Understand the legal fees that come with buying a home
There are many elements that go into buying a new home, from applying for a mortgage to picking the right location. Knowing what comes at each stage will help keep it as stress free as possible – and understanding the legal fees that come with buying a house is a huge part of that. Read on for more information on the costs that you could incur before completion.
These fees will be paid to your mortgage lender. They can sometimes be called arrangement fees, product fees, booking fees or application fees. You can either choose to pay this fee upfront or can sometimes add it to your mortgage, depending on the lender and product you choose. If you choose to do the latter, there is a chance you could pay interest on top of it. However, there is always the risk that if you pay upfront and the purchase falls through, you could lose this money.
Some lenders charge this as a way to secure the mortgage at a fixed rate.
This is paid to your mortgage lender. They can charge this fee to check how much your property is worth so that they know that it’s suitable security for the money they are lending.
When buying a house, it’s important to conduct a survey of the property. This is mainly to benefit your own needs, so that you have security before moving in. A surveyor or lender will conduct this, making sure that there are no structural issues, problems with the plumbing or signs of damp.
You can source this yourself, but it could be worth asking the lender how much it will cost for them to conduct the survey for you. Whichever way you source the survey, you will have to pay a fee to have it done, whether directly or as part of the mortgage cost. However, if you’re buying a new-build house you may decide you do not need a survey, as they come with a 10-year NHBC guarantee.
Mortgage broker fee
A mortgage broker is a specialist who has in-depth knowledge of the market. They will look to find the best mortgage available at the time which suits your needs. It’s always a good idea to speak to a few of them to find out what is the best deal for you.
They may charge you a fee depending on the product you choose or the value of the mortgage. All mortgage brokers receive commission from the lender, but some may not charge you a fee. However it’s always worth checking with your mortgage broker to see if their service is right for you.
Stamp Duty Land Tax (SDLT)
This is a tax that is paid to the Government via your solicitor. They will pay the money to HM Revenue & Customs. In England and Ireland, currently if your property is less than £125,000 then you are not currently required to pay Stamp Duty Land Tax (SDLT).
If you’re a first-time buyer, you can currently benefit from SDLT relief. This means that you will not pay this tax on properties worth up to £300,000. For properties up to £500,000, you will pay no SDLT on the first £300,000. You will then have to pay it on the remaining amount, which is up to £200,000. If your first property is currently worth over £500,000, you will pay the standard rates of SDLT and will not be exempt.
This is the fee you pay to your solicitor. It can be broken down into two parts: firstly the legal fees that cover your solicitor’s time and secondly the disbursements, which are any costs or expenses they incur during the process. In this sense, your solicitor is responsible for transferring the ownership of the property. They will also carry out various environmental and local authority searches in order to ensure there is nothing in the area that may affect the value of your home.
Land Registry fee
The Land Registry are in charge of registering the property under the new owners’ name. There are a range of services that the Land Registry offer, relating to registration, information and land charges. They also have a helpful calculator that can help you to estimate the cost of the service.
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