What are the mortgage & homebuying costs when purchasing a property?

Costs while buying a home

It's not just about the deposit you need to save for and the price of the property you're looking to buy. When saving up, you also need to take into account different fees and charges that'll be payable to your mortgage lender, solicitor, HMRC and more.

Here are the costs you need to consider while buying a home and arranging a mortgage:

1. Mortgage arrangement fee

   

   Mortgage deals typically come with what's known as an 'arrangement' fee (sometimes called a 'product' fee). This is charged by lenders for setting up a mortgage deal. As this fee can be expensive, it should be treated as a key part of the true cost of a mortgage, along with the interest rate. 

   ALWAYS look out for this fee when choosing a mortgage deal. There are two things to consider when looking at the arrangement fee:

   • A low interest rate might disguise a high fee. Lenders sometimes use high fees to make their interest rates look more attractive, so they rise up the best buy tables. Expect an arrangement fee to cost at least £1,000 to get a top interest rate, possibly £1,500.

   • How big a mortgage do you need? Whether it's best to go for a high fee/low-rate deal or a low fee/high-rate deal depends on the size mortgage you need. Generally speaking, higher fee/lower-rate works better for larger mortgages. Our Compare two mortgages calculator can help you to see the correlation.

   You can usually choose between paying the arrangement fee upfront or adding it to your mortgage. The disadvantage of adding a fee to your mortgage is you'll pay interest on it until you've cleared the mortgage. But if you pay the fee upfront, you could lose it in the event the property purchase falls through.

   There's a trick you can use to ensure you don't lose the fee or pay any interest...

   Add the arrangement fee to your mortgage – but pay it off immediately

   Adding an arrangement fee to your mortgage protects you from losing the fee in the event the property purchase falls through for whatever reason.

   Don't worry about this affecting your loan-to value, it won't. Though if you're at the top of an LTV band, the lender might not allow you to add the fee. So check.

   To avoid paying interest on the fee, after your new mortgage starts make an overpayment equivalent to the size of the fee (if you can afford to). Lenders usually allow overpayments of 10% of your mortgage balance each year without penalty.

   • How much? £0 to £1,500 typically (can be more).

   • Who do I pay? Your lender.

   • Will I always have to pay this fee? No.

   • Do I need to pay upfront or can I add it to my mortgage? Either.

2. Mortgage booking fee

   A few lenders charge a separate 'booking' fee to secure a mortgage deal, though it's not very common these days. It might be called a 'reservation' fee.

   If you do need to pay this fee, it'll likely be between £100 and £300, and will be charged when you submit your application. A booking fee is non-refundable, so you won't get it back if the property purchase falls through.

   • How much? £100 to £300.

   • Who do I pay? Your lender.

   • Will I always have to pay this fee? No, most lenders don't charge this fee.

   • Do I need to pay upfront or can I add it to my mortgage? Upfront.

3. Valuation fee

   

   Lenders charge this to check the value of the property you're buying – which can be different to what you've offered for it. They do this for their security, so they can be sure that if you're unable to repay the mortgage, they can repossess the property and get a good amount for it when sold.

   The cost of valuation varies according to lender and purchase price, but budget for about £300. The more expensive the property, the more a valuation fee is likely to cost you. Some lenders chuck in the valuation for free, so you might get lucky.

   • How much? Typically around £300, but can be significantly more.

   • Who do I pay? The lender.

   • Will I always have to pay this fee? No, some lenders will pay it for you.

   • Do I need to pay upfront or can I add it to my mortgage? Upfront.

   Special rule in Scotland

   Sellers must provide a Home Report, which includes a valuation. If dated in the last 12 weeks, lenders may accept a re-type instead of a new valuation.

   If not, you might be able to persuade the seller to get an updated version of the valuation instead. It may cost them, but it can help them entice buyers. Make sure the lender you're planning to use accepts reports from the valuer the seller used, as each lender has an approved panel.

4. Cost of a property survey

   While a property valuation is for the lender’s benefit to confirm the property both exists and is satisfactory security for the mortgage loan it's giving you, a survey is a more thorough inspection of the property for your own benefit.

   You don't have to get a survey done (it's entirely your choice), but doing so can be useful to check the condition of the property you're buying. Plus, many buyers use the information gained in the survey to renegotiate on the property price.

   A survey would hopefully flag the following:

   - If damp exists in your property.
   - Any structural issues with the property.
   - Plumbing problems.
   - Other potential snags.

   If you don't get a survey done and something turns out to be wrong with the property after you've bought it, you'll have very limited options. The lender's valuation will offer you no protection – in fact, the valuer might not even enter the property (they may just drive past to make sure it exists).

   You can pick your own surveyor but it’s also worth asking the lender how much it'll cost to upgrade its valuation to a survey. As you should only need to pay the difference in price, it could theoretically work out cheaper. You'd need to make this clear at the mortgage application stage, so ask the lender or your broker to check.

   There's a risk you fork out for the survey only for the purchase to fall through, so an advantage of organising a survey yourself is you can leave it until the last possible moment. Ideally you'd do it after the mortgage offer is in place but before you contractually commit to buying the property (exchange of contracts).

   Even if you do end up paying for two or three surveys, the consequences of buying a property that turns out to have serious structural issues can be devastating. So think very carefully.

   • How much? £500 to £1,500 depending on survey type.

   • When do I pay? When you commission the survey.

   • Who do I pay? The surveyor (or the lender if they arrange it for you).

   • Will I always have to pay this fee? No, surveys are optional.

5. Anti-money laundering checks

   Estate agents and solicitors are required to carry out background checks on homebuyers as part of anti-money laundering (AML) regulation.

   Solicitors normally charge a nominal amount for AML within the conveyancing fee.

   Estate agents don't tend to charge for AML, but in recent years there's been an uptick in the number of agents doing so – some as much as £75.

   We've heard instances of MoneySavers successfully arguing against paying this fee, so this approach could be worth a try if the estate agent you're dealing with charges a premium. Your chance of success will depend on the estate agent's willingness to shoulder the AML cost itself or pass it on to the property seller.

   • How much? Up to £75, though often there's a minimal or no charge.

   • When do I pay? After you've had a property offer accepted.

   • Who do I pay? Estate agent or solicitor.

   • Will I always have to pay this fee? No, as many estate agents don't charge it.

6. Broker fee

   

   If you use a broker, it may charge you a fee. But there are many brokers who just get paid commission by mortgage lenders, meaning they are fee-free for you to use.

   Where a broker charges a fee, this can be anything from a fixed fee of £300 to 1% of the loan amount (£1,000 per £100,000), which can be expensive. A good broker may be willing to reduce your fee if they are getting decent commission from the lender. Always ask.

   Beware if a broker asks for the fee upfront, as with most fees paid in advance, you could lose it if you later decide not to go ahead (or where the purchase collapses). Our Cheap mortgage finding guide explains how to find a good broker.

   • How much? £0 to £500 (though could be more).

   • When do I pay? Varies depending on broker, usually completion.

   • Who do I pay? Your broker.

   • Will I always have to pay this fee? No, some brokers are fee-free.

7. Conveyancing fee

   

   You'll need to pay a solicitor to carry out the legal work associated with buying a home. This includes conveyancing (transfer of property ownership), paperwork and checking whether environmental factors, planning permission issues or other hidden nasties could cause you problems.

   Some lenders will cover these fees – though only if you use their chosen solicitor. Others might give you cashback incentive once the mortgage has completed. If you use your own solicitor, this will need to be okayed by the lender, as your solicitor usually does the legal work for you and the lender.

   Expect the total legal fees for your solicitor to cost between £1,000 and £2,500. The final price will depend on how much the property you're buying costs (more expensive homes equal bigger legal fees). You might have to pay the solicitor at several points during the buying process, as they incur costs on your behalf.

   • How much? Circa £1,000 to £2,500.

   • When do I pay? Throughout the process and on completion.

   • Who do I pay? Your solicitor.

   • Will I always have to pay this fee? Usually, but some lenders cover it.

   • Do I need to pay upfront or can I add it to my mortgage? Upfront.

8. Land Registry fee

   The job of the Land Registry is to register properties under their owners' names.

   When you buy a property from someone else, the Land Registry transfers their register entry from the seller's name into your name. It charges a fee to do this.

   The fee is dependent on the property's value. It's circa £200 for properties valued between £100,000 and £200,000, and up to £300 on homes between £200,000 and £500,000. This fee is one your solicitor will call a 'disbursement', and normally you'll need to pay it when you complete the property purchase.

   Ask your solicitor to pay the Land Registry online (it's much cheaper than by post).

   • How much? Up to £500 (but can be more depending on property price).

   • When do I pay? At completion.

   • Who do I pay? The Land Registry (via your solicitor).

   • Will I always have to pay this fee? Yes.

9. Stamp Duty

   Stamp Duty is a tax you pay to the Government when you buy a property. Find out how exactly much you'll need to pay by using our Stamp Duty calculator.

   You'll need to send any Stamp Duty due to your solicitor. Once the property purchase is complete, they will pay it to HM Revenue & Customs (Revenue Scotland if you're in Scotland; Welsh Revenue Authority if you're in Wales).

   • How much? Depends on the property price (and if you're a first-time buyer).

   • When do I pay? On completion.

   • Who do I pay? The Government (usually via your solicitor).

   • Will I always have to pay this fee? No, it depends on the property price.

Costs after buying a home

1. Removal costs

   Unless you can pile your belongings into the back of a car you've got, factor in the cost of a removal van. These start at £100+ for small local moves, but can easily cost up to £1,000+ for shifting a whole family's possessions long distances.

   See our Moving home checklist guide for tips on comparing removals costs.

2. Service charges, ground rent and upkeep

   If you've bought a leasehold property, it's very likely you'll pay a regular service charge for the upkeep of the property and shared areas. Plus, you might need to pay ground rent to the freeholder.

   Even if you own a freehold property – particularly if it's a new-build – or are a joint freeholder with neighbours, still factor in costs for maintaining communal areas.

   See our Leasehold versus freehold guide for more on the differences.

3. Furniture and extras

   Currently renting a furnished place? Remember, you'll need to buy everything for inside and outside your new pad – like beds, sofas, carpets, lawnmowers, etc.

   Don't leave anything out. Curtains and paint can cost far more than you think. Don't forget about the cost of white goods too, which can be large. If the seller's including any fixtures and fittings (such as curtains), make sure they're noted down in the contract. If it's not noted down, don't rely on it being there when you move in.

   And don't forget the likes of: light bulbs, lamp shades, toilet brush, washing up bowl, door mats, hooks, etc. Freecycle and Freegle can help with these costs.

4. Monthly mortgage repayments

   

   To work out your monthly mortgage repayments, you need to know the size of your mortgage and rate you'll be paying. You can use our Mortgage best buys tool to benchmark a realistic rate if you've not sorted a mortgage yet.

   Need help finding the right mortgage deal? Our Cheap mortgage finding guide can help. Once you've got a rate, enter the details into our Mortgage calculator to find out the monthly repayment. Try adjusting the mortgage term up and down to see the difference it would make to your monthly repayment, as well as the total amount you'd repay over the term.

   Your mortgage repayments are an ongoing cost. The first payment is likely to be higher than your normal monthly repayment, as you pay interest in the month you get the mortgage, as well as for the upcoming month. So factor that in.

   Carefully decide if you can afford a mortgage
   
   Don't over-stretch yourself or you risk financial ruin. And crucially, don't push too hard. Remember, not having a mortgage isn't as bad as getting one but struggling to repay (and possibly being repossessed).

   Looking for more mortgage help?

   We've got lots of other helpful guides:

   • First-time buyers' guide. Getting on the first rung.

   • Remortgage guide. Learn how to remortgage.

   • Cheap mortgage finding. Find top deals for you.

   • Mortgage best buys. See today's top deals.

   • Shared ownership. Own part of a home.