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Arrangement Fee
Arrangement fees became more popular amongst lenders in the 1990`s and are now a feature of most mortgage applications. In most cases, the arrangement fee is added to the loan on completion and so is not charged if the mortgage does not proceed. In some cases, the arrangement fee can be requested upfront, and is called a booking fee.
This is common with some fixed rate mortgages, where you are paying the lender to secure funds for your application at a certain interest rate. Upfront arrangement fees and booking fees are usually not refundable. Arrangement fees vary in cost, often between £199 and £399. In some circumstances, they can be as much as 1% of the mortgage advance.
Legal Fees
Legal fees for the cost of the conveyancing are payable to the solicitor or licensed conveyancer. The fee charged by a solicitor is based on his time and the costs of legal registrations and miscellaneous costs (known as disbursements).
Solicitor`s fees vary from practice to practice, although 1% of the purchase price is not an unusual figure. People selling an existing property have an additional charge to pay for the conveyancing of their existing property to a new buyer.
There are various conveyancing costs, which are usually itemised by the solicitor on completion. These costs include the following:
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Local search, which reveals any matters affecting the property (such as road widening schemes, planning consents)
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Land Registry fees, which are incurred in the transfer of ownership on the register from the old to the new owner
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Stamp duty, if applicable (see section below)
Once a solicitor has the basic information, he can often give an estimate of costs.
From 14th December, all homes in England and Wales will need a Home Information Pack (HIP), which includes a sale statement, searches and evidence of title. The average pack is taking around 5 days to compile, with costs in the region of £300 plus VAT.
In a sale or purchase there are three distinct stages:
Before Exchange of Contracts
Nothing is legally binding on either side and, generally speaking, there is no refund for a wasted survey, search fees and legal costs if the sale falls through.
Between Exchange of Contracts and Completion
Both sellers and buyers are legally bound to complete on an agreed completion date.
On Completion Day
Money changes hands through the conveyancers, deeds are handed over, sellers move out and buyers move in.
Stamp Duty
Stamp duty is a "purchase tax" charged by the Government. It is charged when documents are legally completed in the UK.
Stamp duty is charged when you buy a property costing more than £125,000. The cost is worked out as a percentage of the purchase price of the property and the rate is charged on a scale.
House Price Stamp Duty
£125,001- £250,000 1%
£250,001- £500,000 3%
£500,001- or more is 4%
In marginal situations, it may be possible to reduce payment of stamp tax. For example, if a purchaser buys a house with curtains and carpets for 128,000 pound, and the curtains and carpets have a value greater than 3,000, pound then, if the purchaser buys the property, separate from the curtains and carpets, the purchase price of the property falls below £125,000 and there is no stamp duty. However, the sale documents would have to show this and the borrower may then only be able to borrow the lower amount.
Higher Lending Charge (formerly known as a Mortgage Indemnity Guarantee - MIG)
This is the cost of an insurance taken by the mortgage lender, but charged to the borrower, when the amount borrowed is a high percentage of the value of the property.
When a mortgage lender agrees to lend against the security of property, the lender`s major consideration is to avoid losing money.
In order to reduce this risk, mortgage providers take out insurance to cover loans where a high percentage of the purchase price is to be loaned.
Typically, if someone borrows less than 90% of the purchase price of a property, the provider does not seek further security, other than the property itself, as the likelihood of loss is low. Above this percentage and the provider is likely to insure against loss.
The following examples show how the higher lending charge is calculated; based on different percentage amounts borrowed.
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