The Typical Fees Involved in Buying a House
Let’s begin by looking at the typical fees involved in buying a house, specifically the ones that relate to charges from the bank, fees from the land registry, and mortgage broker fees (which need not apply if you go through us!). Most of these costs can be divided into the following categories:
Mortgage Booking Fee
The first to consider in the costs involved in buying a house will be the booking fee for the mortgage. This is sometimes referred to as an application or reservation fee. If your chosen mortgage has one (it may not so check with your lender) you will have to pay this fee to your lender upfront as soon as you submit your application. Some lenders may charge a mortgage booking fee to secure a fixed-rate, tracker or discount deal. This booking fee is non-refundable, so if the property purchase falls through you won’t see it again. The fee will cost around £99-£200, though some lenders may not charge it at all.
Mortgage Arrangement Fee
One of the most common fees involved in buying a house is the arrangement fee. This is the product fee you pay for the lender to set up your mortgage and to cover admin costs. Arrangement fees are often part of the cost of a mortgage, along with the interest rate. Many mortgages in 2021 are issued with arrangement fees. The price of arrangement fees can vary significantly and could reach up to £2,000, but will usually range between £100-£1,500.
Your lender can offer you the option to pay this arrangement fee upfront or stack the fee onto the mortgage loan. Choosing the latter option, however, will cost you more long-term, as you’ll have to pay interest on it. On the other hand, choosing the upfront option can also be detrimental if the purchase falls through. This is why you want to be sure you choose a trustworthy lender when it comes to considering the costs of buying a house. Some arrangement fees are charged as a percentage of the loan, rather than a flat fee.
Out of all the fees when buying a house, the arrangement fee is highly important. This is because of its potential impact on the total cost of your purchase. Loan size can affect what deal is best for you. Opting for higher interest rates but lower fees can be more beneficial than going for lower rates with higher fees. Your personal circumstances will tell you which option is best!
There are many options available for you to consider, such as a 95% mortgage or the Help To Buy scheme.
Land Registry Fee
The Land Registry is a government authority that keeps all records of registered properties in England and Wales. It is their responsibility to register and transfer the property under the new owner’s name. Because these are one of the costs of buying a house, you will be charged for this transfer by the Land Registry and pay via your solicitor. The price of this fee is dependent on how much your property is worth. Please consult the following table (figures sourced from Gov, 2021) for an approximation of common land registry fees:
Another cost of buying a house is the valuation fee. Your lender will carry out a valuation of the property you wish to buy is priced correctly. Whilst this seems like a helpful service, the reasoning serves only the lender. Lenders do this to protect themselves in the event you default on the mortgage (are unable to make the repayments) in the future. By having an accurate valuation on the property, they will know that they can repossess the house and sell it for a profit, to recoup their losses.
Valuation fees can vary significantly and are affected by both lender and purchase price. Sometimes it can be included in your mortgage deal as a free extra. On average, however, you should expect the price to be between £200 and £700 if you have to pay for the valuation. This will be dependent on the lender, and the size/value of the property.
If you are looking to buy a property in Scotland, one last thing to remember is that the seller must provide a Home Report, which incorporates a valuation fee. As long as it’s dated within the last 12 weeks then your lender will accept the Home Report as opposed to charging a valuation fee.
In the case where you are using a broker, they could charge you a fee. This will add to the costs of buying a house, but many brokers only get their cash from the commission a lender pays them, so can be fee-free for you to use. Otherwise, a broker could cost up to £500. You’ll be delighted to hear that we fall into the fee-free camp!