Applying for a mortgage – and having it approved – is often just the first step. If you are still thinking about applying for a mortgage and are unsure of what to expect, then you should know about the fees and costs beforehand as well. Knowing what fees and costs are associated with a mortgage can help you prepare for it in a much better way. Here, then, is your essential guide to the fees and costs associated with a mortgage.
The deposit is the most significant amount you will spend when it comes to acquiring a mortgage, as it will depend on the cost of the actual property. The deposit will also affect the kind of mortgage deal you can get and the amount of interest and repayments you will have per month. Typically, you need a minimum of 5 to about 20% of your property’s actual price. For example, if you are interested in purchasing a home worth £200,000, then you should come up with a deposit of between £10,000 to around £40,000.
The arrangement fee
The arrangement fee is charged for the actual mortgage deal or product. Sometimes, it can be added on to the actual mortgage, although this will increase the amount owed, payments per month, and interest. The arrangement fee can cost up to £2000.
The booking fee
The booking fee can sometimes be charged as part of the application for a mortgage, and it is not refundable. Some providers can include it in the arrangement fee, but others will add it based on the mortgage size. It can range from £99 to about £250.
The legal fees
You will also need a licensed conveyor or solicitor to arrange all the necessary legal paperwork. These fees can range from £850 to £1500, depending on the solicitor. These professionals may also do a local search, which can cost from £250 to £300. The local search is done to see whether there are any local problems or future plans.
The valuation fee
This fee is for a survey or valuation of the property, so the mortgage lender will know what it’s really worth. The valuation fee can be between £150 and £1500, and this will depend on the property’s value. It is important to understand that a valuation is not the same as a survey; a valuation will only give information about the property’s value and not its integrity or condition.
The mortgage account fee
The mortgage account fee is for the administrative expenses of the lender when it comes to setting up as well as maintaining (and then closing) the mortgage. The mortgage account fee can range from £100 to £300, depending on the lender.
Other fees and charges
There are also other fees and charges which may be associated with your mortgage as confirmed by mortgage experts from Mortgage Wise, and this includes the cost of moving, the surveyor’s fee, and stamp duty tax on property which exceeds £125,000 in value. If you’re a first-time buyer, however, you don’t have to pay stamp duty on the initial £300,000 value of your property if your property is worth as much as £500,000.