Find out more about the fees and costs you may have to pay when buying a home, from arranging a mortgage to conveyancing.
Buying a property and taking out a mortgage can be a long and expensive process.
Once you've borrowed or saved enough for a deposit and passed a lender's affordability criteria, there are fees and costs to pay - some of which might've passed you by.
Fees vary depending on the price of your property, ranging from a few hundred pounds to several thousand, depending on your choice of mortgage and property.
If you build fees and costs into the overall cost of your property purchase, you shouldn't be unpleasantly surprised.
If you think you can avoid fees entirely, beware. A fee-free mortgage may exclude a number of fees, so you'll still end up paying them.
To help consumers compare mortgage deals, there is a standard format to how lenders describe their fees. All costs should be outlined in a mortgage illustration document - make sure you know what's included.
Sometimes known as a product or completion fee, this is the money paid to your lender to set up your mortgage. Depending on the individual mortgage product, the arrangement fee could be £0 or more than £2,000.
Taking out a fee-free mortgage could be an option, but it's important to work out whether this will be a better deal in the long term, or whether you'd be better off paying a lump sum in the short term in return for a lower interest rate. It all depends on what works best for you.
Look at whether mortgages with fees have a better interest rate or vice versa, and calculate how much you could end up paying over time.
You can add the fees to your mortgage, which may protect you from losing money if you pay it up front and your property purchase falls through.
Be aware that adding the fee to your mortgage will mean you pay more in interest on it. You can, however, overpay your mortgage to reduce the amount of interest you pay.
It might be a good idea to speak to a mortgage adviser, who can help you do the sums to work out which option suits you.
Arrangement fees can consist of some or all of the following:
Also known as a booking fee, this will go towards assessing and processing your mortgage and may be charged when you're getting a fixed-rate, tracker or discounted mortgage. This is usually payable when you first apply and is non-refundable, even if you don't go ahead.
For creating and managing your mortgage account, and maybe closing it in the future.
Your mortgage provider may need to transfer money to your solicitor, and vice versa, using CHAPS (Clearing House Automated Payment System). A fee is usually charged for this.
A solicitor or conveyancer is essential when buying a home, and you'll need to pay them for all the costs that come with the process.
A conveyancer will check and transfer the property's title deeds, check the Land Registry, conduct searches, and complete other paperwork.
If your chosen solicitor isn't on your lender's panel, you may have to pay two sets of legal fees - your own and your lender's. Be sure to check before instructing them to avoid paying twice.
Conveyancing fees vary depending on your solicitor but you can shop around to find the best deal.
Get several quotes and look for firms that have a no-completion guarantee, which means you'll only pay disbursements (things like search costs) if the purchase falls through.
A valuation fee is paid to your lender, who checks how much the property you're buying is worth.
This won't necessarily be the same as what you've offered to pay for it, and if the valuation is lower, you may have to renegotiate the price with the seller, or find money to cover the shortfall.
Lenders check the value of the property to make sure they aren't lending you money for an inappropriate home. The cost of a valuation depends on your lender, but it can be a few hundred pounds.
Some lenders may include the cost of the valuation in the mortgage deal, particularly with fee-free products.
While a valuation fee confirms to your lender that they can provide the loan, a survey is an inspection of the property for your own peace of mind.
A survey can spot subsidence, damp and other issues that could affect the value of the property. It isn't legally required, but it's advisable to ensure you're happy with the house.
If you don't conduct a survey and find something wrong with the property further down the line, it's unlikely you'll have much recourse.
You can arrange your own survey, but it may be cheaper and easier to upgrade to a full survey if that's something your lender offers.
You can choose from a HomeBuyer Report or a structural survey. The first looks at problems with the property that can be spotted easily, the second looks at ‘invisible’ issues. The first is cheaper than the second, usually by a few hundred pounds.
Depending on the property, you may also decide to commission specialist surveys for things like damp and electrics, or engineer reports to examine specific issues.
You may end up commissioning more than one survey and losing money if a planned property purchase falls through.
However, the cost of a survey can be a fraction of the cost of structural issues. Spending money now could save you a lot of money in the future.
You can organise your mortgage application yourself, or you can choose to use a broker or mortgage adviser.
They may charge a fee, but plenty offer fee-free advice.
The amount of stamp duty you have to pay depends on the value of your property. This is paid to your solicitor, who then pays it to HM Revenue & Customs (HMRC) upon completion.
While most of the large set-up costs have been covered, there are still a few things to remember...
It should come as no surprise that a few weeks after you've completed your home purchase you'll have to make your first mortgage payment.
The first payment is likely to be higher than usual, as it usually covers the interest accrued up to the payment date, as well as the first payment itself.
Factor in the cost of a removal van, even if you're hoping to fit all your possessions into a car, Tetris-style. That way, you'll have the cash if you need it.
If you're buying a leasehold property, you'll probably pay service charges and ground rent. Among other things, this can cover the cost of maintaining the building, which you'll be partly liable for along with any other leaseholders.
Before you complete on your property it's essential that you take out buildings insurance. This is usually required by the lender, and should be arranged to start when you exchange contracts.
If you want to exit your mortgage deal early or pay off more of your mortgage in a year than your lender allows, you may be subject to early repayment charges. Some mortgages allow you to overpay a set amount of your balance each year, typically 10%.
Even once your initial deal has come to an end and early repayment charges no longer apply, you may have to pay exit fees to leave or repay your mortgage. Many lenders don't charge for this, but some charge up to a few hundred pounds.
If you're confused about any mortgage fees or are worried you can't pay them, speak to a mortgage adviser.
They can tell you in detail about the fees you're liable for, and ways to cut the cost of your mortgage.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
PLEASE NOTE:, THE FCA DOES NOT REGULATE MOST BUY TO LET MORTGAGES