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What are the costs of buying a home?

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Michael Brown

Acting Editor

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Buying a home rarely just includes the price of your property. There are often other fees to consider, especially if you’re taking out a mortgage. These can be Stamp Duty charges for homemovers and conveyancing fees for remortgage borrowers.

So, below, we’ve listed and explained some of the fees you’ll likely encounter.

Are you remortgaging or staying with your lender?

While there are certainly areas of crossover, different types of borrowers can expect different fees. For example, those coming off a fixed term and staying with their lender through a product transfer won’t need to pay legal fees. However, those switching lenders through the remortgage process may be liable for these costs in addition to an arrangement fee.

Remember home insurance

Whether you’re a first-time buyer, homemover, or remortgage borrower, you need to remember that your home will likely be your most valuable asset. It therefore makes sense to insure your property with buildings and contents cover.

Visit our charts to find the best home insurance policies.

What type of fees can I expect when remortgaging?

Usually, remortgage borrowers can expect more fees than those opting for a product transfer. This is because remortgaging involves a process in which the deeds, which represent the security for the loan, are transferred from one lender to another.

Below, we’ve listed some costs you might be charged as a remortgage borrower.

Arrangement fees

It is common for lenders to charge an arrangement fee for taking out one of their mortgages. This is often used to set up your mortgage and in many cases is non-refundable.

Also known as product fees, these charges differ according to which lender you choose. While some mortgages offer low mortgage rates, they often include increasingly expensive mortgage fees, making their deals more costly.

So keep an eye out for this when shopping around. As a rule of thumb lenders which do require a product fee charge about £1,000, according to the Moneyfacts average.

If you’re struggling to come up with a lump sum payment, arrangement fees can typically be added to the cost of your mortgage. Remember, this is a more expensive decision in the long-term as your fee will need to be repaid with interest.

Conveyancing fees

Conveyancing is the legal process of transferring the ownership of a property from one party to another. The process is typically handled by a solicitor and will run from when you have an offer accepted on a property until the transaction is complete.

Conveyancing fees are usually separated into two costs, legal fees and disbursements. Legal fees refer to the charges you’ll face when hiring a solicitor while disbursements include fees for any third-party costs or work outside the standard transaction.

Conveyancing fees will vary depending on the value of your property. Some lenders are happy to cover your legal fees as an incentive for choosing their services, but you’ll then need to make use of one of their chosen solicitors.

Want to know more about conveyancing?

Looking to understand conveyancing in more detail? Read our guide.

Valuation fee

In order to grant you a mortgage, your mortgage provider will want to know your property’s valuation.

This is to ensure that the lender can price the mortgage loan correctly depending on the risk to them of the borrower defaulting on their payments. This is where house prices can ultimately play a role in what type of rates are on offer for your mortgage. If house prices have increased substantially, it could push you into a lower loan-to-value bracket with better rates. If prices have decreased the opposite can happen.

Also, if the bank were to repossess your home they will know they can recoup their money by selling your property. 

Broker fees

Doing your own independent research on the best mortgage deals can be time consuming and challenging for some consumers.

So it is no surprise that many people choose to seek the advice of an independent mortgage adviser before choosing a lender. While the advice of a specialist can save you money in the long-term, it usually comes with an upfront fee.

If you choose to partner with Mortgage Advice Bureau (MAB), our preferred mortgage advisers, then you will receive fee-free  mortgage advice. Call them on 0808 1499 177 to claim their offer. 

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Do I need a solicitor when remortgaging?

While product transfers don’t require any legal work, moving lenders through a remortgage does. This process needs to be completed by a solicitor or conveyancing professional.  

What fees should I expect when taking a product transfer?

Staying with your existing lender usually comes with no or fewer fees.

Your lender won’t need to request a valuation (unless you’re looking to borrow more equity from the value of your home) and, as stated, you won’t need to undergo a legal process.

This also means product transfers can be shorter than the remortgage process.

Despite these advantages, it is still worth evaluating the options on offer from other lenders. If another bank or building society is offering a significantly lower rate than your current lender then it could make sense to pay your fees and enjoy a cheaper monthly repayment plan.

What if I’m moving home?

If you’re moving home, such as upscaling to a bigger property or downsizing to make more affordable monthly mortgage repayments, you’ll also encounter mortgage fees.

Arrangement and valuation fees usually apply to these types of borrowers, and you may need to pay for the following.

Stamp Duty

If you’re buying a home in England or Northern Ireland for £250,000 or more you’ll face Stamp Duty charges.

This is a tax you’ll need to pay the Government for buying a residential property.

The charge will be a percentage on the value of your home above £250,000, which is explained in more detail in our guide.

If you’re buying a home in Scotland or Wales you’ll also be faced with a tax charge, but the laws are labelled and work differently.

Did you know?

If you’re a first-time buyer you won’t need to pay Stamp Duty if your home is valued at £425,000 or less.  

Homebuyer survey

If you’re buying a new home it is worth making sure you’re happy with the state of the property before you agree a mortgage deal. This is where a homebuyer survey comes into use because a professional can search the property for any potential defects.

This can include structural integrity issues and potential areas which need maintenance or repair costs. For example, highlighting rooms with damp or a faulty boiler.

Removal costs

If you’re moving home you’ll probably need to plan for moving your furniture and personal possessions out of the property and into the new one.

This is why you’ll need to consider getting a removal company to help you with the process.  

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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