Worried about Mortgage Fees and the costs of buying and selling a home? Then you should read this guide...
Thinking about buying or selling a property and worried about the potential costs and mortgage fees associated with doing so? Don't be worried! Get organised and be prepared instead, with our 'Guide to the Costs and Fees of Buying and Selling Property'!
In this guide, as well as taking a detailed look at the potential costs of selling your home or a property, we also investigate the costs of buying a home and the possible mortgage fees that you may encounter, together with details of how Shire Direct can help when it comes to your mortgage!
Mortgage Fees Table of Contents:
Introduction...
Let's be clear from the outset, buying a property is not an inexpensive exercise. The danger is, in all the excitement of moving home it's very easy to overlook some of the costs and fees that inevitably you're going to incur!
So it's very important from the outset you get organised. Hopefully our 'whiz' through the attendant costs of moving home and buying your next property will help you focus on what can be a daunting, yet very exciting experience!
So, we'll start with your present home:
If you are currently renting...
- If you are currently renting, then that's fairly easy! You will need to give your landlord the appropriate notice to conclude your tenancy agreement.
- If you are living with your parents, they may even help you towards the cost of moving!
- Removal Costs: You'll have to arrange for your belongings to be moved to your new home. Depending on how much stuff you've accumulated over the years, you may want to hire a van and get a few friends to help. The alternative is a professional removals firm, and depending how far you are moving, the cost can be appreciable.
If you have a property to sell...
- Home Information Pack: Recent legislation inevitably means that you'll need to have a Home Information Pack (HP) prepared to hand over to potential buyers. The HIP will usually cost between £400 and £600, and must contain the following documents:
- Estate Agent's Fees: If you are not selling your property privately, then you'll need to appoint an Estate Agent to market your property for you. Estate Agency Fees are likely to be based on a percentage of the sale price of your property, usually between 1% and 3%, and even on an average sale price of £180,000, the Estate Agents Fees can amount to £1,800 to £5,400.
- Removal Costs: You will have to transport your belongings to your new home, either on a do it yourself basis on a white van basis, or by calling in a professional firm and a huge pantechnicon (otherwise known as a furniture removal van!).
- Solicitors' Costs: Your solicitor will not only have to deal with the purchase of your new property, he must also deal with the sale of your existing home too. Solicitors costs for the sale of a property will usually be in the region of £550 - £750, including VAT and disbursements.
- Early Repayment Charges (ERC's): If your existing mortgage has a lock-in clause (also known as a mortgage tie-in period), you may well have to pay a penalty for settling your mortgage off early. So you'll need to check if your present mortgage is portable, and can be transferred to your new property.
Costs and Fees usually associated with the purchase of a property:
- Solicitors' Costs: For undertaking all their obligations in the purchase of your new home, including confirming that you have clear title, paying out and receiving funds, and ensuring all legal documents have been properly dealt with, your solicitor will charge in the region of £600 - £850, including VAT and disbursements. Leasehold properties would usually be more in view of the additional work involved.
- Deposit: Although strictly not a cost, unless you are borrowing a mortgage of 100% (or more) of the property value, you will need to pay a deposit. These funds may come from the equity you have accumulated in your previous home, or savings.
- Stamp Duty: This is payable on most properties that have a purchase price of £125,001 or more, and increases in bands as shown in the table below:
The current Stamp Duty Land Tax Rates on UK property
| Purchase Price: |
Stamp Duty payable: |
| Up to £125,000 |
NIL |
| £125,001 - £250,000 |
1% |
| £250,001 - £500,000 |
3% |
| £500,001 or more |
4% |
So from this table, you can see that Stamp Duty can be a very hefty cost of purchase. Your eagle eye will have undoubtedly noticed that where the rates change, there is a significant saving to be had if you can keep in a lower band. For example, if the price you are paying for your new home is around the quarter of a million pounds mark, there's a vast difference in Stamp Duty payable on a purchase price of £250,000 [at 1% = £2,500], and say £252,000, where the Stamp Duty would be 3% [£7,560] - in other words, a difference of over £5,000!
Why not try out our Stamp Duty Calculator and see how much Stamp Duty Land Tax you may have to pay.
- Land Registry Fees: This fee is charged by HM Land Registry to register you as new owners of the property. The fee charged is based on the purchase price of the property:
Land Registry Fees Payable
| Up to £40,000 |
£40 |
| £40,001 - £70,000 |
£60 |
| £70,001 - £100,000 |
£100 |
| £100,001 - £200,000 |
£200 |
| £200,001 - £500,000 |
£300 |
| £500,001 - £1 million |
£500 |
| £1 million & over |
£800 |
- Local Authority Search Fees: These are necessary to ensure there are no impending plans or potential problems that may affect your property such as planning permission on neighbouring properties, plans for new roads in the locality. The cost of these searches is generally between £80 and £250, depending on the local authority.
- Other Fees and Disbursements: Your solicitor may well have to undertake other searches for which he will incur a cost on your behalf. These fees could include:
- Lender's Arrangement Fee: These are often charged with preferentially rate mortgage products, such as a Fixed Rate mortgage, or a Discount Rate mortgage product. They vary in cost between £200 to £995, and can generally be added to the mortgage loan. A recent innovation has been introduced by some mortgage lenders who give the customer the option of paying a higher arrangement fee in exchange for a lower interest rate. This can be an attractive proposition, especially where the customer is borrowing a larger amount.
- Valuation Fees: There are three levels of valuation:
These can cost between about £175 to £1,000 or more, depending on the property value, and the type of valuation instructed. Please see our Glossary page relating to the different types of property valuations.
- The Higher Lending Charge (HLC): The HLC, which was formerly known as the Mortgage Indemnity Guarantee premium, or MIG, is a means of protecting lenders against higher risk cases, especially where a high loan to property value is being arranged. The charge is usually expressed as a percentage of the amount over which the lender would normally lend, this usually being amounts over 75% - 90% of the property value.
For example, the purchase price of a property is (say) £100,000, and the lender charges the borrower a Higher Lending Charge (HLC) of 8% on amounts borrowed in excess of 75% LTV (loan-to-value). The lender has agreed to advance the borrower 95% LTV mortgage. The cost of the HLC will be:
Higher Lending Charge Payable
| £100,000 x 95% mortgage |
= £95,000 |
| Less HLC threshold at 75% (£100,000 x 75%) |
= £75,000 |
| Amount on which HLC is levied: |
= £20,000 |
| HLC @ 8% (£20,000 x 8% |
= £1,600 |
- Mortgage Broker Fees: As you are probably aware, Mortgage Intermediaries are highly regulated these days, and just like any other professional, they have practice costs to meet, in order that they can provide a first class specialist service for their customers. Regulated Mortgage Advisors too have to be appropriately qualified, and all of Shire Direct's Mortgage Advisors hold a minimum of the Certificate in Mortgage Advice and Practice (CeMAP) and the Certificate in Regulated General Insurance (CeRGI), although the qualifications held by Shire Advisors and Managers alike are considerably more extensive. These qualifications, together with our policy of ongoing rigorous and continual training, are designed to ensure you receive top quality service and advice. As far as our broker fee is concerned, it is only payable on successful completion of your mortgage. No Broker fee is payable if we are unable to arrange a mortgage, or if the purchase does not proceed.
- New carpets, curtains and a complete redecoration...!!!: Now how can we put this diplomatically? It's fairly well known that ladies will usually want to take care and charge of the look and feel of their homes, and in our experience, nothing in terms of the decor will be to our better half's taste, so it's usually a complete revamp! We've always found it best to budget for new carpets and curtains, and enough paint to slosh-on in every room!
- And finally... Contingency Fund: When moving home, it's a good idea to plan for things that don't quite turn out as you may have expected! We never know what emergency may beset us, or find that certain household items may need to be replaced, or get damaged or lost in transit. Don't leave yourself without the proverbial two ha 'pennies, provide a sensible contingency fund just in case!
Don't forget your monthly budget!
Remember, to plan ahead and work out your monthly budget. The following items will help you to focus on costs you should take into account. Above all, your new project and the running of your home should be comfortably within your means.
- Monthly Mortgage Payments: You must ensure that these are paid. To miss mortgage payments can have an effect on obtaining credit in the future, and if serious enough, you could lose your home.
- Cost of Protection: Remember that your mortgage will in all probability be your largest debt, and importantly, it is a priority debt. It really is crucial then, that you protect yourself and your ability to service the mortgage in the event of your inability to work as a result of illness, or becoming unemployed, or in the event of an accident, disability, and even premature death.
Naturally, a Shire Mortgage Advisor will carefully assess your circumstances, needs and aspirations relating to your protection, and will provide a statement of their findings in the form of a statement of demands and needs, together with their personal recommendation. For the sake of prudence, your Advisor will consider the following protection areas:
- Home Insurances (Buildings and Contents Cover)
- Life Assurance
- Mortgage Payment Protection Insurance (MPPI)
- Critical Illness Cover (CIC)
- Accident, Sickness and Unemployment Cover (ASU)
Further resources
You'll find a series of handy online Mortgage Calculators, and more specifically our Monthly Budget Calculator that can help calculate your available monthly funds.
Furthermore, remember our Mortgage Glossary contains over 200 detailed explanations, definitions and guides to mortgage and property related subject matters.
We're here to help!
So hopefully that has given you an idea of the potential costs of buying or selling a home or property and the mortgage fees that may be involved. Don't forget Shire Direct are here to help! Our Freephone lines 08000 282 281 are open from 8am until 10pm everyday (including weekends!), and you can also enquire online at any time. We'd love to hear from you, and will be delighted to help in any way we can!
The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.
There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.
THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Adding existing debt to your mortgage will increase the repayment term and overall cost.
