The total fees (also called closing or completion costs) payable when buying a house in the UK are among the lowest in the world and total between 3 and 5 per cent for a property costing below £250,000.
The average fees for a first-time buyer are around £6,000, which includes conveyancing and other solicitor’s fees, survey fee, stamp duty and removals. Most fees are calculated as a percentage of the cost of a property, therefore the more expensive a property, the higher the fees. Even removal costs will be higher if you’ve got a large house (unless you have a lot of empty rooms). If you’re buying and selling, you must consider the cost of both transactions.
Note that a number of fees are associated with a mortgage and if you’re a cash buyer your fees will be lower. The fees for buying or selling a home aren’t tax deductible.
Fees vary considerably depending on the price, whether you have a mortgage, whether you’re buying via an agent or privately, and whether you’ve employed a solicitor or other professional such as a surveyor. There’s no such thing as the declared value in the UK and fees are always paid on the actual price paid. Theoretically it would be possible to under-declare the price (so that a buyer can save on stamp duty and a vendor on capital gains tax) and for a vendor to receive part of the price ‘under-the-table’, although this practice is virtually unknown in the UK. If you’re buying a property without selling one, you will be faced with the following fees:
If you’re buying a property costing over £60,000 you must pay a property tax, called stamp duty land tax. Stamp duty isn’t payable on ‘fixtures and fittings’ (legally called chattels) such as carpets, curtains, light fittings, kitchen appliances and garden ornaments (basically anything moveable), which may be included in the purchase price. You can legally pay for fixtures and fittings separately, which you should do if it will bring the price below the £250,000 or £500,000 threshold (saving around £5,000 in each case).
However, you should be aware that the Inland Revenue investigates sales just below the £250,000 and £500,000 thresholds when it’s suspected that the buyer has fraudulently over-valued fixtures and fittings in order to dip below a stamp duty threshold. From 1st December 2003, buyers have had to complete an eight-page self-assessment form and take personal responsibility for paying stamp duty. Forms must be filed within 30 days of buying and there’s a fine for filing late.
There’s no fixed charge, but you should allow for 0.5 to 1 per cent of the purchase price (plus VAT). Some conveyancers charge a fixed fee. Fees usually include searches (see page 95), although these may be charged separately as disbursements (which generally includes Land Registry fees).
You must pay for the valuation of a property before a lender will offer you a loan, even if you decide not to go ahead with the purchase. Check the cost in advance, which varies depending on the lender and the value of the property. The valuation for a £100,000 property costs from around £175 (plus VAT), although many lenders now waive this fee.
You should consider having a ‘homebuyer report’ or a ‘full structural survey’ carried out, particularly on an old property. The homebuyer report is an assessment of the general condition of the property, together with a valuation, and costs from around £250 (plus VAT) for a £100,000 property. A full structural survey is much more detailed and usually costs from around £350 for a £100,000 property, depending on the surveyor, the property and what’s included in the report. When combined with the lender’s valuation, a homebuyer report or structural survey should be cheaper.
These are payable each time a property is sold and are to record the change of owner in the Land Register. The fee varies depending on whether the land is already registered (most property in England and Wales is registered – see www.landreg.gov.uk). Land in Scotland is registered in the General Register of Sasines or the Registers of Scotland and in Northern Ireland in Land Registers of Northern Ireland. There’s a sliding scale of charges depending on the value of the property, as shown in the table below:
If you borrow more than a certain loan-to-value (LTV), which varies depending on the lender, you must usually take out a mortgage indemnity guarantee (MIG – also called a high lending fee or mortgage risk fee). This is to protect the lender in the event that you’re unable to repay the loan and the lender is forced to repossess and sell the property. Many lenders insist on a MIG if you borrow over 70 or 80 per cent of the value of a property, although some have dropped MIG on loans of up to 90 per cent of the value of a property.
The Arrangement or Acceptance Fee is usually from £150 to £400 and is paid when you apply for a mortgage or when you accept one.
Your lender’s legal fees are usually around £300 (plus VAT) on a £100,000 property, although some lenders waive this fee.
It’s a condition of lenders that a property is fully insured against structural damage (etc.) from the time contracts are exchanged (see page 117).
Although it isn’t a fee as such, the cost of moving house must be taken into account when buying a property and should include insurance against breakages or loss (see page 161). You should expect to pay around £500 for moving the contents of a typical three to four-bedroom house.
Annual running costs usually average around 2 to 3 per cent of the cost of a property.
You must register with your local council when you take up residence in a new area and you may be liable to pay council tax from your first day of residence.
This article is an extract from Buying, selling & letting property (UK). Click here to get a copy now.