Buying a new home is an exciting change, albeit one that can be quite stressful. This is why it’s a good idea to feel prepared before going ahead with the mortgage and home purchase. This will help to ensure you are aware of anything else that must be done and any additional charges you may find yourself facing before you’re handed the keys to a new property. Here are three that must be accounted for straight away:
Mortgage arrangement fee
Lenders, such as your bank or building society, have a variety of mortgage products they can offer you. These all come with different prices, perks and offers but some will also incur an ‘arrangement fee’, an additional cost as well as all the other fees and charges you must pay out for in the run up to purchasing a new home.
Sometimes, this cost is featured on mortgages with the best deals, and is there to cover the lender’s expenses for arranging a mortgage. Typically, an arrangement fee amounts to around £999 but can reach £2,000 so check the products you are being offered carefully and ensure you don’t end up with a surprise charge while setting up a mortgage.
Stamp Duty Land Tax
Stamp Duty Land Tax (sometimes referred to as just Stamp Duty), for many people, is something cast to the back of the mind when looking for houses and then comes as a shock when the quote from the solicitor arrives. Stamp Duty in recent news is having a significant impact on higher value homes, as Government changes made to the land tax as part of the budget announcement are now starting to take effect – the property market has seen an 83% decrease in homes over £5 million being sold in the past year, which is a very small portion of the market but a significant figure nonetheless.
It’s important that you calculate how much Stamp Duty on the property you are considering amounts to, and factor this into your buying budget. It could mean you need to save for a couple more months or you might be in for a pleasant surprise.
On 1st April 2018, Land Transaction Tax (LTT) replaced Stamp Duty in Wales. Money Advice Service have now created a specific Land Tax Calculator tool for properties bought in Wales and a Land and Buildings Transaction Tax Calculator for properties bought in Scotland to support their England and Northern Ireland calculators.
Building insurance fee
If you decide not to take out buildings insurance through a provider your lender recommends, you may be charged a fee. This additional cost covers a search by your lender, to check that you have taken out insurance with someone else and that your home is protected. This is because the mortgage they have granted you rests on the security of your property should it fall through, so lenders want to ensure they are covered for the future.
This fee varies, and can amount to anything from £25 to £50 so isn’t the most expensive charge you’ll find yourself paying for but is still one to be aware of. However, in most cases, it may work out cheaper to go to another insurance provider and pay this fee. It’s all about doing your research.
When looking at properties and calculating costs, be sure to remember these additional expenses and always estimate amounts based on the higher end of the scale.
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