What Fees Will You Pay?
When buying or selling a home, there are a number of fees and taxes which you will need to pay before and after completion. We have written below some of what to expect throughout the process; what needs to be paid, when and to whom.
Fees Before Completion
Most mortgages have at least 1 fee, sometimes 2, associated with it. The first one being the arrangement fee, and the second being the mortgage “booking” fee.
This is the big fee which lenders can charge to arrange your mortgage. There are many names for it, including ‘product fee’ or ‘application fee’, and lenders are able to make up their own names…ultimately it is the fee for the administration associated with your mortgage.
Many lenders allow you to either add the arrangement fee to the mortgage or pay for it upfront. There are pros and cons to both, so it is important that you take time to decide which suits you best.
Adding the fee to the mortgage means you wouldn’t need to pay for this upfront. However, this means you will be paying interest on that fee for the life of the loan.
Paying the fee upfront means you shouldn’t pay any interest on it. However, if the purchase falls through, you may lose that fee.
Luckily, there is a way to avoid paying interest on the fee, whilst not running the risk of losing it if the purchase falls through.
Add the arrange fee to the loan, and pay it off immediately.
If you add the fee to the loan it protects you from losing it if the purchase doesn’t go ahead. Most lenders allow you to ‘over pay’ on your mortgage each year (most up to 10%). Overpaying at the start of the loan will ultimately pay off the fee which was added….meaning you wont pay any further interest on it.
Depending on your lender, you may be charged a ‘booking fee’ for the mortgage product you choose. This is to secure a fixed rate, tracker or discount deal. It can sometimes be called an ‘application fee’ or ‘reservation fee’ and is due to be paid as soon as you make the mortgage application. Do note that this fee is non-refundable and so if the purchase falls through, you will not receive your money back.
- How much Is It? £100-£200
- When do I pay? When you apply for the mortgage
- Who do I pay?Your lender
- Will I always have to pay this fee?Not all products have this fee associated with them
- Do I need to pay upfront or can I add it to my mortgage?This is to be paid upfront
This is charged by the lender for them to go to the property you are purchasing and make their valuation of it. This protects them incase you fail to keep up with repayments and the property needs to be repossessed. It means they know they are going to get a decent price when they sell it on.
The cost for this varies between lenders, but it is worth budgeting around £250.
Do not confused this with a survey which is completed on your behalf to detect any issues with the property.
This survey is for your peace of mind that there are no major issues with the property your are purchasing. You are able to choose just how in depth these surveys are, with the basic one focussing more on the parts you can see (damp, cracks etc), and the in depth one reporting on everything from plumbing and electrics to structural issues.
You can choose not to have a survey done, however this is a risk which needs to be carefully considered. If an issue is detected after completion, and you didn’t have a survey completed, you could shoulder the full financial and emotional burden of getting it fixed without being able to claim compensation.
Your solicitor and conveyancing team will be able to recommend surveying companies nearby, and the price can vary from £400 – £700+ depending on which level you choose. It is also worth speaking to your lender or broker as you begin the mortgage application, as they may be able to ‘upgrade’ your valuation survey to a structural survey.
Do be aware that the purchase can fall through after the survey has been completed, meaning you will lose that fee. However, the frustration and disappointing of this is likely to be a lot less than the financial burden of any potential issues found after completion.
If you choose to use a broker, they may charge you directly for their services. However, there are some brokers who only get paid a commission directly from the lender and so are fee-free for you…it is always worth checking before you instruct anyone.
If you are paying the broker directly, this can vary from £300 to upwards of 1% of the loan amount which can very quickly add a substantial amount to your budget.
Always ask for recommendations on brokers, and the service they offer can vary greatly and have a real impact on an already stressful time.
Be aware that some brokers may ask for their fee upfront, but you could lose this if the sale doesn’t go through.
Stamp Duty is a tax which is paid to the government when you purchase a property. This will be paid to your solicitor who will then pay HM Revenue and Customs on completion of the purchase.
There are no charges on properties up for £125,000, and stamp duty was abolished for first time buyers on the first £300,000 of property purchases worth up to £500,000.
Here is a breakdown of the rate you will pay:
Up to £125,000 Zero
125,000.01 – 250k 2%
250,000.01 – 925k 5%
925,000.01 – 1.5mil 10%
1,500,000.01 + 12%
You will pay your solicitor for all the legal work associated with buying your home. This includes conveyancing which is the transfer of ownership from its current owner to you; ensuring all paperwork is completed and sent to the relevant people; and also checking for planning permission issues, environmental factors or any other hidden issues which could cause you major problems down the line.
It is always worth asking for recommendations on solicitors, as this can really make or break an already stressful time. Good solicitors will need minimal chasing, be proactive with paperwork and searches and keep you in the loop throughout the process.
The prices they charge can vary from £800 – £1500 +, and they may also charge you for additional requested searches. A lot of the time, solicitors will ask you to pay for these extras as and when they come up, but it is worth having the conversation with them before they get started….to avoid any unexpected expenses.
The land registry are responsible for updating the register with the new owners details. They will charge a fee for changing the registered names and this varies depending on how much the property is worth.
This fee is another one which will be charged by your solicitor and most likely need to be paid as and when it is filed. This fee can range from £200 – £500 depending on the value of your home, so it is worth double checking with the solicitor before they expect payment.
Costs After Completion:
The cost of moving all your belongings in to your new home can vary massively depending on how much work you want to do.
If you want to do everything yourself, you can hire self-drive vans for as little as £100 for the day.
There are also some companies who will wrap, pack, move and unpack everything for you, and charge accordingly.
This is a great area for making savings and you can adjust your budget accordingly. Planning in advance means you wont be hit by a hefty bill at the end.
Service Charge, Ground Rent and General Upkeep
When you own a property, there are always expenses to consider, some minimal whilst other can really add up.
If you purchase a leasehold property (where you own the property but effectively rent the land it is positioned on), you are more than likely to pay a service charge. This charge varies from property to property and should always be considered before making any formal offer on a property. These are also subject to change depending on required upkeep of the building/lighting/heating of communal areas.
Ground rent will be paid to the freeholder and can be due throughout the year or as 1 annual fee. This is well worth exploring before making an offers, as a surprise fee make a real financial difference.