Weigh up the hidden expenses of relocation

It's a good time to buy, but movers need to wise up to the true cost, says Nicolas Hopkins

Moving home is exciting, but it can be one of the most stressful times of your life, so getting the finances right is essential. With some certainty returning to the property market on the back of the election of the coalition Government, the bargains there have been across the country may soon disappear. But in the rush to bag a new home, finding the right mortgage is important. That doesn't just mean choosing the best rate or type of mortgage, but ensuring you understand the other costs. Most lenders add a range of fees and charges to their deals which can catch the unwary out.

"For most people, mortgages are a lifetime commitment, so when choosing a loan, borrowers must bear this in mind," says John Hughes, the business leader of retail products at the Britannia. "We would always advise borrowers to look at the range of options available and pick the product which suits their finances and their lifestyle.

"It is also important that borrowers look beyond the headline rate when choosing their mortgage and look closely at the hidden costs – the administration fees, valuation charges, conveyancing costs and exit fees," Hughes says.

The mortgage broker Drew Wotherspoon of John Charcol says homebuyers should spend as long on their financial planning as on choosing their new home. "There are certainly bargains to be had in the property market currently and if you are thinking of moving, now could well be the time. Yet you should never do this without proper planning and a clear knowledge of exactly what it will cost.

"From estate agent fees and removal costs to stamp duty and the plethora of costs that are involved in arranging a mortgage, movers must make sure they know exactly what it will cost," Wotherspoon advises. "Check with all the parties involved in a transaction and make sure they spell out all the costs. You can then make an informed decision about whether moving is right for you."

On top of the mortgage-related costs, movers need to be aware of such expenses as valuation fees, stamp duty, legal costs, estate agents' fees, and the expense of moving. You'll also need to take account of home and contents insurance you'll need to take out on your new property. The sad truth is that buying a home will inevitably cost more than you think, especially with all the unexpected bills that arrive.

One expense that few plan for is a mortgage arrangement fee. Anyone tempted by the best deals is likely to be landed with a bill of £1,000 or more simply to secure the deal with their lender. It means that when comparing rates, you must take account of the arrangement fees, as they could make what looks like a more expensive loan actually work out cheaper than a mortgage with a lower interest rate.

Most lenders will allow borrowers to add the cost of the arrangement fee to the mortgage, but if you do that the cost will rise as it will attract interest over the lifetime of the loan. "The issue with moving home for many has always been the hidden costs that may not have been thought about when a dream home is identified," says Andrew Montlake, a director with mortgage broker the Coreco Group. "Valuation fees, lenders' arrangement fees and application fees have all risen dramatically over the past few years as lenders first sought to top best-buy tables with the fees offsetting the lower rates and, more recently, to boost profits and improve their balance sheets."

There's more to consider when looking at finances. "Stamp duty, solicitors' fees, broker fees and even telegraphic transfer fees can all add up and need to be taken into careful consideration when assessing the relevant merits of a mortgage deal and even the property purchase itself," says Montlake.

Stamp duty has traditionally been the biggest extra expense for homebuyers, with the land tax set to be charged at up to 5 per cent from next April. That can add a considerable amount to a property price, and anyone spending £1m-plus will have to stump up an extra £50,000. The good news is that the rate drops the lower the price, and if you buy somewhere for less than £125,000, there's no stamp duty. From £125,000 to £250,000 it's charged at 1 per cent. However, first-time buyers currently have to pay no stamp duty on properties below £250,000, a move designed to encourage first-time buyers They have until March 2012 to take advantage.

Even if you're not a first-time buyer, it's still a good time to purchase a home, according to the mortgage broker David Hollingworth of advisers London & Country. "The balance of power in the housing market has largely swung in favour of the buyer since the fast-paced market of 2007, when the seller often had the upper hand," he says. "However, during that time, the mortgage market has moved from offering a plentiful supply of cheap money to one of much more restricted availability. Size of deposit has become vital in deciding what deals are available and so it's crucial to know how much cash you can put down after covering all the other costs."

There are 90 per cent deals out there, but you'll find you'll get offered a much cheaper mortgage if you can find a larger deposit. The best deals tend to be offered to those who can raise a 40 per cent deposit. Even then, people should still take account of all the costs before signing up for what seems like a good deal, Hollingworth says. "There are many costs associated with the purchase of property – for example, survey, legal costs and, of course, stamp duty, but the mortgage will bring other costs as well. There are still good deals to be had, but it remains important not to be drawn in by the headline rate, and to factor in any associated fees," he says.

While arrangement fees on the best mortgage deals are around £1,000, it's worth being aware that some lenders may charge twice that on certain mortgages. However, most lenders offer different versions of a deal that carry a smaller or even a no-arrangement fee, Hollingworth says. "The trade-off is a slightly higher interest rate and so the key is to work out what gives the best overall value for your individual circumstances. Those with larger mortgages may find a bigger fee worth paying to snap up a low rate, whereas borrowers with more modest requirements will be better off keeping set-up costs to a minimum. Some deals may even offer help with the cost of valuation and provide a cash-back on completion that can help offset legal fees," he says.

Despite all the complicated charges and hidden fees to take into consideration, Montlake believes it's still a pretty positive time for most home movers. "The good news is that, at present, mortgage rates are competitive, and there are deals to be done on the properties themselves which, when all is said and done, means that now is a good time to buy."

Travel
travel
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
News
Jamie and Emily Pharro discovering their friend's prank
video
Arts and Entertainment
Taylor Swift crawls through the legs of twerking dancers in her 'Shake It Off' music video
musicEarl Sweatshirt thinks so
PROMOTED VIDEO
News
Our resilience to stress is to a large extent determined by our genes
science
Travel
travel
Sport
sportBesiktas 0 Arsenal 0: Champions League qualifying first-leg match ends in stalemate in Istanbul
News
Pornography is more accessible - and harder to avoid - than ever
news... but they still admit watching it
Arts and Entertainment
The eyes have it: Kate Bush
musicKate Bush asks fans not to take photos at London gigs
News
i100
Sport
Manchester United are believed to have made a £15m bid for Marcos Rojo
sportWinger Nani returns to Lisbon for a season-long loan as part of deal
News
news
News
i100
Arts and Entertainment
O'Toole as Cornelius Gallus in ‘Katherine of Alexandria’
filmSadly though, the Lawrence of Arabia star is not around to lend his own critique
Life and Style
fashion
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Quantitative Developer

    £700 per day: Harrington Starr: Quantitative Developer C++, Python, STL, R, PD...

    Web developer (C#, MVC4, HTML5, CSS3, Javascript, Jquery)

    £30000 - £44000 per annum + Bonus+Benefits+Package: Harrington Starr: Web deve...

    Senior Automation QA Engineer (Java, Selenium WebDriver, Agile)

    £40000 - £65000 per annum + benefits+bonus+package: Harrington Starr: Senior A...

    Web developer (C#.NET, ASP.NET, MVC3/4, HTML5, CSS3, JAVASCRIPT

    £35000 - £45000 per annum + benefits+bonus+package: Harrington Starr: Web deve...

    Day In a Page

    Ferguson: In the heartlands of America, a descent into madness

    A descent into madness in America's heartlands

    David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
    BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

    BBC faces corruption allegation over its Sir Cliff police raid coverage

    Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
    Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

    Lauded therapist still in limbo as battle to stay in Britain drags on

    Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
    Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

    Lewis Fry Richardson's weather forecasts changed the world...

    But could his predictions of war do the same?
    Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

    'I want to have contact with the audience, not iPhones'

    Kate Bush asks fans not to take photos at her London gigs
    Under-35s have rated gardening in their top five favourite leisure activities, but why?

    Young at hort

    Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
    Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

    Beyond a joke

    Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
    The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

    The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

    Sadly though, the Lawrence of Arabia star is not around to lend his own critique
    Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

    A wild night out

    Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
    Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

    Comic Sans for Cancer exhibition

    It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
    Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

    Besiktas vs Arsenal

    Five things we learnt from the Champions League first-leg tie
    Rory McIlroy a smash hit on the US talk show circuit

    Rory McIlroy a smash hit on the US talk show circuit

    As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
    Boy racer Max Verstappen stays relaxed over step up to Formula One

    Boy racer Max Verstappen stays relaxed over step up to F1

    The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
    Fear brings the enemies of Isis together at last

    Fear brings the enemies of Isis together at last

    But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
    Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

    Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

    Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment