Mortgage Fees & Costs Guide

What Does Buying a Home Actually Cost?

When planning to buy a property, the deposit is usually the number that receives the most attention.

But your deposit isn't the only money you'll need.

Buying a home can involve mortgage fees, solicitor costs, surveys, property taxes where applicable, insurance, removals and other expenses. Some costs need to be paid relatively early in the process, while others become payable closer to exchange or completion.

This is particularly important for first-time buyers.

If you've saved £30,000, for example, it doesn't necessarily mean that the entire £30,000 should become your mortgage deposit.

Understanding the likely costs before making an offer can help you decide how much money to retain alongside your deposit.

Your Deposit

The deposit is the amount of the property purchase you're funding without the mortgage.

For example:

Property price: £250,000

Deposit: £25,000

Mortgage: £225,000

This would represent a 90% loan-to-value mortgage, commonly referred to as 90% LTV.

Your deposit represents 10% of the purchase price.

What Is Loan-to-Value?

Loan-to-value, or LTV, compares the mortgage amount with the property's value or purchase price used by the lender.

It is calculated as:

Mortgage amount ÷ Property value × 100

For example:

£180,000 mortgage ÷ £200,000 property value = 90% LTV

LTV matters because mortgage products are commonly arranged into different LTV bands.

Changing your deposit can therefore affect the mortgage products potentially available to you.

Should I Use All My Savings as My Deposit?

Not necessarily.

A larger deposit can reduce the amount you need to borrow and potentially improve your LTV.

However, putting every available pound into your deposit can leave you with very little money for the rest of the purchase.

You may still need money for:

• Solicitor fees

• Searches

• Surveys

• Mortgage fees

• Moving costs

• Insurance

• Furniture

• Repairs

• Property tax where applicable

• Emergency savings

There is value in considering your overall financial position rather than concentrating exclusively on achieving the largest possible deposit.

Keep a Financial Buffer

Owning a home can create unexpected expenditure.

A boiler could fail.

An appliance might need replacing.

A survey might identify work that needs attention.

Moving itself may cost more than expected.

Keeping some savings after completion can provide a financial buffer rather than leaving you dependent on credit immediately after buying.

How much you should retain depends on your circumstances and personal financial planning.

What Is a Mortgage Product Fee?

Some mortgage products have a product fee.

You may also see terminology such as:

• Arrangement fee

• Mortgage fee

• Product fee

The terminology varies between lenders and products.

Some mortgage products have no product fee, while others can have a significant fee.

This is why the mortgage with the lowest interest rate isn't automatically the cheapest overall option.

Should I Choose a Mortgage With No Product Fee?

It depends.

Imagine comparing two mortgage products.

One has a lower interest rate but a substantial product fee.

The other has a slightly higher rate but no product fee.

Which one costs less can depend on:

• Mortgage amount

• Interest rate

• Product fee

• Initial product period

• Mortgage term

• Other costs

For a relatively small mortgage, paying a large fee to obtain a slightly lower interest rate may not always provide sufficient savings.

For a larger mortgage, the calculation could be different.

Compare the overall cost, not simply the headline interest rate.

Can I Add the Product Fee to My Mortgage?

Some lenders and products may allow a product fee to be added to the mortgage, subject to their rules.

This can reduce the amount you need to pay upfront.

However, adding a fee to the mortgage means you're borrowing that money.

Unless it is subsequently repaid, you can also pay interest on it.

It may also affect the mortgage amount and, in some circumstances, the loan-to-value.

What Is a Mortgage Valuation?

A mortgage lender normally needs to establish whether the property provides acceptable security for the proposed loan.

It may therefore arrange a valuation.

Depending on the lender and product, the valuation could be:

• Free to the applicant

• Included within the mortgage product

• Charged separately

The lender determines what type of valuation it requires.

Is a Mortgage Valuation the Same as a Survey?

No.

This is an important distinction.

A lender's valuation is primarily for the lender's benefit.

Its purpose is to help the lender assess the property as security for the mortgage.

It shouldn't automatically be treated as a detailed inspection of the property's condition.

If you want greater information about the condition of the property, you may want to arrange an appropriate independent survey.

How Much Does a Property Survey Cost?

Survey costs vary.

The amount can depend on:

• Type of survey

• Property size

• Property value

• Location

• Age

• Construction

• Complexity

Rather than budgeting according to one universal figure, obtain quotes for the property you're considering.

Do I Need a Survey?

A survey isn't the same as the lender's mortgage valuation.

Whether you choose to have one and what level is appropriate depends on the property and your circumstances.

A survey can potentially identify issues such as:

• Damp

• Roof problems

• Structural concerns

• Defects

• Drainage issues

• Timber problems

• Maintenance requirements

For older, unusual or visibly altered properties, a more detailed assessment may be particularly worth considering.

What Does a Solicitor or Conveyancer Do?

Your solicitor or licensed conveyancer handles the legal work associated with the purchase.

This is known as conveyancing.

Their work can include matters such as:

• Reviewing the legal title

• Ordering searches

• Raising enquiries

• Reviewing the contract

• Checking mortgage conditions

• Dealing with your deposit

• Preparing for exchange

• Handling completion funds

• Registering ownership

• Dealing with applicable property-tax administration

The precise work depends on the transaction.

How Much Are Conveyancing Fees?

Conveyancing costs vary according to the solicitor and complexity of the purchase.

The quote may include several different components rather than one single fee.

Ask for a detailed quotation showing:

• Legal fee

• Search costs

• Land Registry-related costs

• Bank-transfer charges where applicable

• Additional leasehold costs where applicable

• Other disbursements

• VAT where applicable

Comparing only the headline legal fee can be misleading if other charges aren't included.

What Are Disbursements?

Disbursements are costs that your solicitor or conveyancer pays to third parties as part of the transaction.

Examples can include certain:

• Search fees

• Land Registry fees

• Identity checks

• Other transaction-specific costs

Your conveyancer should explain which charges apply to your purchase.

What Are Property Searches?

Your conveyancer will usually arrange relevant searches as part of the legal process.

These may include searches concerning matters such as:

• Local authority information

• Water and drainage

• Environmental information

Additional searches can be appropriate depending on the property and location.

Searches can reveal information that isn't obvious simply from viewing the house.

Do I Have to Pay Stamp Duty?

Property taxation depends on the jurisdiction, purchase price and your circumstances.

For purchases in England and Northern Ireland, Stamp Duty Land Tax (SDLT) may apply.

Different rules can apply depending on matters such as whether you're:

• A first-time buyer

• Buying your main residence

• Purchasing an additional property

• Buying through a company

• A non-UK resident for applicable SDLT purposes

Tax rules and thresholds can change.

For that reason, don't rely on an old article or a historic tax calculation when budgeting for a current purchase.

Check the current position with your solicitor, HMRC or an appropriately qualified tax adviser before committing to the transaction.

Do First-Time Buyers Pay Stamp Duty?

First-time buyers may qualify for specific SDLT treatment where the applicable conditions are satisfied.

However, eligibility, thresholds and tax rules can change.

Don't assume that being a first-time buyer automatically means there will be no property tax to pay.

Your solicitor can confirm the position for your particular purchase.

What If I'm Buying an Additional Property?

Purchasing an additional residential property can result in different SDLT treatment.

This can be particularly relevant for:

• Landlords

• Buy to let purchases

• Couples where one person already owns property

• People retaining their previous home

• Certain company purchases

Property-tax rules can be complex, so obtain appropriate advice rather than estimating the tax solely from the mortgage amount.

Are There Mortgage Adviser Fees?

Mortgage advisers can have different charging structures.

Some may charge:

• No client fee in certain circumstances

• A fixed fee

• A percentage

• Different fees according to the complexity of the case

You should understand any adviser fee before deciding to proceed.

At Cambs Ely Mortgages, any applicable mortgage advice/arrangement fee will be explained before you choose to proceed.

Are There Broker Fees and Lender Fees?

Potentially.

These are different.

A mortgage adviser or broker may charge a fee for their service.

The mortgage lender may separately charge product or application-related fees depending on the mortgage selected.

Always distinguish between:

Adviser/broker fee

and

Mortgage lender/product fee.

Are There Estate-Agent Fees When Buying?

If you're purchasing a property through a conventional estate agent acting for the seller, the seller normally has the contractual relationship concerning the estate agent's selling fee.

However, buyers can encounter businesses offering additional services or contractual arrangements.

Never assume a payment or contract is required simply because a property is being marketed through an agent.

If you're asked to sign an unusual buyer agreement or pay a buyer-side fee, understand exactly what you're agreeing to and consider obtaining legal advice where appropriate.

What About Buildings Insurance?

If you're buying a house with a mortgage, the lender will normally require appropriate buildings insurance to be in place in accordance with its mortgage conditions.

The point at which you're responsible for insuring the property can depend on the legal transaction and circumstances.

Your solicitor and mortgage adviser can help you establish when cover needs to begin.

Don't leave this until completion morning.

What Is Buildings Insurance?

Buildings insurance covers the physical structure of the property against insured events, subject to the policy terms, limits and exclusions.

It can include areas such as:

• Walls

• Roof

• Permanent fixtures

• Other insured structural elements

The exact cover depends on the policy.

What Is Contents Insurance?

Contents insurance is different from buildings insurance.

It is designed to protect eligible belongings within the home against insured events, subject to the policy terms.

Depending on the policy, this can include items such as:

• Furniture

• Electronics

• Clothing

• Personal possessions

Buildings and contents insurance can sometimes be arranged together.

What About Life Insurance and Protection?

Protection isn't a purchase cost in exactly the same way as conveyancing or a survey, but it should be considered when planning your ongoing household budget.

Depending on your circumstances, you may want to consider:

• Life Insurance

• Critical Illness Cover

• Income Protection

• Family Income Benefit

The purpose is to consider what would happen financially if death, serious illness or an inability to work affected your household.

Our Protection Guide explains these options in more detail.

Do I Need Life Insurance to Get a Mortgage?

Life insurance isn't universally a condition of obtaining a residential mortgage.

However, whether you have a financial need for protection is a separate question.

For example, if two people's incomes are required to maintain the mortgage, consider what would happen if one income permanently disappeared.

Protection should be assessed according to your circumstances rather than assuming it is either automatically required or unnecessary.

What About Removal Costs?

Moving costs can vary substantially.

You might:

• Hire a removal company

• Hire a van

• Move yourself

• Require temporary storage

• Need specialist movers

Obtain quotes before completion so this doesn't become an unexpected last-minute expense.

Don't Forget the Small Costs

Some individual moving expenses can appear relatively insignificant, but together they can add up.

Examples can include:

• Redirecting post

• Changing locks

• Cleaning

• Storage

• Packing materials

• New furniture

• Curtains or blinds

• Appliances

• Minor repairs

• Decorating

• Broadband installation

• Additional travel

Not every buyer will incur every cost.

The point is to leave room in your budget rather than assuming the property purchase ends with the deposit and solicitor bill.

What Costs Are Different for Leasehold Properties?

Buying a leasehold property can involve additional considerations and costs.

Depending on the property, these might include:

• Service charges

• Ground rent where applicable

• Management-company fees

• Notice fees

• Deed-related fees

• Other leasehold administration costs

Your solicitor should review the lease and explain the financial obligations associated with the property.

What Is a Service Charge?

A service charge is generally a payment towards costs associated with maintaining or managing shared parts of a development.

This can potentially include areas such as:

• Communal areas

• Building maintenance

• Insurance

• Lifts

• Gardens

• Management

The amount and what it covers depend on the development and lease.

Service charges should be considered as part of your ongoing affordability, not simply as a legal detail.

What About Major Works on a Leasehold Property?

If you're buying a leasehold property, ask your solicitor about known or proposed major works and relevant information available during the transaction.

Significant works to a building can potentially create substantial future costs for leaseholders.

Understanding the leasehold position before exchange is important.

What Costs Apply to a New-Build Property?

New-build purchases can involve their own costs and arrangements.

Depending on the development, these could include:

• Reservation fees

• Upgrades

• Estate-management charges

• Service charges

• Solicitor costs

• Mortgage costs

Developers may also offer incentives or contributions.

Tell your mortgage adviser about all developer incentives because the mortgage lender may need to consider them when assessing the transaction.

What Is a Reservation Fee?

A developer may require a reservation fee to reserve a new-build property.

The terms should explain:

• Amount

• What it reserves

• Reservation period

• Whether it is refundable

• What happens if the purchase doesn't proceed

Read the reservation agreement before paying.

What About Buying a Buy to Let?

Buy to let purchases can have a different cost structure from purchasing your main home.

Potential costs can include:

• Larger deposit requirements

• Mortgage product fees

• Valuation

• Legal costs

• Applicable property tax

• Landlord insurance

• Letting-agent costs

• Safety requirements

• Maintenance

• Licensing where applicable

• Initial refurbishment

Our Buy to Let Mortgage Guide explains the wider considerations.

What Costs Apply When Remortgaging?

A remortgage can also involve costs.

Depending on the product and lender, these might include:

• Early Repayment Charge

• Product fee

• Valuation fee

• Legal costs

• Adviser fee

• Other lender charges

Some remortgage products may include certain valuation or legal services.

Compare the overall transaction rather than simply looking at the new interest rate.

Our Remortgage Guide explains this in more detail.

What Is an Early Repayment Charge?

An Early Repayment Charge, or ERC, can apply if you repay a mortgage during a period when the mortgage terms specify a charge.

This can be particularly relevant when:

• Remortgaging

• Moving home

• Repaying a mortgage early

• Making significant overpayments

Always check your existing mortgage before making decisions based on the outstanding balance alone.

How Much Money Should I Have Before Making an Offer?

There isn't one amount that works for everyone.

You need to consider:

Deposit

plus

Purchase costs

plus, ideally,

An appropriate financial buffer

Your exact position depends on the property, mortgage and personal circumstances.

Before making an offer, it can be useful to understand the approximate mortgage and transaction costs so you know what purchase price is realistically affordable.

Example of Planning Your Purchase Funds

Imagine you've saved £35,000.

Instead of automatically deciding:

£35,000 = deposit

consider:

Total savings: £35,000

minus

Legal and purchase costs

minus

Survey and moving costs

minus

Other applicable costs

minus

Money you want to retain after completion

equals:

Potential deposit available

This can produce a much more realistic buying budget.

Should I Put More Money Into the Deposit to Get a Better Rate?

Potentially, but calculate whether it is worthwhile.

If an additional deposit moves your mortgage into a different LTV band, different mortgage products may become available.

However, don't automatically use your emergency savings to cross an LTV threshold without comparing the financial benefit.

Ask:

How much additional deposit is required?

How much does the mortgage actually become cheaper?

How much cash will I have left after completion?

The best balance depends on your circumstances.

Why the Lowest Mortgage Rate Isn't Always the Cheapest

This is worth repeating.

Consider two hypothetical products:

Mortgage A

Lower interest rate
Higher product fee

Mortgage B

Slightly higher interest rate
No product fee

Mortgage A might appear more attractive when looking only at the rate.

But once the fee and mortgage amount are considered, Mortgage B could potentially cost less over the relevant comparison period.

The reverse could also be true.

This is why mortgage recommendations should consider overall cost and circumstances rather than simply ranking products by interest rate.

First-Time Buyer Cost Checklist

Before making an offer, consider:

☐ Deposit

☐ Mortgage product fee

☐ Mortgage valuation where chargeable

☐ Independent survey

☐ Solicitor/conveyancer fee

☐ Searches and disbursements

☐ Applicable property tax

☐ Mortgage adviser fee where applicable

☐ Buildings insurance

☐ Contents insurance if required

☐ Protection if appropriate

☐ Removal costs

☐ Storage if required

☐ Initial repairs

☐ Furniture and appliances

☐ Emergency savings

Home-Mover Cost Checklist

If you're selling and buying, also consider:

☐ Estate-agent selling fee

☐ Existing mortgage balance

☐ Early Repayment Charge

☐ Sale conveyancing costs

☐ Purchase conveyancing costs

☐ Available equity

☐ Mortgage porting implications

☐ Additional borrowing

☐ Removal costs

☐ Applicable property tax

Our Moving Home Mortgage Guide explains how the sale, equity and new mortgage can work together.

Before You Commit to a Property

Try to understand four numbers:

1. How much deposit do I have?

2. How much could I potentially borrow?

3. What will buying the property cost?

4. How much money do I want left after completion?

Together, these numbers provide a much more useful picture than simply asking:

“What's the minimum deposit?”

How Cambs Ely Mortgages Can Help

Cambs Ely Mortgages can help you understand the mortgage costs alongside the mortgage itself.

When comparing mortgage options, we can consider the interest rate together with relevant product fees, mortgage term, loan-to-value and overall borrowing requirements.

For first-time buyers in particular, understanding these costs before viewing properties seriously can help establish a more realistic purchase budget.

We help clients in Ely, Cambridge, Cambridgeshire, East Anglia and across England, with appointments available remotely.

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Important Information

This guide provides general information and shouldn't be treated as personalised mortgage, financial, legal, insurance or tax advice.

Mortgage, legal, survey and moving costs vary according to the transaction and provider. Tax rules, allowances and thresholds can change, so obtain current advice for your circumstances before making financial commitments.

Mortgage products may include fees and Early Repayment Charges.

Your home may be repossessed if you do not keep up repayments on your mortgage.