Other mortgage costs to consider
Arranging any type of finance comes with fees and costs. Here are some examples that may apply, depending on whether you are buying a new property or remortgaging an existing one.
Stamp duty
What is stamp duty when buying property?
When we mention stamp duty, we mean stamp duty land tax (SDLT). This must be paid when buying property, land and long term leasehold properties in England and Northern Ireland. The general rule is, the more expensive the property you’re buying, the higher the stamp duty.
How much is stamp duty on property?
The amount of stamp duty payable varies depending upon the purchase price of the property. Stamp duty percentages can also change from year to year depending upon tax policies. In general stamp duty is paid when you’re buying a home worth £250,000 or more, or a first home priced above £300,000, means you would have to pay stamp duty.
Is stamp duty applicable to me?
If you’re purchasing a property or piece of land in the UK, in most cases you will have to pay stamp duty. For residential properties or land, stamp duty applies if the price is £250,000 or higher. However, there maybe relief for first-time buyers subject to tax policies.
How much is stamp duty when you are buying your next home?
If you already own a home and are selling it to buy your new property you will typically pay stamp duty at the normal rate. Stamp duty is paid in ‘bands’, so you pay a certain percentage on the proportion of the land or property value which falls within each band. The table below gives you an idea of how this works.
|
Portion of home purchase price. |
|
|
£0 – £250,000 |
|
|
Rate of stamp duty |
0% |
|
£250,001 – £925,000 |
|
|
Rate of stamp duty |
5% |
|
£925,001 – £1.5 million |
|
|
Rate of stamp duty |
10% |
|
Above £1.5 million |
|
|
Rate of stamp duty |
12% |
So for buying a property worth £400,000 you would pay nothing on the first £250,000, then 5 per cent (£7,500) on the next £149,999. This based on the tax rates above which can be changed from year to year.
Do first-time buyers pay any stamp duty?
If your a first-time buyer you’ll get stamp duty relief. At present this means you don’t pay stamp duty on the first £425,000 provided the property price is £625,000 or less. If the property is bought more than the £425,000 threshold, stamp duty is charged at 5 per cent on the proportion above £425,000. So if buying a home for £500,000 your stamp duty is calculated at 5 per cent of £74,999, bringing the amount payable to just under £3,750.
How much is stamp duty on buy-to-let properties and second homes?
If you’re buying a rental property or a second home and not selling your main residential property. The stamp duty will be 3% higher in each tax band on the proportion of the purchase price it falls into.
Be aware stamp duty thresholds and percentage charged can change depending upon tax policies. For the exact details on your stamp duty liability, please refer to the official government website. https://www.gov.uk/stamp-duty-land-tax.
If you are currently buying a property your solicitor can confirm the amount of stamp tax due.
Legal fees
You will pay fees to your solicitor for doing the legal work associated with your purchase. This work is known as conveyancing.
Land registry
A fee for registering your ownership of a property.
Estate agent
Payable to your agent if you are selling through one. Typically this is a percentage of the final sale price.
Removal company
Fees vary depending on how far and how much you’re moving. You will typically pay 50% as a deposit and the rest on the day you move. It’s best to get several quotations before deciding which firm to use.
Mortgage valuation
This is for the lender’s benefit not yours. It satisfies them that the property is worth what you say it is.
Property valuation / survey
This is for your benefit and satisfies you that there are no issues with the property you’re buying. You may pay for a full structural survey or a less comprehensive homebuyer’s survey.
Mortgage lender’s arrangement fee
You pay this to the lender for arranging your mortgage, either up front or by adding it to your loan. Arrangement fees can vary significantly depending on the mortgage product you choose.
Early repayment charges
If you repay your mortgage in full, or in part but exceed the agreed partial repayment level, before the end of your mortgage term you can expect to pay a fee. This can range from a simple administration fee to significant early-redemption charges.
Higher lending charge
Where you are borrowing a high proportion of your property’s value your lender will insure itself against you defaulting and property values falling. The lender will usually pass this cost to you by adding it to the loan.
“Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.”
“Think carefully before securing other debts against your home.”
