Many people, especially first-time buyers, underestimate the fees and charges associated with buying a house. If they’re buying a house with a mortgage loan, they’ll need to make a down payment, usually 10% of the purchase price, when they exchange contracts with the vendor. They’ll also need to pay a mortgage deposit, which is the difference between the purchase price and the mortgage loan they’ve secured, when they complete the sale.
Valuation and Survey Fees
All mortgage lenders require a basic valuation of a property to make sure that it’s worth the purchase price and to prevent fraud. The cost of a basic valuation varies according to the value of the property and from lender to lender; indeed, some lenders waive the valuation fee altogether as an incentive for borrowers to take out a mortgage with them. Typically, however, borrowers can expect to pay at least 100 for a basic valuation.
Borrowers should also consider a more detailed survey, such as the homebuyer’s report or a full structural survey, to uncover any structural defects. More detailed surveys can cost up to 1,000 plus VAT at 20%, but these offer borrowers the peace of mind that comes from knowing they should not have to pay for major structural repairs after they move in.
Conveyancing is the branch of the law that deals with the transfer of legal ownership. Property buyers need to secure the services of a solicitor or licensed conveyancer to handle the legal side of buying a house. Once again, conveyancing fees vary from solicitor to solicitor, with some charging a flat rate and others a percentage of the purchase price of the property (typically up to 0.5%). Legal complications, local authority searches and water authority searches can push conveyancing and legal fees up to 1,000 or more, depending on the value of the property.
Stamp Duty Land Tax
All properties valued at 125,000 or more 150,000 or more in areas designated as “disadvantaged” are liable for Stamp Duty Land Tax. There are three bands of liability: between 125,000 and 250,000, property buyers pay 1% of the purchase price; between 250,000 and 500,000, they pay 3%; and over 500,000 they pay 4%. So, for a typical UK property valued at 162,900, the buyer would pay 1,629 in Stamp Duty Land Tax.
Land Registry Fee
The Land Registry maintains the Land Register, which documents the evidence of ownership of land and property in England and Wales. The Land Registry imposes a fee on those who need to transfer the registration of ownership from one person to another.
Other Fees and Charges
Some mortgage lenders require borrowers whose loan-to-value ratio in other words, the percentage of a property that’s mortgaged is above 75%, 80% or 90% to pay mortgage indemnity insurance. Other fees and charges that may not be immediately apparent are removal fees, buildings and contents insurance, home insurance and charges for disconnecting and reconnecting services, such as electricity and gas, water and telephone.