The Costs Explained – Essential Reading

Are you wondering how much it costs to buy a house or a flat? There are certainly upfront fees to think about as well as the cost of the mortgage itself.

Mortgage Fees

These might include a booking fee typically £99-£250; an arrangement fee of up to £2,000 depending on amount borrowed and the mortgage valuation fee which is at least £150. It is best to pay these upfront rather than adding to your mortgage so that you aren’t paying interest on them for the life of your mortgage. There are many types of mortgage products available so do look beyond the interest rate to make sure you take all fees into account too.

Stamp Duty

Stamp Duty is a government tax paid on homes costing £125,001 or more. As of April 2016 there is an extra charge at 3% if you are buying an additional residential property such as a second home or buy-to-let which starts at £40,000 value. Check this by using the Government calculator at https://www.gov.uk/stamp-duty-land-tax

Deposit

Generally the bigger the deposit the bigger the mortgage you can take out – subject to affordability of course. Overall you need to have at least 5-10% of the purchase price to put down.

Valuation Fee

The mortgage lender will assess the value of the property to ensure it is suitable security for the loan – which costs  £150-£1500 depending on the value of the property you want to buy. Some lenders might not charge you for this depending on the type of mortgage product you select. Note that the valuation isn’t a survey so might not identify all repairs and maintenance that might be needed.

Surveyors Fee

Dependent on how thorough you want your survey to be and the size/value of the property.

Insurance

The lender will require you to take out buildings insurance to protect your new home and it is a good idea to make sure you also have adequate contents insurance too.

Freehold or Leasehold

If you purchase a leasehold property you will have to pay ground rent and service charges to the person or company who own the freehold – make sure that you check these charges out in full.

Be prepared – so there aren’t any shocks waiting for you!