Buying a new home is one of the most exciting things you can do. But let's face it, it can also be pretty stressful and that stress often comes through a lack of understanding of the process and the fees involved. In this article, we explain all the fees that you are likely to encounter so that you feel more confident and less stressed about navigating your way through your next property purchase.
Mortgage Brokers Fee
A mortgage broker fee is usually a flat rate fee agreed in advance based upon the complexity of the client's situation and the advice they require. Budget from £195 through to as much as £1000 for much more complex scenarios and requirements. Not all mortgage brokers charge a fee for their services; however, if they don't, it's possible that their services may be restricted in some way, for example only using a limited number of lenders rather than advising across the whole market.
Lenders Product Fee
Some mortgage lenders levy a 'product fee or an 'arrangement fee' to get access to the lowest deals in the market, and these can vary from £500 to £2000. The fee will usually be payable when the mortgage application is submitted and can be paid directly by you upfront or sometimes added to the mortgage itself. Just because a product carries a lender fee doesn't mean it's a better deal overall and adding the fee to the mortgage loan means you will pay interest on that fee too.
Solicitor / Conveyance Fees
You will need to choose and instruct a Solicitor to make your offer for you and carry out all the legal work for you. Their fees will vary depending on whether you are just buying a home or buying and selling a home. Expect to pay from £300 through to £2000 or more for more complex cases involving multiple properties. Note, if your remortgage is not a "product transfer" - i.e. with the same lender and requires no additional legal work, a remortgage will need you to have a solicitor to help with the legal side of things.
Estate Agents Fees
Estate Agent Fees only apply if you have a home to sell, and this is a fee levied by the estate agent for selling your home. Many estate agents now operate on a fixed fee basis, but some will also charge you a percentage of the sale price. Fixed fees will typically be around £100 to £700 depending on the service level you choose whereas percentage fees are generally around 1% to 1.5%.
Valuation Fee / Survey Fee
This fee is charged by the mortgage lender and is to confirm to the lender that the property is suitable to lend against and it's value. So whilst it's the lender who benefits from this, it's you who has to pay it. The fee is usually paid at the time of mortgage application, although sometimes, Lenders will offer one free valuation as an incentive. If you require your in-depth survey over and above a standard mortgage valuation, then this will be at your expense. From time to time, a lender may also insist on a specialist report along with the mortgage valuation if things like damp and rot are noted. Again, this will also be a cost you have to bear. A standard mortgage valuation will be around £300.
In Scotland, the seller must provide the valuation and is paid by the seller, not the buyer. It is common for a Lender to arrange for a re-type of the sellers Home Report at no cost to the purchaser.
If you are selling your home, then you will need to have a Home Report prepared by a surveyor before you can market the property. This will provide an energy performance report, a valuation report and property details questionnaire. The home report will cost the seller between £585 and £820.
In the current climate, you will need to put at least a 15% deposit down. The bigger the deposit, the smaller the mortgage and the lower the interest rate is likely to be.
Land and Building Transaction Tax
The land and building transaction tax is a tax levied on the purchaser and is calculated as a percentage of the purchase price and increases in bands. Between the 15th July 2020 and the 31st March 2021, a special 'Covid' related incentive is in place which means for all purchases up to £250,000 completed between these dates, no tax is due. Here is a handy calculator to help you work if and how much LBTT is due.
The final thing to consider is the monthly costs involved in owning your own home. As well as the mortgage repayment itself, you also need to factor in the costs of any ground rent (if you are buying a flat), service charges, maintenance agreements, buildings and contents insurance, life assurance, critical illness and income protection.
At Greenshoots Financial, we make sure we take the time and give you the time to get your head around all the upfront and regular costs involved. Once we have appraised your circumstances, we will make a personalised recommendation for you taking into account all the fees and costs described above. That way, we can give you the confidence of knowing that you are in a strong financial position to proceed or whether you may need a little longer to save towards some of the costs.
Contact us today to arrange an appointment with one of our mortgage brokers. firstname.lastname@example.org 01506 537111