House purchase Fees/Costs

This Article deals with the fees which are incurred on house transactions. The majority are paid by the solicitor on completion of the sale. Those which are paid up front relate primarily to the lender.
 
The section will also be broken down to indicate single payments and ongoing payments.

The Lender
 
Valuation fees.
 
These are single payments made prior to the survey being done. Price is subject to the type of survey undertaken. and the purchase price of the property. The examples below give a rough guide
 
Mortgage report and valuation £150 plus
Housebuyers Report £350 to £950
Full Structural Report £500 to £1300
 
Admin/Arrangement Fees
 
These are primarily admin fees to cover costs incurred by the lender. When carrying out the information gathering stage prior to offer. They can include things like charges for credit searches, bank statements and reference requests, and are mostly paid for as and when required.
 
There may also be arrangement fees for specific mortgage schemes . If so, these can be either added to the loan as part of the offer or deducted from the loan as part of the offer.
 
Indemnity guarantee premium
 
This is essentially a single charge paid on what the lender deems as high risk borrowing. These can be either added to, or deducted from the loan at offer depending on the lender.
They work as follows based on the loan to valuation.
The loan to valuation is the percentage loan offered against the valuation or purchase price.
 
Valuation of £100.000
Loan required £50.000
Percentage loan 50%
 
In general An indemnity guarantee will be charged where the lending exceeds 75% of the valuation. So based on the example above. Loans above £75.000 will incur an indemnity premium. Costs and applications for these will vary between lenders.
 
Redemption Fees
 
This is a charge which is levied by the lender if the mortgage is  finished early, or moved to another lender. Such an example may be, where the purchaser wishes to raise additional funding by accessing some of the properties equity value. So the property is re-mortgaged with another lender.
Obviously an after purchase expense that can easily be overlooked. Prices vary from lenders and amounts borrowed
 
Special reports
 
These can include things brought about by the surveys . Such as timber and damp reports, assessments on work required for subsidence or damaged structures etc.

Insurance
 
As well as life assurance on the loan, there will be risk which needs to covered on the property, so suitable buildings and contents insurance may well be required.
 
Estate Agency Fees
 
These are primarily commission based, and are calculated as a percentage of the purchase price. Between 1 and 2 percent. The figure is usually subject to agreement before the agent is instructed to act. This fee will be paid by the solicitor on completion  of the purchase.
 
Arrangement Fees, in rare circumstances a charge may be made by the agent to cover initial costs. Any such charge would be agreed with the purchaser and paid up front.
 
Solicitors
 
All of these fees are paid after completion. This bill is the most expensive so requires a degree of explanation
 
The Estate agency fee will be collected and paid to the agent by the solicitor
 
Stamp duty: on registration of the sale, the purchaser may be eligible for stamp duty. The scales vary across different parts of the UK. The first example applies to England and Wales. This is paid to the Inland revenue by the solicitor. It is incurred where the purchase price exceeds £125.000 and works on a sliding scale as follows
 
Purchase price up to £125,000,  Zero payment
Purchase price between £125,000 and £250,000,
payment incurred at 2%
Purchase price above £250,000, payment incurred at 5%
 
In Scotland stamp duty comes into effect on purchases of
£145.000 and works as follows
 
Purchase price up to £145,000,  Zero payment
Purchase price between £145,000 and £250,000, payment
incurred at 2%
Purchase price between £250,000 and £325,000,
payment incurred at 5%
Purchase price between £325,000 and £750,000,
payment incurred at 10%
Purchase price above £750,000, payment incurred at 12%
 
These were current at the time of writing
 
Solicitors
 
The solicitors fees are calculated on the work they actually do
When the bill is drawn up, it will give a detailed breakdown of the costs and how they were incurred.
 
These then are the single payments fees as they occur throughout the process.
 
Lastly the ongoing payments
 
These are the most important, and are the ones which if not paid continuously could lead to
repossession of the property
 
they are, in the case of a capital repayment loan. The capital and interest payments to the lender.
 
In the case of an interest only loan, the interest repayments to the lender. and the capital element into the repayment vehicle.
 
Two final things, you as the purchaser must ensure the repayment vehicle will be able to repay the loan.
So monitor it regularly. If problems occur contact the lender.
 
Life assurance premiums, make sure these never get cancelled /stopped in anyway or form.
When payment stops, the cover stops.

Article taken from the book
Key to the door
The little guide to mortgage borrowing in the UK
Mark Reed

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