The Real Cost of Buying a Home

When it comes to purchasing a property, there is more than just the monthly payments to consider.

Hello and welcome to this podcast brought to you by Charles Cameron and Associates.

When it comes to purchasing a property, there is more than just the monthly payments to consider. Many people underestimate how much the extra fees will cost, as besides the deposit amount, there are plenty of other costs you will need to budget for too.

In this episode, we’ll highlight the main costs of buying a home to ensure you are aware of the fees associated with this process.

1- Firstly, there will be a mortgage arrangement fee – ‘or administration fee’ which is a fee charged by the mortgage lender when you apply for a new mortgage. You can either pay the arrangement fee upfront or add it to the mortgage. If you pay it up front, this may be risky as if the purchase falls through, you may lose it or you may have to liaise with the lender to request a refund, which can be time-consuming. However, if you add the fee to your overall loan, you’ll only pay it if the mortgage completes, though you will then also be paying interest on it. Most mortgages allow overpayments of up to 10% of the total outstanding mortgage balance per annum without incurring penalty charges. You can have the fee amount saved and pay it as part of your overpayment once you complete on the purchase. A typical arrangement fee is around £1,000, but this can vary.

2- Secondly, there will be solicitors’ or conveyancer’s fees – You will need to instruct a solicitor or a licensed conveyancer to handle the legal requirements of transferring the legal title of the property from one person to another. They will also help you with the land registry charges, a fee for transferring the register to the new owner, local authority searches charges and disbursements, payments or taxes that need to be made to a third party by your solicitor as part of the home buying process.

There are generally two steps to the process: the exchange of contracts, when the contracts become legally binding for both the vendor and the purchaser, after that, the sale cannot legally be stopped without incurring penalties, and then there is completion, when you collect the keys of the property and finalise the deal. Please note this is the process if you are purchasing a property in England and Northern Ireland.
If you are a first time buyer, some lenders might offer the incentive of cashback towards legal fees , while if you are in the process of remortgage your property, the legal costs are often covered by the lenders.
The average fees can range from £500 to £1,150 plus disbursements, and this can add up to £700 to the base fee.

3- Thirdly. Stamp Duty Land Tax– This is a tax you’ll have to pay when purchasing a property in England and Northern Ireland. If you’re buying a home that costs more than £250,000, you’ll usually have to pay Stamp Duty Land Tax (SDLT). Though there is currently a discount for First Time Buyers, so you won’t need to pay stamp duty on properties under £425,000. How much you pay depends on the value of your home, with charges increasing in fixed bands with the price of the property. You can find a stamp duty calculator on our website at www.ccameron.co.uk/helper, that can help you calculate how much tax you will need to pay for the property.

4- Fourthly, a house survey which involves a detailed look at the condition of your property. Your mortgage lender will carry out a valuation survey that will look solely at the property’s worth – it doesn’t cover structural issues and may not highlight any problems with the property, and you may be liable to cover the costs as part of your mortgage product, though you will not be given this report. Therefore, it is recommended that you also pay for a survey of the property as well. Surveys enable you to have a more thorough inspection of the property, highlighting any current issues as well as any issues that may arise in the future. The costs and fees involved in a survey will vary depending on the type of survey you want.
So, let’s have a look at the three different RICS surveys available as standard in the UK, and explain what each survey covers along with their estimated costs:

• The most basic and so cost effective survey is the RICS Home survey (Level 1); this is suitable if you are buying a property built from conventional materials which is in a seemingly reasonable condition. This is a basic survey and highlights risks to the building and grounds, but it does not offer detailed advice or recommendations, nor a valuation. This survey would typically cost between £300 and £900
• The middle tier survey is a RICS Home Survey (Level 2); also known as a Home Buyer Report. This is a popular choice for most conventional properties. It is a mid-level survey and will report on any roof spaces and cellars. This survey could cost between £400 to £1,000
• The most complete survey is a RICS Home Survey (Level 3); this is a suitable choice for larger, older or more run-down properties, or if you are planning to make major changes to the property. This is the most detailed in comparison to the previous types of surveys. It could cost you between £650 to £1,500

The cost will also vary depending on three things.
– The property’s value
– The type of survey you have chosen
– The location of the property

5- Finally, mortgage advice fees – having a Professional, Independent Adviser on your side who will provide valuable advice and support throughout the entire mortgage process is crucial in todays market. However, many Advisers will charge you a Broker fee. The cost of mortgage advice can vary, but on average, it will either be a fixed fee of around £495 – £995, or a percentage of the loan amount. At Charles Cameron, we offer this service free of charge for all our corporate partners employees, and their friends and family by not charging a broker fee at all.

In conclusion, there are many factors to consider when buying your home, and the process can be incredibly daunting and costly for many. Here at Charles Cameron, we understand the challenges presented by the process and will work with you to ensure your property purchase is a seamless one. To get started, contact our team of independent mortgage advisors today.

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