How-to Guides - Credence

Finding the RIGHT mortgage for you

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What are the costs involved with a mortgage?

There are costs and fees associated with mortgages. These can include arrangement fees, legal and search fees, and surveyors' fees. Here are some to watch out for

Valuation fees

There are three types of valuations: a basic mortgage valuation, a homebuyer's report and a full structural survey. The first is instructed by the lender to assess the property for lending purposes. You usually pay for this. The latter two surveys are more detailed and are instructed by you. You pay for these when the surveyor has produced the report. The type of valuation you require depends mainly on the age and type of the property you are planning to buy. While they cost more money, they will often give you more negotiating muscle when it comes to agreeing the final price.

Arrangement fees and booking fees

Most products have these and they may be worth paying if there are attractive interest rates on offer. However, sometimes you can save hundreds of pounds by accepting a slightly higher interest rate and paying a much lower initial fee - or none at all.

Higher lending charges

These can arise if you borrow more than a certain percentage of the value of the property and they can amount to many thousands of pounds. However, because they can usually be added to the loan amount, they don't hurt you until you either come to sell the property or re-mortgage later on. Avoid them where possible as they can then be a painful sting in the tail. Not all lenders charge these, so it is important to get the right advice before making a decision.

Early repayment charges

These are the fees that people most often pay unnecessarily. Usually this is because they didn't consider their long-term plan before jumping into a mortgage. These penalties generally apply during the period of a preferential or introductory rate. However, some of them extend beyond this period and you can even find yourself tied into a mortgage where the interest rate increases significantly. This means you pay a lot more each month but you can't repay the mortgage early and escape without incurring a large penalty.

Legal fees

Legal costs vary from one legal firm to another. Also the type of service you get varies significantly between legal firms. You need to be careful that you get the right level of service and value for money when deciding which solicitor to use for your purchase or re-mortgage. If you need any help or advice on legal costs we would be delighted to help. Some costs you might want to bear in mind at the outset are as follows:

Stamp duty is payable on purchases above £125,000 at 1% unless the property you're purchasing in an exempt area. The charge increases to 3% above £250,000 and 4% above £500,000.

Local searches vary depending on where the property is located. You need to know in advance what these costs are in order to budget properly. We will be able to provide you with these costs once we know the property location.

Tips for first-time buyers

Budgeting is the keyword for first-time buyers. It is important to know how much you can borrow. Sometimes you may be able to borrow a lot more than you think, or a lot less. Either way, it makes sense to know before you go house-hunting. It's wise to have a mortgage agreed in principle before you go looking at properties. This puts you in a stronger negotiating position.

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