The hidden fees of property ownership

Buying your first home is a significant milestone and a major financial achievement. As you start your home search, you’ll likely focus on securing a mortgage, determining your deposit, and evaluating the sale price.

However, it's equally important to consider the entire buying process and the ongoing costs of maintaining the property. A clear understanding of all associated expenses will help ensure that you make an informed decision.

Mortgage arrangement fee

Most first-time buyers are aware of the need to save for a deposit, but many overlook the mortgage arrangement fee. Also known as a product fee, this is a charge that lenders impose for setting up your mortgage.

This fee can be paid upfront or added to your mortgage balance, which will increase the total loan amount and the interest paid over time. Mortgage arrangement fees typically range from £0 to £2,000, depending on the lender and mortgage product. While some lenders offer fee-free mortgage options, the interest rate may be higher as a result.

Other potential fees include:

• Booking fees: £100 to £200 for reserving a mortgage product.
• Product fees: Up to £1,000 for providing the mortgage product.

Additionally, early repayment fees may apply if you pay off your mortgage earlier than agreed, typically ranging from 1% to 5% of the remaining balance on fixed-term mortgages.

By factoring in these fees alongside your deposit, you’ll be better prepared for the overall cost of securing a mortgage.

Risk warning: Your home may be repossessed if you fail to keep up with your mortgage repayments.

Mortgage broker fees

Many homebuyers opt for a mortgage broker to assist them in finding the best deal. At Hello Mortgage, we are a whole-market mortgage broker, fully authorised and regulated by the Financial Conduct Authority (FCA), committed to finding you the ideal mortgage.

Brokers typically charge a fee, though this is often offset by the savings achieved from comparing different offers. It's important to include this cost in your budget when planning for your home purchase.

Our fees are situational and range from £250 to £500, payable upon completion of the mortgage.

For more information or to receive a tailored quote, please feel free to contact us for a complimentary initial mortgage consultation.

Important: This content does not constitute financial advice and is for informational purposes only. Please consult a regulated financial adviser before making any decisions about your mortgage.

Mortgage valuations and surveys

Once you've found a property and secured mortgage approval, the lender will arrange a property survey to confirm the condition and value of the property. The lender will conduct a survey on the property to determine the property value and make sure that the property has been valued correctly. These assessments from the lender can be fee-free; however, some lenders do charge based on the value of the home.

Independent mortgage valuations typically start at £400, but the cost can vary based on the size, age, and value of the property.
It's advisable to obtain a second independent mortgage valuation separate from the lender's assessment. RICS-accredited firms must conduct these second valuations. For more information, click here.

Stamp duty

On April 1st, stamp duty regulations changed, making property purchases for first-time buyers more accessible. The nil-rate threshold decreased to £125,000, meaning stamp duty land tax is not payable until after the value of the home exceeds £125,000.  

First-time buyers are now exempt from stamp duty on properties valued up to £300,000. To help them get on the property ladder.

To calculate your stamp duty, use a Stamp Duty calculator here.

Please note: This calculator provides an estimate and should not be used as a substitute for financial or tax advice.

Legal fees

The process of transferring ownership of a property typically involves legal work, with solicitor fees normally ranging from around £1,500. Some lenders offer cash back or fee-free legal services if you use an approved solicitor.

Legal fees can vary depending on the complexity of the case. For example, Sort Legal, our partner company, charges fees starting at £1,611 for a first-time buyer purchasing a home valued at £250,000.

Click here to learn more about Sort Legal's services.

Important: Please note that the legal services provided by Sort Legal are subject to their terms and conditions.

Home insurance

When purchasing a property, you'll need both building and contents insurance to protect your investment.

• Building insurance covers the structure of the property.
• Contents insurance covers personal belongings inside the home.

Before exchanging contracts, lenders require building insurance. The price of building insurance differs depending on factors such as location and risk.

Approximate yearly costs of building insurance:

• Standard homes: £100–£300
• Larger or high-risk homes: £300–£1,000
• Buy-to-let properties: £150–£500
• Commercial properties: £500–£5,000

At Hello Mortgage, we also offer life insurance after the mortgage offer is accepted. As the client now has a valuable asset, they may want to protect it through life insurance.

This is not required but advised when purchasing a property.

Interest rate changes

If you have a fixed-rate mortgage, your payments will remain the same for a set term. However, once the fixed period ends, your interest rate may increase, resulting in higher monthly payments. It’s essential to prepare for potential interest rate rises to maintain financial stability. Fixed-rate terms typically last for 2, 5, or 10 years.

Please note: Your home may be repossessed if you fail to keep up with your mortgage repayments.

Utility bills

In addition to your mortgage, you'll need to budget for regular utility bills, including electricity, water, internet, and TV licenses. Here’s an estimate of typical monthly costs for a 3-bedroom semi-detached house in the UK:

• Gas and electricity: £150–£200
• Water: £35–£50
• Council Tax: £120–£200
• Broadband and TV licence: £30–£60
• Home insurance: £12.50–£25

These are average monthly payments, and your personal circumstances may result in different bills.

Final thoughts

Owning a home is a rewarding experience, but it comes with ongoing financial responsibilities. By considering all costs, from deposits and legal fees to insurance and utilities, you can create a comprehensive budget and enjoy a smooth transition into homeownership.

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