Arrangement Fee
Lender's Valuation
Survey
Legal/Conveyancing Fees
Stamp Duty
Stamp Duty Land Tax Exemption in Disadvantaged Areas
Land Registry Fee
Other Search Fees and Costs
Estate Agent’s Commission
Removal Fees
Higher Lending Charge
Other Potential Costs
Contingency Fund
Arrangement Fee (back to top)
This is a one-off fee sometimes charged by lenders to cover the cost of setting up the mortgage.
Lenders Valuation (back to top)
Every lender will insist on a valuation being undertaken, to ensure that the property is worth the price being paid for it. The costs of this are borne by the borrower, and can vary widely. Some lenders even waive the valuation fee, as an incentive for you to take out a mortgage with them.
Survey (back to top)
Depending on the age and condition of the property you are considering, it may be wise to have your own independent, more detailed survey carried out to check for any defects. There are two types of survey – the Homebuyer's Report and the more comprehensive Building Survey. The latter, also known as a Full Structural Survey, can cost in excess of £1,000 plus VAT, depending on the value of the house.
You should also allow for potential extra expenditure for more specialist checks, for example electrical, roofing, drainage, plumbing and woodwork expert reports on older properties.
Legal/Conveyancing Fees (back to top)
You will need to hire a solicitor or conveyancer to deal with the legal aspects of buying a property. Fees can vary enormously, so it is a good idea to shop around for the best rate.
Some solicitors charge a flat rate while others charge a percentage of the property price, normally up to 1 per cent. As well as the price of your house, the fee will take into account factors such as the amount of documentation, the level of skill required and the complexity of the transaction, so make sure you get a definite quote before proceeding.
In theory, you will also have to pay for the legal work done by your lender's solicitor, although most buyers use the same solicitor to complete both parts of the transaction. This can generally save money, but it’s worth comparing charges quoted by other firms.
Stamp Duty (back to top)
Stamp duty is a government tax, charged for properties above £125,000. If your new home is priced over £125,000 and up to £250,000, stamp duty is charged at 1% of the whole property price.
Above £250,000 to £500,000, stamp duty is levied at 3%. Over £500,000 it is charged at 4%.
Note: that between 3 September 2008 and 31 December 2009 the starting threshold for SDLT was £175,000 - higher than shown in the table above. The threshold was reduced back to £125,000 from 1 January 2010.
First-time buyers:
If you are a first-time buyer the threshold for when you start to pay stamp duty is £250,000. This is only if you have never owned a house or flat in the UK or anywhere else in the world. If you are buying with someone else they must never have owned property before either. This higher threshold applies to purchases made on or after 25 March 2010 and before 25 March 2012.
If the property is in an area designated by the government as 'disadvantaged' a higher threshold of £150,000 applies for residential properties.
Therefore if your new home is priced over £150,000 and up to £250,000, stamp duty is charged at 1% of the whole property price.
Above £250,000 to £500,000, stamp duty is levied at 3%. Over £500,000 it is charged at 4%.
More information on exempt areas is available on the HM Revenue & Customs website.
Land Registry Fee (back to top)
The Land Registry is a government department which administers all registered properties in England and Wales. It charges a fee for transferring the register to the new owner, which varies in bands, according to the value of the property.
Other Search Fees and Costs (back to top)
Depending on the area that you are buying in, additional searches needed may include a commons search, coal authority and brine searches.
If you are buying from a limited company e.g a builder, your conveyancer may need to undertake a company search. In addition, if you are buying property that is still unregistered – for example where it has not changed hands for many years – your conveyancer will need to commission land charges and possibly an index map search.
Conveyancers also regularly incur bank transfer fees, to ensure that the purchase funds are transferred the same day that completion takes place. Remember to get a quote before you commit.
Estate Agent’s Commission (back to top)
If you're selling your property as well as buying one, the fee charged by your estate agent has to be taken into account. Usually this is charged as a percentage of the property price, so make sure you get a quote before proceeding.
Removal Fees (back to top)
Ask for quotes from several removal firms, as prices vary.
If you are doing the removals yourself, allow for van hire, VAT and insurance, fuel and return travel from the hire company when you return it.
Higher Lending Charge (back to top)
This is an insurance premium charged by some lenders where your loan amount exceeds a given percentage of the price of the property (this calculation is often referred to as the Loan to Value or LTV). Some lenders do not enforce a Higher Lending Charge, while others only charge when the LTV is higher e.g. greater than 90%.
The Higher Lending Charge is put in place to protect the mortgage lender. Should you default on your mortgage repayments the lender will need to recover the money you originally borrowed. The Higher Lending Charge enables the lender to insure themselves against the event that that your property is repossessed and sold for less than the amount you owe. The insurance does not protect you and the insurers have the right to recover any amounts owing from you.
Often the one off premium can be added to the total value of your loan rather than paid for up-front.
Other Potential Costs (back to top)
· Buildings insurance premiums
· Contents insurance premiums
· Connection of services, including telephone
· Installation of new equipment, including kitchen and bathroom fittings
· Carpet laying
· Kennelling of pets
· Mail redirection
· Change of address notification
Contingency Fund (back to top)
Leave a decent-sized contingency fund for emergencies. You do not want to be left without funds if there are any unexpected extra costs.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Mortgage Talk's typical fee for arranging your mortgage is £199, however depending on your circumstances, a fee of up to 1.5% of the mortgage amount may be charged.