Associated Costs
Buying a house can be an expensive project, however, our experienced and professional ‘Independent Mortgage Advisers’ will ensure that you fully understand all the associated costs and considerations involved with buying a house.
All mortgage related fees which you'll have to pay will be set out clearly in the key facts illustration (KFI) that we will provide you with.
However, there are some other costs that are not included in the KFI, such as stamp duty or your conveyancing fees.
See below a brief summary of Fees and Costs:
Application Fees
A commitment or administration fee, usually payable to the lender, to reserve the mortgage funds.
These fees can also be called booking, administration, or arrangement fees. They are common with limited offers such as fixed rate deals and may not be refunded if your mortgage does not complete.
In some circumstances, these fees can be added to the loan.
Higher Lending Charge
Also called additional security fee, or mortgage indemnity insurance.
The higher lending charge is an insurance which your lender may take out for its protection in case, at some future stage, you fall significantly behind with your mortgage payments and your lender has to repossess your property and sell it. If the property is sold for less than the amount of your outstanding mortgage, your lender can claim on the mortgage indemnity to recover some (or all) of its loss.
The basic security for the mortgage is your property. The mortgage indemnity, therefore, acts as a form of additional security for your lender. It is not, however, additional security for you.
Lenders have different limits on the maximum loan they will make on a property. These vary from around 75% to 90% of the value of the property, depending on the lender. If you need to borrow more than this, your mortgage will be a high loan-to-value advance and you will normally be charged a fee for it. Payment of this fee therefore enables you to borrow more than your lender would normally be willing to lend on the security of the property alone.
Some lenders use this fee to reimburse themselves for the amount they have paid for their mortgage indemnity insurance, while others choose not to purchase indemnity insurance from an insurance company, preferring to use the fee to make other arrangements to cover the risk. The fee is not, therefore, the cost of mortgage indemnity insurance. It is just the cost to you of taking out a high loan-to-value mortgage.
If you do have to pay a higher lending charge, many lenders will allow it to be added to the mortgage.
Valuation Fees
You normally have to pay the lender a fee for a surveyor to value the property you are intending to buy or re-mortgage. This is done for the lenders benefit, to assess that the property is appropriate security for the mortgage.
It should tell you if there's something seriously wrong with the property, but it doesn't involve a detailed inspection.
The percentage of the value you can borrow will be based on the figure in the report, and not necessarily on the price agreed with the seller.
Other Surveys
If you are looking for additional peace of mind, more ‘in-depth’ survey reports are available at an additional cost.
A ‘Homebuyer’s Report’ is more thorough than the lender’s valuation report and looks in much more detail at the condition of the property.
The ‘Full Structural’ survey will give even more detail on the property’s condition but, again, will be at a higher cost to the borrower.
Stamp Duty
Stamp duty is a tax on property purchases, and applies to properties over £125,000 and is collected by your solicitor although certain other thresholds and exemptions may apply.
The amount of tax depends on the purchase price of your property:
- £0 - £125,000 → No Stamp Duty
- £125,000 - £250,000 → 1% of the purchase price
- £250,000 - £500,000 → 3% of the purchase price
- over £500,000 → 4% of the purchase price
These limits may change.
Legal Fees
As well as paying a solicitor or licensed conveyancer for the work that they do, you will have to pay the cost of land registry charges and local search fees.
The whole process ensures that once the sale goes through, the property really belongs to you and that you are fully aware of any factors affecting the property.