Mortgage arrangement / application fee
It is very likely you will be charged an arrangement fee when taking out a mortgage – I will be able to talk you through the mathematics of the transaction to determine which deal is best value for the fee charged. Low rate v high fee or higher rate v lower fee.
As a minimum you will be required to get a basic valuation carried out and you may decide to request additional surveys on the house you want to buy. A valuer will value the property and tell you how much it is worth, whilst a survey will tell you about the structure of the property and any faults that it may have.
Valuations and surveys not only give you peace of mind that what you are paying is correct, but it will also give the lender confidence as well. A lender will need to have the property being used as security valued to protect themselves from negative equity and to make sure their mortgage is secure. The applicant is usually expected to pay this upfront, when the papers are submitted.
There are 3 levels of valuation / survey:
Basic Valuation – All lenders require a basic valuation. They need to know that they are not lending you more than the property is worth, and that if you sell it off you will get at least as much money back as you paid for it. Although this is often referred to as a survey, it is really too superficial to merit this title.
The valuer arrives at a value by comparing the property with similar ones, taking factors such as age, condition and location into account. The valuation also points out any very obvious major faults which could affect the property’s value, but is very brief and is not nearly as detailed as a real survey.
Homebuyers survey / report – this service includes a basic valuation but also contains a report on the condition of the property, highlighting any defects that the surveyor has spotted. The most significant change was the introduction of colour coded Condition Ratings usually referred to as the ‘Traffic Lights System’. The surveyor must rate each element of the property using one of the following Condition Ratings.
Condition Rating 1 – No repair is currently needed. The property must be maintained in the normal way.
Condition Rating 2 – Defects that need repairing or replacing but are not considered to be either serious or urgent. The property must be maintained in the normal way.
Condition Rating 3 – Defects that are serious and/or need to be repaired, replaced or investigated urgently.
Full structural survey – This is the most comprehensive – and the most costly – type of survey. It is suitable for any building, but is especially recommended for older buildings (75 years and upwards); those constructed out of unconventional materials such as timber or thatch; and properties which have had lots of alterations or extensions, or which you intend to alter or renovate.
The surveyor will check the property thoroughly, looking at everything that is visible or easily accessible to examine the soundness of the structure, its general condition and all major or minor faults. More specialist surveys can also be carried out on aspects such as foundations, damp proofing, or tree roots, either by a specialist within the firm of surveyors or by an independent specialist surveyor.
Early repayment charge
The charge some lenders make if a mortgage is paid off early.
Higher lending charge
Not all lenders charge these, but if you borrow a high percentage e.g. if you borrow more than 75% of the price of the property, you may have to pay this type of fee. I will let you know if these will apply to you.
Estate agents’ fees
These will differ by agent, some will charge upfront fees and some may charge fees on the completion of sale. The cost is likely to be based on a percentage of the property value, so it is best to get a quote before proceeding.
Solicitor / conveyancing fees (including Land Registry fees)
Conveyancing is the legal process to transfer the ownership of a property from the seller to the buyer. If you are buying a property, your solicitor generally works on behalf of the mortgage lender, who usually insists on certain searches before they will release the money for your property. If selling a property, the solicitor will draw up a contract for the sale. They will also apply for title deeds (or details of freeholder if leasehold) from your mortgage lender. They will also set a completion date and inform the relevant parties and make sure all mortgage conditions requiring attention are complied with.
This is a ‘front end’ fee charged by several lenders. The idea is you’re asked to pay the fee (typically £100 to £300) to secure the funds you are intending to borrow. It is sometimes described as an administration fee or a booking fee. Reservation fees are often charged on fixed rate mortgage offers where the funds on offer may be limited. Some lenders believe the fee is a useful way of getting the borrower to show commitment at an early stage. Some, but not all reservation fees are refundable should the home loan not go ahead.
When you buy property, you may need to pay stamp duty. Stamp duty land tax (SDLT) applies to any property purchase over £125,000, unless your property is in a disadvantaged area where separate rules apply. The table below shows you the current limits. Purchase price of property:
Up to £125,000 – 0%
£125,001 – £250,000 – 2%
£250,001 – £925,000 – 5%
£925,001 – £1,500,000 – 10%
Over £1,500,000 – 12%
Removal fees are one of the easily forgotten costs of property buying or selling. Removal fees will have to be paid if a company is hired to help shift belongings and goods from one property to another. You should look around for a competitive quote and ask around for a reliable removal firm, your estate agency will help you with
*Your home may be repossessed if you do not keep up repayments on your mortgage.
Andrew Harrod Financial Services Ltd is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority. Registered Office: 12 Dunholme Road, Gainsborough, Lincolnshire DN21 1XJ. Registered Company Number: 8109370. Registered in England & Wales
“Free initial consultation”. A fee may be charged on application. The actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.”