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Buying Property and Hidden Fees

By: Lucy Debenham BA (hons) - Updated: 8 Sep 2012 | comments*Discuss
Buying Property Hidden Fees Hidden

Buying a property and moving house is reckoned to be one of the most stressful undertakings a person can experience during their lifetime. So one can only imagine how perturbing it would be to suddenly be hit by unexpected charges and hidden fees during this time. This article reveals some of the hidden fees that are encountered most by unsuspecting homebuyers in the UK.

Land Registration Fee

When compared to the price of property, the Land Registration fee may not seem like a particularly large sum of money, but nevertheless it may still come as a surprise when purchasing a house.

The Land Registry’s job is to keep records of who owns what house within England and Wales, as well as whether the home has any outstanding charges (i.e. mortgages) on it. This information has to be updated each time a property has a new owner, and as a result the Land Registry charge for updating their records. The fee that is paid is subject to whichever price bracket the house falls into. For instance, a house that cost between £50,001 and £80,000 should expect to pay a £40 Land Registration fee, whereas a house costing between £200,001 and £500,000 will have to pay £220 at this time.

Fee Mortgage Lender’s Fees

The fees charged by mortgage lenders for their services are known by a number of aliases – the most common being ‘set-up fee’, ‘administration fee’, ‘arrangement fee’, ‘application fee’ as well as ‘administration fee’ or ‘reservation fee’. These different terms are used to describe basically the same administrative service provided by the mortgage lenders, the common denominator being that the charges are a means for the lenders to achieve a tidy profit for themselves. Unless you have the cash to pay the agreed price of the house up front, then you will have to go through a mortgage lender to organise your loan, and ultimately will incur this hidden fee. Typically, homebuyers can expect to pay anywhere from £500-£2000 in mortgage lender’s fees, with the average fee calculated at around £800.

However, rather than charging a flat rate, some mortgage lenders are now implementing a new approach by charging a percentage of the loan that has been taken out – usually around 3%. In recent years, with the “housing boom” seeing house prices steeply rise, this tactic has meant that this particular hidden fee can amount to quite a hefty sum.

In addition to this fee, some mortgage lenders may attempt to sell you mortgage protection insurance plans. As with credit cards, these protection plans are designed as a means to protect those that cannot make their mortgage repayments through accident, sickness or unemployment (or all three, if you’re really unlucky!). However, it is widely believed that the protection policies sold alongside the loan are inflated over and above a normal price that an independent broker could offer. They are also not always suited for those that run their own companies, are freelance, contract workers or self-employed, so may prove null and void in some circumstances. Make sure that this fee hasn’t automatically been added on before you start making your monthly repayments.

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