5 Often Overlooked Mortgage Costs You Need to Factor Into Your Budget


Buying a home in Britain is not as simple as it used to be. Gone are the days of simply paying a 120% mortgage on your property. These days, first-time homebuyers need to consider a number of hidden fees that are associated with the mortgage. Of course, these additional costs come on top of having to pay approximately 10% of your property’s value upon purchasing.

Stamp Duty

If the property you are purchasing is over £125,000, you need to pay a stamp duty on the mortgage. For homes that are valued between £125,001 and £250,000, you pay a duty of 1%. Prospective buyers pay 3% on homes valued between £250,001 and £500,000, 4% for properties situated in the £500,001 and £1 million range, and 5% on mansions that fall between £1 million and £2 million. In the off chance that your first property is valued at over £2 million, the stamp duty price is 7% of the home’s value. More details on the HMRC website.

Unfortunately, you cannot simply add your stamp duty fee into the price of your mortgage. You need to make both payments separately, but because you pay it when you pay your mortgage, it becomes a factor. This fee, and most of the others, will be available as options in any good mortgage calculator, such as the one on the Clydesdale Bank website. These are a fantastic way to work out the true cost and should be in your mortgage application toolkit.

Mortgage Booking Costs

Not only will money lenders charge you interest on your actual mortgage, they will also bill you for something called an “arrangement fee.” This fee is paid to the lenders who have taken time to structure your mortgage and compile the necessary paperwork. This payment is sometimes referred to as booking fees, administration fees, or completion fees.

In 2012, the average booking fee was £1,498, which is by no means an insignificant cost, especially if you are purchasing a cheap mortgage and plan to restructure it in a few years.

Valuation Fee

Because mortgage lenders want to know how much the home you are purchasing is worth, they will ask to have a surveyor visit your home so that is not worth less than the mortgage they are giving you. This valuation is typically a painless process, and requires nothing more than the surveyor simply taking a look at your place. Most UK lenders will charge you a fee for this valuation, though, so make sure to include this in your mortgage budget.

Money Transfer Costs

Although this cost is fairly minimal, lenders charge either £20 or £25 as a transfer fee for when they disperse their mortgage payment to you. Without paying this fee – no matter how trivial it may seem – you will not be able to pay your seller for their property until you take care of it.

Paying for a Solicitor

Paying for a solicitor to handle the legal loose ends of your mortgage purchase and paperwork is another cost that should be budgeted for when buying a mortgage. These lawyers do not come cheap, obviously, but they will ensure that your mortgage’s terms and conditions are iron clad.

For more overlooked mortgage costs you need to factor into your budget, please visit this website.

photo credit: MHBaker via photopin cc

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