searches and land registry. There is also the possibility the cost of reconnecting the water, phone, gas and electricity, the redirection of the post as well as other forms of ongoing repairs and decoration.

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Hidden costs can be very distressing especially when you are not aware of them. In most cases, when you apply for a home loan, there are certain fees and charges that you did not know about and when you are required to make the payment, you are caught off-guard. It would be easy if you have certain allocations for it besides the amount for downpayment but if you haven’t, then it might cause some complications. 

Stamp duty and legal fees – Among The stamp duty and legal fees can be quite costly where you will most likely to know about this prior to applying for the loan. In most cases, you will know that you will have to pay some amount for the SPA (Sales and Purchase Agreement) for your loan agreement to be activated. In order to do this, there is a certain stamp duty imposed by the government which you must pay. Take note that there are different regulations for government schemes for these fees.

Lock-in Period – This is a certain percentage of your original loan amount which the loan provider will charge you if you pay off the loan earlier. In most cases, it is like a penalty that the loan provider imposes if you are able to pay off your loan during the first few years of the tenure and would mostly be around 2 to 3%.

Late penalty – Make sure that you are aware of any deadlines for payments and submission of documents. If you not aware of that, you could be charged a late penalty if there were delays in submission which is very common since you will be dealing with several parties.

Answered on October 3, 2015.
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