Graduate Mortgages

Graduate Mortgages - Additional Costs

One of the major issues for graduates is that they usually have little or no cash savings to put towards any other costs that are incidental to the purchase of property. Therefore, it is vital that borrowers consider how they are going to meet these additional costs.

Deposits
In the normal course of purchasing a property, a 10 percent deposit is expected on exchange with the balance due on completion. This can present a problem for graduates who do not have cash savings of 10 percent.

Many graduate mortgage lenders will now offer 100 percent mortgages that will cover the deposit. However, mortgage rates are often considerably higher for those who are unable to offer even a small percentage deposit and this can have a long lasting impact on monthly repayments.

Premiums
It is worth bearing in mind that if you are going to need all the potential benefits of a graduate mortgage such as a 100 percent mortgage or fee-free mortgage, then the lender may require that you pay a Mortgage Indemnity Premium.

The purpose of this policy is to indemnify the lender in case they need to sell the property at a loss. Although this type of policy is a one-off cost it can, nevertheless, amount to thousands of pounds. Lenders deal with this issue differently and some will add it to the mortgage balance, increasing your monthly payments; others make no charge.

Survey and Legal Fees
Whilst it is normally possible to obtain an offer in principle from a mortgage lender, this will be based solely on your financial status as a borrower. When the actual property has been selected, almost all lenders will require that, at the very least, a standard survey is undertaken to confirm the value of the property.

A lender's survey is very basic and will simply tell the lender how much they can expect to get back if there is a need to repossess and resell the property. It may be prudent for the borrower to take an additional survey which goes into more detail, particularly with older properties.

Legal Fees are variable but can be reasonably priced. Most solicitors will now offer a fixed fee for dealing with the conveyance of a property, which at least offers a degree of certainty.

Other Costs
Other costs that should be considered include furniture, household building and contents insurance and removal costs. All these should be calculated and accounted for as part of the house buying process.

Summary
On top of the purchase price other costs also have to be met, both on a regular basis and as one-off initial costs;
not all lenders charge fees such as premiums or arrangement fees and this should be considered when choosing lenders;
other costs include surveys, legal fees and removal costs, all of which need to be accounted for.