A teddy bear in a box after moving house

The cost of moving house

Although your mortgage is likely your biggest expense when buying a house, there are other costs that you’ll need to consider. Some of these you might not be aware of, so we’ve provided a list of the additional costs to expect. This will help to avoid any nasty surprises down the line and allow you to budget for these charges.

1. Mortgage fees

On top of the interest you pay, there are also mortgage fees you’ll need to make to your lender. This is the cost for securing and setting up your mortgage, known as a booking and arrangement fee. Before taking out a mortgage you should look at these fees and make sure you can afford them.

Booking fee

A booking fee – also known as an application or reservation fee – is a charge to your lender made to secure your mortgage deal. This charge is non-refundable and you’ll need to pay it upfront when you’ve made your application.

The cost of this is likely to be between £100-£200.

Arrangement fee

The biggest mortgage fee you will have to pay is the arrangement fee. This is the cost of the lender setting up your mortgage. You will usually be given the option to pay this amount in full or to add it onto your mortgage.

This cost can vary but on average, this is somewhere in the region of £1,000-£2,000.

2. Valuation fee

A mortgage valuation is a requirement of the lender to allow them to check whether the property is safe to lend on. They will want to make sure that if you default on the mortgage, they will be able to repossess the property in order to get back any money lost.

On average, valuations cost around £300 – £400 and you will be expected to pay this upfront.

3. Survey fee

A survey is a more thorough version of the valuation and can help you to confirm that the property’s condition is as you expect. Although surveys are optional, they are strongly advised. This is because if you choose not to get a survey and it turns out that there is something wrong with the property, then you won’t have any protection.

You will usually have a survey done when mortgage offer is in place but before the exchange of contracts. It can sometimes be worth asking your lender how much it will cost to upgrade the valuation to a full survey, in theory making the process cheaper.

You will be looking to pay around £400-£700 for a survey depending which type you choose.

4. Legal fees

You will need a solicitor or licensed conveyor to carry out the legal work associated with buying your new home. This is to take care of the conveyancing (the transfer of home ownership) as well as checking paperwork and carrying out legal searches. You can choose your own solicitor but this will need to be agreed on by the lender. These fees will usually need to be paid in instalments through the buying process.

The cost of a solicitor will usually cost in the region of £1,000 – £1,500. However, this could be a lot more depending on the value of your property.

5. Stamp duty

Stamp duty land tax (SDLT) is the tax that you pay to the government for buying a property in the UK which has a value of more than £125,000. The percentage of tax you pay depends on the property value. You will only pay stamp duty on that portion of the purchase price.

Purchase priceStamp duty rate
Up to £125,000Zero
£125,000.01 to £250,0002%
£250,000.01 to £925,0005%
£925,000.01 to £1,500,00010%

Although it’s your responsibility to pay the stamp duty tax, your solicitor will likely organise this payment for you.

6. Land registry fee

The Land Registry charges a fee to register your property in your name. The fee calculator on the Land Registry website can help you to work out exactly how much you will pay for this. Again, your solicitor will usually help to arrange this payment on your behalf.

This fee is dependent on the value of your property but is likely to be somewhere between £200 to £500.

A person draws an image of a house

Top tips for getting a mortgage

When you’re looking to buy your first home, getting a mortgage will be your top priority. You will want to do what you can to get the best chance of being approved. Here we look at the top ways you can increase your chances of getting a mortgage.

1.     Check your credit score

Checking your credit report is the first thing you should do before applying for a mortgage. Lenders favour applicants with a good credit score, but there are still lenders who will consider your application if you’re suffering from a poor credit history or no credit history. Either way, it’s good to know what situation you’re in so you can work to improve your credit score if you need to. This means you can avoid any nasty shocks when applying for a mortgage as you will have a better idea of what you can expect. You will also be able to see if there are any errors on your credit file that need correcting before applying for your mortgage.

You can check your credit report easily through credit reference agencies such as Experian and Equifax.

2.     Work out your affordability

Before applying for a mortgage you should work out for yourself what you can afford to pay each month. Adding up how much you spend on monthly outgoings will allow you to see what you have left to use towards your mortgage. It will also allow you to see which areas you can cut back on or where you can make any lifestyle changes if you need to in order to be able to afford your mortgage payments.

Our online calculator can help you to work out how much you can borrow.

3.     Save as much as you can!

No matter how good your credit score is, or how low your monthly outgoings are; if you don’t have a sizeable deposit then it’s unlikely you’ll be able to get a mortgage at all. For more information about deposits take a look at our beginner’s guide to mortgages article.

You will also need to ensure that you have enough savings for other costs that will arise when buying a house. This includes any legal fees as well as stamp duty if the property is worth more than £125,000.

If you haven’t got one already, a savings account is essential when saving for a house. You should set up a direct debit from your current account to your savings account each month. If you think you might be tempted to access these savings before this point then you might want to consider a fixed rate bond.

4.     Carefully manage your bank accounts

Nothing looks worse to a mortgage lender than a badly managed bank account. Manage your money responsibly to ensure your bank accounts are in the best shape before applying for your mortgage. Don’t go overdrawn and make sure you pay off any credit card payments on time.

If you have any outstanding debts from previous loans then it’s a good idea to try and pay these off before applying for a mortgage. Lenders will want to see that you have as few debts as possible when applying for a mortgage. This will help with your affordability and also help to improve your credit rating. If you do have any large loan repayments to make then you should consider repaying these before making your mortgage application.

5.     Timing is everything

You should apply for your mortgage when your credit score and bank accounts are in good shape. If you’ve recently had more money coming out of your account than usual then it might be a good idea to wait a few more months so these transactions don’t show on your most recent payslips.

You should also try to avoid getting a mortgage if you’re between jobs. If you’re in your probationary period you are likely to be considered as higher risk by lenders. Some will only consider your application if you have been in your role for over a year. If you’ve started a new job in the last few months then it’s a good idea to wait until you’ve passed your probationary period until you apply for a mortgage. If you’re looking to change jobs then you should wait until your mortgage has been accepted before you apply for a mortgage.

You should also wait for the best time in your own life to get a mortgage. This is a huge financial commitment that you should make sure you’re ready for so make sure it’s right for you.

A child holds a small wooden house in their hands

Beginners guide to mortgages

Getting a mortgage is probably the biggest financial commitment you will ever make. But if you’re a first-time buyer, you might not know where to start. Here we have outlined the main things you need to know about getting a mortgage.

What is a mortgage?

A mortgage is a large loan used to help buy property or land. This makes up the difference between the total cost of the property and the deposit (lump sum payment). Interest and mortgage fees will be added onto the cost of your mortgage for borrowing the money.

Mortgages are secured against the value of your house until it’s completely paid off. This means that if you fail to keep up with your repayments then your mortgage lender has the right to repossess the property to sell and get their money back.

Do I qualify for a mortgage?

You can get a mortgage if you’re 18 or older and in full-time employment. Most lenders will require that you’re no longer in your work probationary period and that you have a good credit score. However, there are still options available for people who have a poor credit history.

How much can I borrow?

The amount you can borrow is based on your yearly earnings; as well as your partner’s earnings if you’re taking out a joint mortgage. Our online tool can help you work out how much you can borrow if you’re unsure.

No mortgage provider will allow you to take out a mortgage that you can’t afford. The lender will also want to see at least 3 months’ worth of bank statements to determine how much you can borrow for a mortgage.

How big a deposit should I put down?

Although there isn’t a set amount that you have to put down as a deposit, most lenders require around 20% of the house’s value. For example, if you’re looking to purchase a £200,000 house, then you should look to put down a deposit of £20,000.

The bigger the deposit you put down, the cheaper your mortgage repayments will be as you will have a smaller mortgage to pay back.

Consider your LTV (Loan to Value)

A larger deposit will reduce your LTV (Loan to Value), allowing you to get a better deal. Your LTV is the size of your mortgage in relation to how much your property is worth. High LTV mortgages (above 80%) won’t guarantee the best interest rates as these are considered riskier for lenders.

If you’re in a position where you need to secure a high LTV then you’re more likely to get approved if you have good credit score.

How much will I pay each month?

Your monthly repayments will be based on a number of factors. This includes your LTV, the type of mortgage you take out and the length of the term:

Types of mortgages

Fixed rate mortgage – Where the interest rate stays the same for a set period of time, as do your monthly payments.

Variable rate mortgage – Where the interest is set at the lender’s SVR (Standard Variable Rate), considered as their basic mortgage.

Discount mortgage – This is the same as a variable rate mortgage but a reduction is applied for a certain length of time.

Tracker mortgage – This is similar to a variable rate mortgage but instead, they track a nominated interest rate, usually the Bank of England’s interest rate, rather than the lenders SVR.

Capped mortgage – This is also the same as a variable rate mortgage, however, the interest rate can never rise above a set “cap”.

Offset mortgage – These mortgages are linked to a savings account as well as your current account. Each month the lender will look at what you’ve put into savings and deduct this from what you owe on your mortgage.

Whichever type of mortgage you agree to, you will be contracted for a number of years before you are able to renew or remortgage by going elsewhere to get a better deal.

Mortgage term length

On average mortgages run for 25 years, but terms can be longer or shorter than this depending on your situation. As affordability is more prevalent with house prices increasing, many people are choosing mortgages with longer terms in order to get a lower monthly payment.

If affordability isn’t an issue for you then choosing a shorter term could be a better option as you will pay less in interest over time.

If necessary, you can extend or reduce your mortgage term; however, there may be an additional cost to this. You should always ensure that you can afford the change in monthly payments if you choose to change your term.

Applying for a mortgage

The process of applying for a mortgage is relatively straightforward. You will need to provide information about yourself as well as information about the property you are looking to purchase.

When applying for a mortgage you should avoid making multiple applications in a short period of time. This is because lenders will be able to see each of these on your credit file, suggesting that you might be desperate for finance.