Buying a house is a long process. As a buyer, you can’t be caught slacking off on each step because if something’s gone wrong, it will delay your home ownership.
After your mortgage offer is issued, the hard part is over, and you’re one step closer to your new house. But after that, you might still be oblivious to the next steps and have a question like, “So, what happens after my mortgage offer is issued?”
You’ve come to the right place, as we will outline an easy guide to answer your question!
Double Check Your Mortgage Offer
Although you already know the details of your mortgage when you applied for it for the first time, it’s always a good idea to double-check the mortgage offer you’ve received at this point. By doing so, you can avoid any discrepancies that may come up in the future. Always involve your solicitor during the whole process to carefully review every detail.
The Mortgage Term
The complete term of the mortgage is how long exactly you have to pay for your home loan. You need to work out your mortgage term with your lender to determine the best period to pay off your mortgage.
The most common mortgage term in the market is 25 years, although you can also choose the best term for you depending on your affordability to pay the monthly income, as well as your motivation to be debt-free as soon as possible.
While it may sound convenient to stretch the mortgage term as far as possible, you also need to calculate the interest rate since it increases every year.
The Monthly Payment
Your lender will calculate a minimum amount you have to pay each month to repay your mortgage. Monthly payment consists of the actual balance on the loan and the interest repayments on the loan per month itself.
Remember, the interest rate varies. It’s important to be vigilant on what to expect on your monthly payment. The interest rate itself is not always fixed and it tends to go up from time to time.
To get you started with the ballpark figure of your monthly payment, there are at least three variable rates that you need to take into account for your calculation. This includes:
- Annual interest rate (APRC)
- The starting balance of your loan
- The number of payments in total
All things considered, it is also important not to miss any repayment because it will harm your credit score. Or worse, your house might be repossessed when you can’t keep up with the monthly payment.
The Interest Rate Scheme
Mortgage interest rate is the percentage of your principal loan balance to purchase a house for a specific time period. Determined by the lender, it’s important to know what to expect on the interest rate scheme on your mortgage.
While some guarantee the fixed rate for your mortgage interest, most of the time it will also rely on your credit profile. The best way to understand this is by discussing it with your lender and re-evaluate it if necessary.
Additional Fees During Process
There is a list of fees to keep in mind when it comes to buying your house. These include:
- Stamp Duty. You have to pay Stamp Duty on properties over £250,000 unless you are an eligible first time buyer.
- Deposit Fee. On average, you need to save up around 5% to 20% of the house price. The bigger the deposit, the lower your interest rate is likely to be.
- Valuation Fee. In order to assess the value of the property, the mortgage lender is going to charge you around £150-£1,500 based on the property’s value.
- Legal Fees. As mentioned in the beginning, buying a house is a long process and to support all the legal work you need to pay a solicitor for about £850-£1,500 including VAT at 20%.
Insurance
A mortgage is a huge financial commitment, you have to make your repayment on time, even when you are unable to work due to illness or work redundancy. While Mortgage Payment Protection Insurance is not mandatory in the UK, it’s always better to think ahead about what can possibly happen in the future.
To avoid the worst case scenario as a homeowner, you can purchase Mortgage Protection insurance. It can be a safety net for when you no longer afford to pay your monthly payment. Get a monthly premium to protect you for around £20 to £40.
Inform Your Lender to Accept the Offer
Once you’re happy with your mortgage offer, it’s time to contact your lender to proceed with the next stage: the completion of the transaction. You may have to sign a memorandum of understanding, and the solicitor will then proceed with the seller’s solicitor to take you to the next process.
After that, normally the lender will conduct a final check on the buyer’s finances, including the buyer’s income or employment status and valuing the purchase price of the house. Work closely with your solicitor to make sure that you don’t miss anything before accepting the mortgage offer from your lender.
Completion of the Purchase of the Property
Typically, if you purchase a house in either England or Wales, the solicitor will set a date to exchange contracts where you’ll officially commit to buying the house. After the contracts are exchanged, you will be responsible for paying the security deposit on the house and its insurance.
On the completion day, the lender will send the mortgage funds to your solicitor, who will send it to the seller’s solicitor on your behalf. Once it’s gone through, you’re an official homeowner!
Once the transaction is complete, more often than not, house removal is your next concern. The moving process can be super stressful and challenging, so it’s never too early to prepare for your move.
Alternatively, you can start early and delegate it to a professional moving company.
Choosing a removal company can be tricky, but it can ease your moving process with their service.
Now that you know what happens after your mortgage offer is issued, are you ready to become a homeowner soon?