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What Fees will I need to Pay?
There are several types of fees involved in buying a property, whether for the first time or as a next-time buyer. The ones discussed here are the main ones, but fees are not limited to this list:
Valuation Fee – There are three main types of valuation; a basic valuation for mortgage purposes, a homebuyers report and a full structural survey. The basic valuation is a valuation mainly for the benefit of the mortgage lender, but it will point out any defects which might either need further investigation or might adversely affect the value of the property. This type of valuation is the cheapest of the three, but still be prepared to pay approximately £300 - £500 for it, and this has to be paid at the time of the application.
Arrangement Fee – These are the fees charged by some lenders for arranging the mortgage. They have risen quite drastically in recent years and can range from zero up to a couple of thousand pounds, depending on the deal. Some lenders also charge this fee as a percentage of the loan amount, so always check how the lender calculates this fee and if they do in fact charge it. Lenders usually allow this fee to be added onto the mortgage amount, but be aware, this means you’ll be paying interest on the fee and you’ll increase the loan secured against your property.
Booking Fee – This is a fee charged by some lenders for securing a particular special rate deal. It’s similar to an arrangement fee in that it can be added to the loan, but again, if you do this you’ll be paying interest on the fee. The amount of the fee can vary from lender to lender, but it’s not usually as high as an arrangement fee.
Higher Lending Charge – These are fees charged by some lenders for lending you a high loan amount compared to the value of the property (known as the Loan to Value ratio (LTV)). The typical LTV at which this charge may kick-in is 75%. This fee, once again, varies from lender to lender and can be added to the loan amount; however you will pay interest on it if you add it to the loan.
Legal Fees – These are charged by your solicitor to manage the legal side of any purchase or re-mortgage. It is possible to get mortgage deals where the lender will offer a contribution towards these fees, as long as the solicitor is approved by the lender. In the case of re-mortgages, many lenders offer to meet the full cost of the conveyancing. The cost of the conveyancing depends on the solicitor you choose however, they tend to charge on a sliding scale the more expensive the property the higher the fees will be. It’s worth checking what their charges are before you commit and it’s always preferable to use one that has been recommended to you.
Stamp Duty Land Tax – New thresholds introduced from 3 September 2008 mean that if you buy property and the purchase price is £175,000 or less you don't pay any SDLT at all. If it's more than £175,000, you pay between one and four per cent of the whole purchase price. The £175,000 threshold (up from £125,000) will remain in place up to and including 31 December 2009. Look out for the smaller fees, eg the telegraphic transfer fee for transferring the funds from the lender to the solicitor, there’s also sometimes an insurance administration fee for not taking your buildings insurance out with the mortgage lender. Information accurate at time of publishing. For up to date inforamtion go to http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/DG_10010529
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