Valuation costs
Mortgage valuation
The lender will need to establish that the property offers adequate security for mortgage purposes for the loan you require. To do this they will need to assess its value, condition, and likely marketability in the future, and will therefore instruct a valuer to carry out a mortgage valuation on their behalf.
The fee for this is payable by you, and is based on a sliding scale of charges relating to the purchase price or anticipated value. This is payable at the time that you apply for the mortgage.
As this is a report for mortgage valuation purposes only, you should not rely on it to tell you what you need to know about the condition of the property. For more detailed information about its condition you should consider either a Home Buyers Report, or an independent structural survey.
Home Buyers Report
A Home Buyers Report is a more informative and detailed report. It includes information about the condition of a property that is visibly evident, together with any essential repairs, and highlights any urgent and important matters before you commit to buying it. As well as being more helpful to you, as it includes a mortgage valuation, it can also be used by the lender for mortgage purposes.
The report is arranged through the lender, and the fee is payable with your mortgage application. The cost is based on a sliding scale of charges relating to the property's purchase price or anticipated value. Although it costs substantially more than a basic mortgage valuation, it is more informative and, as it includes a mortgage valuation, you do not have to pay for this separately.
Full structural survey
A structural survey is a more technical report commissioned by you for your own information and should detail all the obvious defects in a property and repairs required, as well as advising about likely repairs in the future. It contains a market valuation but not a mortgage valuation. As it is for your own purposes the lender will not be able to use it for mortgage purposes, and will instruct a mortgage valuation by their own valuer. You will have to pay for the cost of this, at the time of making your mortgage application, as well as for your structural survey.
Miscellaneous lenders fees
You will also need to pay an administration fee and/or arrangement fee and/or booking fee, depending on the lender and the particular product selected. These fees may be payable at the time that you apply, but can sometimes be added to the loan. If you choose to add a fee to the loan it will become part of the mortgage balance and you will pay interest on it over the mortgage term.
Higher Lending Charge
A Higher Lending Charge, (previously known as Mortgage Indemnity Guarantee premium), is a one off charge payable when the loan you apply for exceeds a certain percentage of the purchase price or value, whichever is less. In these circumstances, the lender may take out an indemnity from an insurance company to protect them from the risks of lending a high percentage of the property's value. If your property has to be repossessed by the lender in the future and is sold for less than the amount you owe, the policy allows them to recover the shortfall from the insurer. The Higher Lending Charge or MIG premium covers the cost of this policy.
Some lenders will pay the premium themselves and not pass on the cost, but the majority will pass the cost on to the borrower on loans over 90% of value. Where they do charge, the cost can usually be added to the loan. However, there is a wide variation, with some lenders not charging it at all, while others may charge it on loans as low as 70% of value.
Solicitor's charges
As well as the conveyancing costs if you are buying a property, you are responsible for all legal costs associated with setting up a mortgage or a remortgage. It makes sense to check that your solicitor is approved by your lender so they can act for them at the same time, thereby reducing costs and saving you money.
Some solicitors will quote a fee in advance, whilst others will charge a standard fee, although they will have to charge more if the case is particularly complex. They will also add to their bill any other expenses such as stamp duty, land registry charge, and Local Authority search fees.
Solicitors' services are not regulated by the Financial Services Authority
