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Associated costs

Arrangement fee / booking fee
Arrangement fees became more popular amongst lenders in the 1990s, and are now a feature of most mortgage applications. In some cases the arrangement fee is added to the loan on completion, and so is not charged if the mortgage does not proceed. In others the arrangement fee can be payable up-front, and in these cases is often called a booking fee. This is common with some fixed rate mortgages where the lender will ask you to pay an up-front booking fee to secure the mortgage rate and have funds allocated to your application. Arrangement/booking fees can vary but are usually between 199 and 399, although they can be as much as 1% of the mortgage advance in some circumstances.

NB: Up-front arrangement fees and booking fees are usually non-refundable.

Legal fees
When you buy, sell or remortgage a property you will need the services of a conveyancer (either a solicitor or licenced conveyancer employed by a firm of solicitors). The conveyancer will charge you for carrying out the legal formalities associated with the property sale and/or purchase, or remortgage. These fees can also include those for local authority searches.

Stamp duty
Stamp duty is a 'purchase tax' levied by the Government and collected through the sale of stamps to be affixed to certain documents. It is charged when documents are legally completed in the UK.

Stamp duty is charged on the sale of properties costing more than £125,000. The rate charged depends on the purchase price of the property.

House price stamp duty
Up to £125,000 0%
£125,000 - £250,000 1%
£250,001 - £500,000 3%
Over £500,000 4%

Stamp duty for first time buyers - 

Up to £250,000 0%
£250,001 to £500,000 3%
Over £500,000 4%


Higher lending charge
This is a fee charged by a mortgage lender where the amount borrowed exceeds a given percentage of the value of the property.

When a mortgage lender agrees to lend against the security of property, the lender's major consideration is to avoid losing money. In order to reduce this danger, mortgage providers take out insurance to cover loans where a high percentage of the purchase price is to be loaned.

Traditionally, if someone borrows up to 75% of the purchase price of a property, the provider does not seek further security than the property itself, as the likelihood of loss is minimal. Above this percentage and the provider is likely to insure against loss.

The higher lending charge premium is paid by the borrower, though it can often be added to the loan if the lender's criteria allows for this. In that case, it is important to add the value of the premium to the sum assured for any endowment or term assurance selected.

Please Note: Not all lenders make the borrower pay the higher lending charge. Many lenders pay the higher lending charge premium themselves, and some will only ask the borrower to pay the higher lending charge for any borrowing over 90% of the value of the property even though they may take out a policy that protects for borrowing over 75% of the property value.

The lender pays the premium direct to the insurance company with whom it has arranged the cover, and receives protection from them on the amount of the loan over the 75% level in the event of the borrower defaulting.

Survey fees
There are three main types of survey: Mortgage Valuation, Homebuyers Report and Structural, and as with most things in life, you get what you pay for! You also need to note that the cost of each type will also vary according to the value of the property being surveyed.

Mortgage valuation
A basic valuation costs the least of all surveys because it is the least detailed. Normally, a mortgage lender will insist you have this survey because it gives them basic information about the value of the property especially whether it is a good security for the loan. It will advise them about some basic conditions of the property (eg: what type of construction it is; what type of roads service the property, etc).

Homebuyers report
Often referred to as the middle one, this type of report is much more detailed than the basic mortgage valuation, and is normally instructed by purchaser for their own use and peace of mind. The surveyor has a legal responsibility to the purchaser for the contents of his/her report. The main objectives of the report are to give guidance on value and to assist the prospective home buyer to:
  • make a reasoned and informed judgment on whether or not to proceed with the purchase
  • assess at what price it would be reasonable to purchase the property
  • be clear what decisions and actions should be taken before continuing with purchase
  • be aware of the general condition and particular features of the property
  • know about any particular points which should be referred to your legal advisors
  • be aware of any other relevant considerations concerning, for example, safety, location or perhaps insurance

Matters which are judged not to be significant are generally not included in the report but where necessary, the surveyor may also be able to provide some extra service which is considered outside the scope of the standard package (eg: a schedule of minor defects to be remedied over the course of time).

Internally, the condition of service installations, such as wiring and drainage and central heating, will also be examined but not tested.

Structural survey

The Structural Survey and is the most detailed (and expensive!) of the three types of survey. Like the Homebuyers Report, it is carried out by a Chartered Surveyor on behalf of the purchaser and with the legal responsibility for the contents of the report.

The surveyor will examine and report on chimney pots and stacks; gutters and down pipes, and look at all external walls to see if there is any current or previous evidence of settlement or subsidence.

He/she will examine windows and external timbers and endeavour to identify a damp proof course. He/she will lift manholes to examine the drain runs, advising on the necessity or otherwise of a drains test if there is visual evidence of drainage problems.

He/she will also examine the site, identifying any visually apparent problems with the boundaries or potential threats posed by trees to the stability of the building. Inaccessible roof surfaces are examined from the ground with the aid of binoculars. Inside the property the surveyor will go into the loft, if access is available, to inspect the structure of the roof, the insulation, any water installation and examine chimney stacks, checking if there is adequate support. The composition of ceilings may be noted together with the condition of any wiring found within the loft.

The surveyor will then examine the underside of the ceilings and check for signs of movement which may indicate roof spread, and then inspect all internal walls to see if there are any signs of settlement or subsidence. The surveyor may recommend immediate remedial action, or monitoring of cracks within internal and external walls.

The surveyor will then inspect timbers, plumbing, electrics and heating. If there are obvious problems here he/she may recommend specialist reports.

Estate agents fees
If you are selling a property through an estate agent, the firm will charge you a fee for handling the sale. The majority of estate agents will only charge if the sale completes, and their fee is usually an agreed percentage of the price at which the property is sold (+ VAT). Such fees can vary from one agent to another and can depend on whether or not the agent has exclusive rights to sell your property and how saleable your property actually is. There are also a few agents who will charge a lower fee up-front, regardless of whether or not they sell your home. Its a bit of a gamble as once they have your money, theres less incentive for them to market your property.

In most cases these days, estate agents fees will run well into 4-figure sums, making them, along with Stamp Duty, one of the biggest costs associated with a house move. Its a good idea to try to negotiate the fees before signing the agents agreement
 

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