Something that is often overlooked when purchasing a property by many are the fees that can be associated with it. The majority of people who buy a house or an apartment need a mortgage and the majority of people who need a mortgage will need insurance. But, that isn’t necessarily the end of the necessary finances that come with home ownership. In this blog, we will discuss the fees that are often associated with purchasing a property and whether or not they are worth it.
What Fees Might You Have To Pay?
Not as common as some of the other fees but definitely a big part of the purchase process if you are buying a new build property! With most brand new built properties, they will be sold before they have actually finished being built. Normally, a building developer will show prospective buyers a purpose built ‘show home’ and the blueprint plans for a house. This will give buyers an opportunity to see what the house or flat will look like and because it is yet to be built, it will allow the buyer to have a bit more say in how the home will look when it is built.
Because the property has not been built and you are buying it directly from the developer, they will ask you to pay a reservation fee which will allow them to put your name on the property to be built and take it off the market. That property is then reserved by you until you get your mortgage offered and pay for it. If you are getting a mortgage, you will normally need to have a valid credit check in place from your mortgage advisor before a builder will let you reserve.
The actual amount you will pay for a reservation fee depends from property to property and from builder to builder. But, it generally can be between £100 and a couple of thousand pounds. Sometimes a builder will refund all or part of your reservation fee depending on the circumstances.
Are They Worth It?
Yes, if you want to increase the confidence the builder has in you. It might sound strange to some but, like anyone selling something, a builder does not know you so they have a natural cautious attitude. They want to make sure that the property they are selling to you will be purchased in a timely manner without any time wasting and without them losing out on any money. By taking the property off the market for you, they are reducing the sale potential of the property if you (for whatever reason) don’t end up buying the property.
The builder will want some reassurance that you will ultimately buy the property off them. The biggest reassurance is usually the mortgage offer coming through however, the mortgage reservation fee is a good way of showing the builder that you are committed to buying. It also means that if you pull out of the sale or can’t purchase for another reason, they won’t lose out on too much money for the time that the property has been off the market. As they will still have your reservation fee which at that point would not normally be refundable.
When you go through the mortgage application process with a mortgage advisor, they will most likely charge you an advice fee. Sometimes called a broker fee or an application fee. A mortgage brokerage fee is an essential fee to pay when securing expert advice from a mortgage advisor. A mortgage brokerage will find you the absolute best lender, deal, and product on the mortgage market for your circumstances. Something that would have taken you hours and hours to do on you own (if you could at all).
They will then do the entire mortgage application process for you so that you don’t have to stress or worry about it. They will complete the full application form, provide the lender with all of your required mortgage documents, chase the lender decision regularly for you to make sure your mortgage is offered on time. They will also liaise with your solicitor for you to make sure that everything is going through on time and smoothly on the legal side so that your purchase can complete on time.
All of this is handled in one place by a team of administrators who support your mortgage advisor, so a fee is essential to make sure that you get the best quality mortgage journey available.
Are Mortgage Advisor Fees Worth It?
In recent months, perhaps because of the worry around the cost of living crisis, mortgage advisors have been seeing a lot of discussion about the fees they charge and whether or not it is worth it.
Mortgage and protection advisor at Oportfolio Jade Pinkerton is one of those who has seen these questions cropping up recently:
“Lots of clients are talking about mortgage advice fees at the moment. I’ve definitely noticed a change in attitudes lately, and no doubt this is due to the rising cost of living. Having a mortgage advisor to provide people with the tailored personal mortgage advice they need is so important, now more than ever before. The difficulty to get mortgage applications over the line with banks has increased exponentially lately.
banks are becoming more cautious of lending and stricter with their acceptable/unacceptable criteria – and we do all the chasing, arguing and processing for our clients so they don’t have to. We wouldn’t be able to afford to provide this service if we didn’t charge small fees. It is definitely worth it to have us take care of your application for you. Going it alone can be a minefield.”
Often mortgage lenders will charge fees for the more exclusive and competitive rates and products that they offer. This is primarily to keep the exclusivity of the product and to make sure that there aren’t too many people on a particular mortgage product. Normally product fees are around £1000 – £2000 depending on the lender or product.
Luckily, most lenders will offer you two choices of how this can be paid. Either up-front or by adding it to the total balance of your mortgage loan. The second option means that if your budget is already tight, you won’t need to worry about finding an extra £1-2K to pay for your product. You can add it to your loan balance (if your mortgage affordability will allow it) and pay it back as part of your monthly mortgage payment.
Are Product Fees Worth It?
Yes and no. This is where the expert advice from a mortgage professional comes in handy. An advisor will be able to carefully look at your mortgage budget, the projections of how much you will pay over the mortgage term and the financial benefit of a paid for product compared to a product with no fee. They will determine whether or not paying for you product will actually financially benefit you and if it does, they will recommend either adding it to your loan or paying it up-front.
At this moment in time, mortgage products are increasing across the board so it may be a lot more financially beneficial for you to choose a product that charges a fee as the rate or the deal might end up saving you a lot of money. All of this can be determined by your advisor.
An integral part of the property purchasing process is securing the help of a solicitor to complete the legal side of the purchase. Everything legally to do with purchasing such as contracts, transferring money to different parties and making sure that all transactions and communications are legally sound is handled by a property solicitor. Without this, anything could literally happen and you or the person selling you the property could find themselves committing some form of property crime.
If you find a solicitor to act on your behalf yourself, they will charge a fee for their services in a similar way to a mortgage broker. because they are handling all of the processes for you, they will need to be reimbursed so that they can provide the best quality service possible. Solicitor fees are determined by the individual solicitor or firm and can vary greatly. Always get a solicitor quote before agreeing to use their services. Some fees can range between £1,000 and £2,000 but some can be less and some can be more.
Are Solicitor Fees Worth It?
Absolutely. Some lenders when applying for a mortgage will offer free legals with their package. Now, sometimes this can be good but often there can be delays and issues with free solicitors. When it comes to solicitors, you really do get what you pay for. So, if you pay a fee for a quality solicitor, you are likely to get quality service. If you don’t pay a fee, your house purchase journey could end up becoming a nightmare.
If you are stuck with where to look for a solicitor, your mortgage advisor will have several trusted legal firms that they can recommend and introduce you to.
As part of the mortgage process, a lender will normally insist that the property is professionally valued before they agree to lend any money on it. They do this for a couple of reasons;
- To make sure that the property is worth what you are paying for it and ultimately worth the money that they are lending you for it.
- To make sure there are no major issues with the property so that if they should ever need to repossess the property and re-sell it, they won’t lose out on any money.
A property valuation is carried out after a mortgage underwriter has agreed the application in principle. They will then instruct one of their trusted panel valuers who will either go out and view the property or carry out a desk-top computer valuation to make their assessment. If the property is valued up by the valuer and there are no other issues, the offer is normally produced.
Sometimes a lender will offer a free valuation with their trusted valuers. As they are the lender’s trusted valuer, this is normally a good thing as they are usually high quality and thorough with their assessments. However, some lenders/valuers will charge a valuation fee as part of the process which again is a good thing as the valuer will need to charge a fee to carry out a thorough valuation.
The fees charged vary from valuer to valuer but a standard fee is normally between one and two hundred pounds.
Are Valuation Fees Worth It?
Yes. It may seem like valuations are just carried out to safeguard lenders. Although this is a big part of it, a thorough property valuation will also give you peace of mind that you aren’t being overcharged for the property and that you aren’t buying a property that will cause you lots of problems down the line! If your mortgage product offers a free valuation then this is great but if you have to pay a fee, we think it is definitely worth paying the small amount charged to get a quality property valuation.
If you or anyone else you know is worried out fees associated with purchasing a property or has any questions about the fees that Oportfolio charge to arrange your mortgage, please feel free to give our team a call today.