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Checklist of costs and fees associated with buying or selling a home

A. Costs and fees associated with buying a home

1. Deposit

First things first: the deposit. This is by far the biggest cost in buying a home. Many sellers and mortgage lenders require that you pay at least 10% of the purchase price up front. You'll also get a better interest rate the more money you put down. Note too that if you fail to stump up 10%, mortgage lenders typically impose require that you obtain expensive mortgage indemnity insurance (see below). If you're worried about funding a deposit, remember that if you're selling a property as well as buying one, your solicitor can apply the money received for the deposit on the property you're selling to fund the deposit for the property you're buying.

2. Legal fees

After you've found a property you want to buy and the seller has provisionally accepted your offer, you should contact a solicitor or licensed conveyancer as a matter of priority to begin the legal process of buying your house. Conveyancing costs can range from around £200 to £1,500, depending on the work involved and the value of the property. A solicitor will also charge for any additional costs they incur (called 'disbursements'), like postage, VAT, etc.

3. Stamp duty

Stamp Duty Land Tax (SDLT) is payable on the purchase or transfer of property or land in the UK where the amount paid is above a certain threshold. For purchases of freehold residential property and land valued at:

  • less than £125,000, you do not have to pay SDLT;
  • between £125,000 and £250,000, you have to pay SDLT at 1% of the purchase price;
  • between £250,000 to £500,000, you have to pay SDLT at 3% of the purchase price;
  • between £500,000 and £1m, you have to pay SDLT at 4% of the purchase price;
  • between £1m and £2m, you have to pay SDLT at 5% of the purchase price;
  • over £2m, you have to pay SDLT at 7% of the purchase price;
  • for certain person including corporate bodies, purchases over £2m require £15m SDLT.

In addition, you may qualify for 'Disadvantaged Areas Relief', which exempts you from paying SDLT on property/land valued under £150,000. You can check whether any property you're interested in qualifies for this exemption on HM Revenue & Customs website. Claims must be made before 5 May 2014.

You should also visit HM Revenue & Customs to learn about the other SDLT reliefs available, such as the relief for zero-carbon homes valued at under £500,000.

4. Survey costs

If you need a mortgage, your lender will ask you to pay for a mortgage valuation report (MVR) to confirm that the property is worth the amount that you have asked to borrow. The cost of a basic mortgage valuation costs about £100-300, depending on the size and cost of the property.

For added protection, most buyers pay for a more comprehensive survey to be done -- either a homebuyer's report or a full structural survey. A homebuyer's report costs about £300 to £600, whilst a full structural survey can cost up to £1,000, again depending on the property.

To save time and money, most buyers ask their mortgage lender to arrange for the surveyor who does the MVR to do the homebuyer's report or full structural survey at the same time.

5. Mortgage application fee / arrangement fee

Some mortgage companies charge a hefty fee to process your mortgage application. Typically the fee is around £500, but some lenders charge over £1,000. You may be able to add this to the loan, which is usually a good idea because some providers do not refund the fee if they reject your application or you pull out of the mortgage before completion.

6. Mortgage indemnity insurance

If you borrow a high percentage of your property's value (i.e., over 75-90%), your lender may ask that you obtain indemnity insurance to cover you if you can't keep up the mortgage repayments. Expect to pay roughly £1,500 per £100,000 of purchase price.

7. Building and contents insurance

Your mortgage lender will insist that you take out building insurance, so that its investment is still safe in the event that your home burns down or some other calamity occurs. Expect to pay around £500 plus depending on the cost to rebuild your home.

8. Insurance penalty

Some lenders require that you buy their building insurance and will impose a £25 penalty fee if you refuse and buy it elsewhere.

9. Mortgage payment protection insurance

This is designed to meet your monthly repayments if you are too ill to work or lose your job, but you will not need to take out this protection if you have other insurance that basically covers the same thing or you have a good amount of savings. Expect to pay around £2.50 each month in insurance for every £100 that you pay on your mortgage.

10. CHAPs fee

Some lenders charge about £30 to cover the CHAPS (Clearing House Automated Payment System) / telegraphic transfer fee involved in transferring the lender's money to your solicitor.

11. Search fees

Solicitors generally recommend around five searches -- which altogether costs about £300 -- but you may need more depending on the property and area you're buying in. Expect to pay an additional £50 for each extra search you commission.

12. Land Registry fee

After you move, you will need to pay a fee to the Land Registry to register the new change of ownership. The size of the fee depends on the purchase price of the property. These are the Scale 1 fees:

Purchase price

Registration fee

Up to £80,000

£20

£80,001- £100,000

£40

£100,001-£200,000

£95

£200,001-£500,000

£135

£500,001-£1000,000

£270

£1,000,001 and over

£455

£1,000,001 and over

£700


B. Costs involved in selling a home

1. Estate agent fees

Standard estate agent commission is around 2-3% of the sale price. Thus, the higher the sale price of your home, the more money the agent will earn.

2. Legal fees

As stated above, conveyancing costs can range from around £200-1,500 plus VAT, depending on a number of factors (e.g., the cost of the property, complexity of the transaction, etc).

3. Early repayment charge

Usually fixed and discounted variable rate mortgage lenders impose a charge if you repay the loan early. The charge can be as high as 1-4% of the outstanding loan.

4. Exit fee

Another charge levied by mortgage lenders, this time when you finish paying off your mortgage or switch your mortgage to another lender. The fee may be as high as £300 in some cases.

5. Indemnity insurance

An indemnity policy is a type of insurance taken out to deal with a defect in the title of the property being sold (e.g., a restrictive covenant or a missing document of title). As a way to complete the transaction, but also satisfy the buyer, your solicitor may suggest you take out an indemnity policy, which will pay the buyer if the defect becomes a problem. All such policies require that their existence not be disclosed to third parties.

Do you need to find a conveyancing solicitor? Use our Solicitor Directory.

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