Mortgage fees, what are they and do I need to pay them?
Posted on 9th June 2023 at 10:45
Buying your next home can come with a number of fees you need to pay. But we will look at the fees you must pay, the fees you can avoid if you need to and when you can expect to pay them. Follow us on the time line of your next purchase. Some fees you would incur for additional services you may opt to take, but some fees are part and parcel of buying your next home.
Estate agent fees
If you are selling your home, you will need to use an estate agent to market your property and handle the paperwork. Depending on which agent you use, this may be a flat fee or a % of the sale price. There are some estate agents out there who don’t charge a fee at all. But majority will charge a flat fee or a %. This fee will be paid on completion and is often taken out of the equity left over form your current property. Normally the solicitor will deduct this and pay this directly to your estate agent on your behalf on completion.
All purchase will require a valuation of some sort to ensure that the property that the lender is going to lend on is in fact worth that amount. This is to cover themselves in the worst-case scenario that you fail to maintain your mortgage payments and they need to repossess the property to recoup what they lent you. So, although this process is more of a benefit to the lender than you, the lender sometimes charges you for valuation, but most will offer this for free as an incentive to use that lender. If you do choose a lender that charges a valuation fee you will pay this on application and will be non-refundable.
A mortgage valuation will tell you how much the property is valued at, nothing more and nothing less. If you want to establish the condition of the property you will need a building survey. You can typically expect to pay £4-500 for a full building survey but they can save you that many times over if they uncover some potentially expensive issues. The best-case scenario is the survey finds nothing and you are paying a fair price for a structurally perfect property. Another scenario is that you discover a potentially costly issue that you can renegotiate the purchase price to reflect this or request the seller to fix these prior to completion. This could save you money if you can renegotiate the purchase price. If the survey uncovers a big issue that you cannot afford to fix or puts you off buying the property you can pull out of the purchase.
How do you know if you should get a survey? The key indicators would be if the property is old, looks like it hasn't’t been renovated or taken care of recently, cracks in the walls or signs of damp. These are signs of potentially costly repairs. If you are confident that the property shows none of these signs or the property is fairly new then you may not feel the need to have a survey done. If the property hasn't’t been modernised for a while or is quite old then having a survey can give you that peace of mind.
Mortgage adviser fee
Not all advisers charge fees. But just because an adviser charges a fee doesn’t make them a bad person or an adviser you should avoid. An adviser who charges a fee will do so for a number of reasons. If they charge a fee they value the service they offer and as a result will reduce the number of clients they work with because they don’t need to take every client they need and they also value their time. They also value the level of service the offer and may have access to the whole market which justifies why they charge a fee as they can access some lenders or products that other advisers cannot.
When the adviser charges their fee varies from adviser to adviser. Some will charge on offer when they have secured the mortgage you have instructed them to find. Some will charge on completion when the job is finished, we know of some who do half and half. They will charge half on offer and the other half on completion. Its important to remember here that advisers are running a business and need to make a profit for the service they offer and the value they offer. Your chosen adviser should disclose to you at the outset if they charge a fee and when that fee is payable.
You cannot buy a property without a solicitor. Like with most products or services you get what you pay for and cheapest doesn’t mean best. As part of the legal process your solicitor will request searches from the local authorities, as this takes a few weeks for the authorities to return these your solicitor will request these at the very beginning of the process. This request cost money so your solicitor will request funds upfront to cover this cost, but the remainder of your solicitor cost will be paid on completion along with paying your deposit.
If you are liable for stamp duty this will be paid on completion along with your deposit and solicitor fees. When your solicitor quotes to work on your behalf their quote should include their fee and also your stamp duty liability. When you pay your solicitor on completion you will transfer to them your deposit, the remainder of your invoice to them and your stamp duty in one transfer. Your solicitor will then pay your stamp duty on your behalf. Once of the most common questions we get is how do I avoid stamp duty? Unfortunately if your purchase price falls into the stamp duty bracket you do have to pay this.
Moving costs include the use of a removal van or storage costs if you need to store things in the short term until your next home is ready. If you decent to move yourself you may just hire a van and ‘DIY’ it. If you have a lot of stuff and your budget allows you may want instruct a professional removal company to do everything for you. Of course this is totally up to you.
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