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mortgage costs

Mortgage Fees and Costs

Mortgage Costs

The costs associated with a house purchase might be broken down into the initial costs - to enable you to buy the property and the monthly costs once you have moved in.

Initial Costs

There are several costs to consider:

  • Your deposit
  • Mortgage expenses
  • Legal charges
  • Existing property charges and fees
  • Moving Costs

Your Deposit


Most lenders offer mortgage loans up to a percentage of the purchase price. Mortgage schemes typically require deposits in increments of 5% ie. 10% deposit (90% loan to value) or 15% deposit (85% loan to value). You may be purchasing a property of value 100,000 with a deposit of 12000. If raising a deposit of 12000 (12%) leaves you financially stretched, consider reducing your deposit to 10000 (10%).


Mortgage Expenses

These may consist of some or all of the following:

  • Valuation fee - Usually payable up front
  • Lenders Arrangement fee - Can often be added to loan
  • Lenders Product fee - Can often be added to loan
  • Lenders Booking fee - Up front or may be added to loan
  • Higher lending charge*  - Can often be added to loan
  • Lenders Completion fee    - Usually charged on completion
  • Cancellation fee - May be charged if mortgage does not complete

All mortgage fees will be shown on the Key Facts Illustration. Please ask your broker for a Key Facts Illustration.

Some fees are not refundable. Please check with your broker when the various fees are charged and if they are refundable

* Higher lending charge : previously known as 'mortgage indemnity premium' or 'higher percentage advance fee' . This is a form of insurance to protect the lender in cases where there is a high percentage loan to value. This is normally applied as a single premium which is often added to the loan. Paying this premium does not protect you from being pursued by the lender in the event of repossession. (This fee can often be added to the loan)

Legal charges


These may consist of some or all of the following:


  • Stamp Duty   - Payable on completion (see the table below)
  • Search fees etc  - Your solicitor/conveyancer may require an up front payment
  • Legal fees*  - Normally payable on completion

* Providing your solicitor is on the lenders panel, then your solicitor should be able to complete the legal tasks on behalf of you and the lender.


Stamp Duty Land Tax (SDLT generally applies to purchases*)
Residential land or property SDLT rates and thresholds
Purchase price/lease premium or transfer value

 

Stamp Duty Land TaxUp to 125,000125,001 to 250,000250,001 to 500,000500,001 to 1M
First Time Buyersnilnil3%4%
All other Buyersnil1%3%4%

 


If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid. For example, a house bought for 140,000 (by someone who is not a first-time buyer) is charged at 1 per cent, so 1,400 must be paid in SDLT. A house bought for 300,000 is charged at 3 per cent, so SDLT of 9,000 is payable.

Stamp duty is payable through your solicitor

First time buyers and Stamp Duty


The first time buyer’s 250,000 threshold applies from 25 March 2010 up to 24 March 2012 inclusive.


* Although stamp duty normally applies in purchase situations, it is possible to become liable to stamp duty if you are remortgaging and at the same time changing the ownership.

The Inland Revenue will be interested in the amount of money changing hands as a result of this transaction. The rules are complicated and we recommend you discuss this aspect directly with the Inland Revenue.


Existing Property charges and fees


If you are selling a property then you will have to budget for your estate agents fees. You should discuss the sale of your property with at least 3 estate agents.


If your mortgage is not portable then you may have to pay back an early repayment charge to your current mortgage lender. Please discuss this aspect with your mortgage broker.


Moving Costs


You will need to move your possessions from your current property to the new property. You may need to hire a removal company. You should obtain quotes from a few companies


Monthly Costs


These may consist of some or all of the following:

  • Mortgage Payment
  • Investment Premium (If you have chosen an interest only loan backed by an endowment or ISA or similar)
  • Life Assurance (may be compulsory)
  • Buildings/Contents Insurance (compulsory)
  • Mortgage Payment Protection (optional)