There are various additional costs and fees which can be incurred when buying a home or arranging a remortgage.
The first of these is the mortgage arrangement fee. This a fee which is charged in some instances by the lender. Usually an arrangement fee is only payable on a “special” deal such as a fixed or discounted rate, although some lenders do charge arrangement fees on all types of mortgage. If an arrangement fee is charged, it can usually either be paid up front or added onto the loan.
There are also legal fees which are paid to your solicitor or conveyancer. These are made up of the solicitor’s own fee (typically £300-£400) plus “disbursements”. These are fixed amounts that the solicitor pays to others on your behalf, for example fees to the land registry, search fees, etc. Some lenders offer packages where they will meet part or all of these costs.
Stamp duty is a Government tax on the purchase of a property. The level of tax varies depending on the purchase price and the rules were amended in the 2005 Budget. For a purchase price of up to £120,000 there is no stamp duty. Between £120,000 and £250,000 the level of stamp duty is 1%. This rises to 3% for properties from £250,000 to £500,000. Properties with a purchase price of £500,000 or more attract stamp duty at 4%. Stamp duty is not normally payable on a remortgage, except in cases where an additional name is being added to the title deeds.
Finally, there are the valuation and survey fees. There are three types of survey: a Basic Valuation, a Homebuyer’s Report, and a Full Structural Survey.
A Basic Valuation is usually the minimum that is required by the lender before they will proceed with the mortgage. This type of survey gives very little information about the state of the property and so is not normally recommended for older properties. The cost of a Basic Valuation is usually around £100-£500. Again, this is something which the lender will sometimes pay, for example as part of a special deal for remortgages or first-time buyers.
A Homebuyer’s Report provides more detail about the overall condition of the property, and will highlight any problems that require attention. The report follows an industry-wide format and covers areas such as: the heating, wiring, evidence of damp, subsidence, condition of the walls and roof structure, etc. Costs for this type of survey are typically in the region of £300-£600.
A Full Structural Survey is the most comprehensive type of inspection, covering every aspect of the property from the foundations upwards. It is also the most expensive – often around double the cost of a Homebuyer’s Report.
The type of survey you opt for will depend to a large extent on the type of house or flat you are buying.