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This site includes a sections on mortgages that break down the different options that you have when you look for a mortgage. Recommended mortgage providers for the UK: For a comparison of mortgage broker quote providers,
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This information applies to England, Wales and Northern Ireland
If an estate agent is selling a property for you, there is a contractual agreement between the estate agent and you. If you have a problem with an estate agent it is usually necessary to check a copy of any written agreement between you and the estate agent and establish what verbal agreements, if any, were made.
As the seller, you pay the estate agent for their services and the estate agent is therefore acting on your behalf. It is your interest they will represent and the buyer should bear this in mind if they are interested in a house being sold through an estate agent.
You may think that the bill from the estate agent, after the sale is completed, is too high. It is important to check that the bill gives a clear breakdown of the costs, for example, the commission fee, advertising, VAT. The bill should then be compared to the original agreement between you and the estate agent.
If as the seller you cannot agree the amount of the estate
agents’ bill you should consult an experienced adviser, for example, at
a Citizens Advice Bureau. To search for details of your nearest CAB, including
those that can give advice by email, click on nearest
Citizens Advice Bureau .
If you decide not to continue with the sale of your home, you may have to pay some estate agents’ charges, for example, to cover any costs the estate agent has already incurred. This will depend on the original contract between the seller and the estate agent.
If you dispute the amount the estate agent is charging, you
should consult an experienced adviser, for example, at a Citizens Advice Bureau.
To search for details of your nearest CAB, including those that can give advice
by email, click on nearest
Citizens Advice Bureau .
If you have been using one estate agent this is known as ‘sole agency’. When you agree a sole agency with an estate agent the contract will usually state how long this period of sole agency will last. At the end of this period you are free to use one or more additional estate agents.
If you use one or more additional estate agents before the period of sole agency has come to an end, you are breaking the contract with the original estate agent. This means that if the new estate agent finds a buyer for the house you would have to pay commission not only to the new estate agent but also to the agent with whom you had the sole agency agreement. If the original agent found a buyer, the amount of commission that the seller would have to pay to the new estate agent would depend on the type of agreement you had with them.
However, you may be able to negotiate changing the sole agency agreement to a joint sole agency agreement with the original estate agency.
For information about different types of agency agreements, see If the seller wishes to use an estate agent .
You may want to change your estate agent. You should check the terms of the agreement you have with the estate agent to see if this is possible. If it is possible you may still have to pay some charges to the estate agent to cover costs, such as advertising, that the estate agent has incurred.
If you dispute the amount the estate agent is charging, you
should consult an experienced adviser, for example, at a Citizens Advice Bureau.
To search for details of your nearest CAB, including those that can give advice
by email, click on nearest
Citizens Advice Bureau .
You may have found your own buyer for the property who has not come through the estate agent, for example, a friend may want to buy the property. You are entitled to sell to a buyer who has not been found by the estate agent but you may find that you will still have to pay the estate agent. What you have to pay will depend on the contract.
You may not be satisfied with the service the estate agent is providing, for example:-
You may wish to consider complaining to the estate agent in writing or changing to a different estate agent.
If you are not satisfied with the estate agent’s response
to your complaint, you should consult an experienced adviser, for example, at
a Citizens Advice Bureau. To search for details of your nearest CAB, including
those that can give advice by email, click on nearest
Citizens Advice Bureau .
The buyer or seller may think they have lost money because:-
If you think that you have lost money because of the estate
agent, you should consult an experienced adviser, for example, at a Citizens
Advice Bureau. To search for details of your nearest CAB, including those that
can give advice by email, click on nearest
Citizens Advice Bureau .
If you are selling your property a potential buyer will usually want a valuer and/or surveyor to inspect the property. You will have to allow the valuer/surveyor to look round the property if you want the sale to go ahead.
The circumstances in which a surveyor or valuer can be held legally responsible for any financial loss suffered by the buyer as a result of the survey or valuation are limited and you should consult an experienced adviser if you think that the surveyor or valuer is responsible. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB .
As the buyer, you may be having difficulty in getting a mortgage, for example, your salary is not enough or the property is unusual. Different lenders have different rules about giving mortgages and it may be worth you trying some other lenders.
The lender may decide that the security value of the house is less than the amount that you have agreed to pay for it. This means that the lender will not lend as much money as you had requested. You may therefore try to negotiate a lower price with the seller. If the seller will not drop the price and you still want to go ahead with the purchase, you may have to borrow the difference from elsewhere if you do not have the extra money available.
If the seller will not lower the price or you cannot pay the difference, you may consider if another lender would give the house a higher valuation.
There may be a delay in the lender making a formal mortgage offer to you. Until the mortgage offer is made, contracts cannot be exchanged. You should contact the lender to find out if there is any reason for the delay, for example, the lender is waiting for salary details from your employer. It may be possible for you to do something about the problem, for example, contacting your employer yourself.
The buyer may withdraw the offer they have made before contracts are exchanged. Until contracts are exchanged, the buyer is under no legal obligation to buy the home and does not have to pay for any of the costs that you as the seller may have incurred. However, you may wish to ask the buyer to contribute towards these costs.
The buyer may decide to reduce the offer they have made for the house. If they do this before contracts are exchanged it is up to you as the seller to decide whether or not you want to accept this lower offer. However, once contracts have been exchanged the buyer is legally committed to paying the price stated in the contract. If they try to drop the price at this stage, you do not have to accept this lower price. If the sale then is not completed the buyer will forfeit the 10% deposit they paid when contracts were exchanged and you could also sue the buyer for any additional loss.
The seller may accept an offer for their house and then inform you as the buyer that they have been offered a higher price by someone else. This is known as ‘gazumping’. You may decide to offer a higher price in order to try and secure the house but there is no guarantee that you will not be gazumped again. There is nothing illegal about gazumping and the purchase price of a house is only legally settled when contracts are exchanged. You may however have entered into an agreement with the seller that the seller will not consider other offers during a set period before the exchange of contracts. If such an agreement exists, and you are gazumped during this period, you will be able to sue the seller for breach of contract.
The seller may withdraw their acceptance of the offer anytime before contracts are exchanged, for example, they have found another buyer or have decided not to sell. There is nothing you as the buyer can do about this but you could ask the seller for a contribution towards any costs you have incurred, for example, survey fees.
The seller may accept more than one offer and instruct their solicitor to send draft contracts to more than one potential buyer. The solicitor must inform all potential buyers that more than one contract has been sent out and that the first contract which is returned, signed and ready for exchange, will get the house. This is known as a contract race and is quite legal. There is nothing you as the buyer can do except withdraw if you do not want to incur the necessary costs in getting the contract completed quickly.
A buyer or seller may find that they have problems because they are involved in a chain of buying and selling. This happens when a buyer or seller is selling and/or buying at the same time and the other people involved are also buying and selling. This creates a chain of buyers and sellers which may be very long.
As the buyer or seller you may think that there is an unreasonable delay in the conveyancing. You should find out from your solicitor or licensed conveyancer the reason for any delay.
If you are not satisfied with your solicitor or licensed conveyancer’s response, you may wish to consult an experienced adviser, for example, a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB .
When a buyer pays a deposit on a property this is held by
the seller’s solicitor or licensed conveyancer. Any interest earned on
the deposit during the period is kept by the solicitor or licensed conveyancer
(EW only) and should be passed on to the seller at completion. The seller may
need to ask for the interest as it is not always passed on. If the solicitor
or licensed conveyancer refuses to pass on the interest the seller should take
this up with the Office for the Supervision of Solicitors or the Council of
Licensed Conveyancers in England and Wales (Law Society in Northern Ireland).
If you as the buyer or seller think that the solicitor or
licensed conveyancer’s bill is too high, you should not pay the bill but
should first check that all the various costs are clearly itemised. You should
ask the solicitor or licensed conveyancer to explain anything you do not understand.
If you are still not satisfied with the amount of the bill, you may wish to
consider taking further action against the solicitor or complaining to the Council
of Licensed Conveyancers.
As the buyer you may think that the solicitor or licensed
conveyancer has been negligent, for example, after the sale has been completed,
you may discover there is a problem with the boundary wall or there is a road
widening scheme that will reduce the size of the garden and this might mean
that the value of your house was reduced. In England and Wales, if this happens
and you want compensation, you should seek legal advice about suing the conveyancer.
If you have a complaint regarding poor service or behaviour, you should follow
any internal complaints procedure of the firm concerned. If you are not happy
with the outcome you should complain to the Office for the Supervision of Solicitors
(OSS) if you used a solicitor, or the Council of Licensed Conveyancers if you
used a licensed conveyancer, and you may be able to get compensation. In Northern
Ireland, problems with conveyancing are dealt with by the Law Society of Northern
Ireland.
As the buyer you may be dissatisfied with the state of the property when you move in, for example, it is dirty. There is nothing you can do about this because the seller is under no legal obligation to leave the house in a clean state. However, the seller is under an obligation to empty the house of all their furniture and belongings. If the seller has left some belongings in the house you should ask the seller to remove them. If the seller cannot or will not remove the items you will have to arrange to have them moved. Moving the items may cost you money and you could try to recover this from the seller. However, if the seller refuses to cover the costs you may have to take the seller to court to recover the money and this is unlikely to be worthwhile.
As the seller you may find that the value of your house has dropped since you bought it. This may mean that if you sell it at its current value you will still owe money to your lender. This is called ‘negative equity’.
There are a number of different schemes which have been designed to help someone with negative equity. For example, it may be possible to transfer the existing mortgage to a new property rather than pay it off and take out a new one. Different lenders will offer different schemes and you should discuss the situation with your lender.
The seller must leave all the fixtures, for example, a fireplace, and any fittings that they agreed would either be included in the sale or paid for separately, for example, fitted carpets. If as the buyer you find that something has been removed you should check with your solicitor or licensed conveyancer whether or not the item should have been left. The solicitor or licensed conveyancer may be able to resolve the problem.
If the problem is not resolved, you should consult an experienced
adviser, for example, a Citizens Advice Bureau. To search for details of your
nearest CAB, including those that can give advice by email, click on nearest
Citezens Advice Bureau .
A house may be damaged after contracts have been exchanged but before the sale is completed, for example, a burst pipe or a broken window. It is the seller’s responsibility to inform the buyer of any damage. It is however the buyer’s responsibility to insure the property from the date of exchange of contracts and to have the repairs carried out. The buyer will then have to make a claim on their insurance policy.
The buyer or seller may think they have been discriminated
against on the basis of their race, sex or disability in the process of buying
or selling a property.
Arrangement Fee - This is a fee charged by lenders to cover the cost of the administration involved in setting up the mortgage. Some lenders will waive this fee, in particular because they will make profits through the mortgage anyway. This fee is usually between £100 and £500.
Booking Fee - This is sometimes applied when you apply for a fixed rate mortgage, and is charged because in order for you to be offered that amount of money at that fixed interest rate, the lender needs to borrow a chunk of money from the money market, on whose rates fixed rates are set around. The lender has to "book" this chunk of money, and the cost for doing that is passed onto the borrower. This fee is usually between £100 and £500.
Lender's Valuation Fee -In order to check that the price of the property is fair and worth the price paid for it, a lender will commission a surveyor to carry out a valuation. The price of this depends on the property's value. So if the property is worth £50,000 you'll need about £125, but for a house worth £150,000 you'll need about £250. Look out for lenders who do not waive this fee, as an incentive for you to go with them.
Survey -This is for your benefit, and you are strongly advised to commission one to see if they can spot any defects that you'll have to pay to fix when you move in. A homebuyer's report will cost between £250 and £500 and a full structural survey will cost up to £1000 plus VAT. Again it depends on the property's value.
Legal/Conveyancing Fees - Although you could do this work yourself with a DIY
conveyancing kit, it is strongly recommended that you hire an expert solicitor
or licensed conveyancer to carry out the legal aspects of the purchase. You
should shop around as there is no standard fee for this. Some solicitors charge
a percentage of the property's value and some charge a flat fee. They will give
you an estimate depending on the amount of work needed, which depends on the
complication of the transaction.
You will also need to pay for the lender's solicitor to do their work. Sometimes
you can use that solicitor yourself and cut down the cost. But get an estimate
and compare with other firms.
Stamp Duty - A government tax that is charged for properties bought for above £60,000. You will pay 1% of the property's value if your home is worth between £60,000 and £250,000. You will pay 3% of the property's value should it be worth between £250,000 and £500,000, and 4% for anything above £500,000. So a £300,000 will cost you £9000 in stamp duty. Literally, you are paying for a local authority to put a stamp on your title deeds. The tax originated when William of Orange asked his courtiers to come up with a way of getting him more money through taxes. We kid you not!
Land Registry Fee - This is a government department looking after a registry of all the registered properties in England and Wales. They will charge a fee for transferring the registration for the property to the new owner. The fee will depend on the price of the property. Up to £40000 = £40. £40,001 - £70,001 = £60. £70,011 - £100,000 = £100. £100,001 - £200,000 = £200. £200,001 - £500,000 = £300. £500,001 - £1,000,000 = £500 and for £1,000,001 and above = £800.
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Local Authority Search Fees - This is the fee charged by the local authority when your conveyancer carries out a local search to check that there are no potential problems such as a new road being built nearby or planning permission granted on a neighbouring property. You should allow £60 for this and more should the property be in a London borough.
Other Search fees and Disbursements - Other search fees include the coal authority, the land charge, index map, commons and company searches along with the bank transfer fee when your mortgage finds are moved. You should allow about £70 to cover this on an average house purchase.
Estate Agent's Commission - Should you be selling as well as buying a home, your estate agent will charge you a percentage of the property. This is likely to be about 1.5 - 2% of the property's value. Should you be selling it privately, then you should set aside funds for advertisements.
House-Hunting Expenses - The act of hunting for a house can be costly. You should allow money for the travelling you'll have to do, along with hotels and eating out should you be buying in a different area. You should add telephone calls as well as the fact that you may have to take time off.
Removal Fees - You should get quotes from 3 separate removal firms, because prices can vary enormously. You will also need to give tips. Removal companies will not only move your stuff, some will pack it all up and unpack it in your new property. Should you decide to do the removals yourself, you will need to pay for van hire, and petrol, plus return travel from the van hire company when you get and return the car. You will need to put aside £25 extra for insurance.
Mortgage Indemnity Guarantee (MIG) fee - An insurance premium that lenders sometimes charge when the Loan to Value of your mortgage is over 75% of the property. Some lenders will not charge an MIG at all, whilst some will do it only for LTVs of more than 80% or 90%. This is charged to cover the lender should you default on your mortgage repayments leaving your lender unable to recover the money it is owed. The insurance covers the lender, not the borrower.
Different lenders charge differing amount, but on average the costs will be thus:
Should your loan be between 75% and 90% of the property's value, you are likely
to pay about 4% of the amount between what you have borrowed and the property's
value.
Should your loan be between 90% and 95% of the property's value, you are likely
to pay about 6% of the amount between what you have borrowed and the property's
value.
Should your loan be between 95% and 100% of the property's value, you are likely
to pay about 8% of the amount between what you have borrowed and the property's
value.
Other Costs
- Premiums for Buildings insurance
- Premiums for contents insurance
- Removal insurance
- Disconnection and re-connection of utilities
- Installation of new equipment
- Laying of carpet
- Animal Kennelling
- Redirection of mail
- Notices for change of address.
The repayment mortgage means that each month you make a payment to your lender consisting of both the interest on your loan and a repayment of part of the capital. Thus, your monthly repayments will be higher with an interest-only loan. You are reducing your debt every month, which should give you peace of mind. You will need to arrange life assurance, so that should you die before the end of the term your mortgage will be paid off.
An interest-only mortgage is more complicated. You need to make monthly payments of interest to your lender, on premiums for life insurance, and into an investment vehicle that should result in your outstanding capital being paid off at the end of the term. Now, when you add all these payments up, you will find that interest only payments are slightly cheaper than a repayment mortgage, but you get more risks for this. You get no guarantees that your investment plan will pay off your outstanding mortgage debt.
There are three main types of investment vehicles to be used to pay off the mortgage capital. The endowment mortgage is where you invest with an insurance company in an endowment policy. This could be a "with profits fund" or a "unit-linked" policy. These policies will grow, hopefully enough to pay off your mortgage leaving you with a lump sum. You could also be left with a shortfall though.
A pension mortgage is where you use the 25% lump sum from your pension fund to pay off the mortgage. You can't get hold of this money until you are 50, and you are not guaranteed that it will be enough, but it is very tax efficient, as you get your highest level of tax relief on your contributions.
Finally, an ISA mortgage is where you pay into an Individual Savings Account (ISA) and hope the fund grows enough to pay off the mortgage. Again, you could have a surplus, but again there are no guarantees. Also, the tax free nature of ISA's is not guaranteed and ISA's may not even exist in a few years time.
The variable rate mortgage alows the interest rate can go either up or down. This means that the interest rate could stay the same for many months, or may change on numerous occasions over the course of a few months. In general, the standard variable rate (SVR) charged by the mortgage lender will mirror the Bank of England Base rate, so you should monitor that rate to suggest what your mortgage rate may be.
You should be wary of a lender with an unusually high SVR. This is especially so, in view of the incentives offered by borrowers to encourage them to take on a variable rate mortgage.
- They could offer a discount for a few months up to a period of a few years. At the end of the period you will revert to the SVR, which can be a shock.- They may offer cashback, a sum of money towards the fees or charges you have to pay out to get a mortgage. It is likely you'll pay for this with a higher SVR.
- You may be offered specific subsidies for fees or charges.
A Base Rate tracker mortgage is a newer variable rate mortgage, where interest charged is linked entirely to the Bank of England Base Rate, set each month on the first Thursday by the Bank of England's Monetary Policy committee. The rate will usually be at a set level above the base rate (e.g. 1%) for the life of the mortgage.
With a fixed rate mortgage, you are guaranteed to pay a certain level of monthly payments for an agreed period. You can thus budget with a certain amount of confidence as you are protected against rising base rates. The period in which your rate is fixed could be up to 25 years, and as low as 6 months, after which you revert to the standard variable rate for the mortgage.
A capped mortgage is a combination of fixed and variable mortgage. There is
a maximum rate over which you will not be charged for a certain period. If the
SVR falls below the cap, your payable rate follows it down
You should always ask about redemption penalties should you take on a discounted, fixed or capped mortgage. Redemption penalties charge you for paying off or moving mortgages, and whilst it could be during the deal, it may be after the deal has ended.
The basic choice of where to get your mortgage from is between the building societies, the banks, the insurance companies, specialist lenders or intermediaries.
Should you be looking for a traditional mortgage lender with many years of experience in the mortgage markets, then you should try a building society. This doesn't necessarily need to be a large society, you may find that your local society, whilst much smaller, has some good deals and low rates. However, these local societies also tend to only lend on properties in their local area.
Building societies are owned by their members, who put money in with their savings, and borrow money through loans and mortgages. This means that profits go to the members in the form of good deals, rather than to shareholders. This is what is known as mutuality.
High street banks are owned by shareholders, and are beholden to them, rather to their customers. But they are taking more of a share in the mortgage market and have a major advantage in terms of the number of branches that they have around the country. This means that customer convenience is maybe better. Some large building societies have recently converted to banks, so you can still have access to their mortgage expertise.Then there are specialist lenders, who cater for specific parts of the market, such as the self-employed or maybe for people with bad credit. They do not have a high-street presence and operate usually from a single office, thus reducing costs, enabling them to provide mortgages for people for whom there may be little other option. You used to only be able to access the products from specialist lenders through intermediaries or broker, but now you can get a mortgage via the internet or over the phone.
Then, should you want to try and save time and money, you can go to a mortgage intermediary. This could be a mortgage advisor or a financial advisor. They will provide you with an overview of the market, enabling you to compare lenders and mortgages in order to find the best on for you. Intermediaries may be tied to one lender, or multi-tied to a few, or could be independent, in which case you have the whole of the mortgage market open to you. Brokers get paid in commission from the lenders, but they may also charge you up to 1% of the borrowed amount.
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