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Costs of buying and moving home

A significant consideration when calculating how much you can afford to spend on your new home is the costs of the move itself; the mortgage is only one aspect of the financial picture, and other expenses may have to be paid upfront before you move.

The deposit

This is the largest chunk of money you will have to find (5-10% of the value of the property). If you're a current homeowner, you may have enough equity to cover the deposit. The more deposit you can pay the better mortgage deal and lower interest rate you're likely to get. Occasionally, 100% mortgages are offered but expect to pay a higher interest rate to compensate for the higher risk you are to the lender. Most lenders offer up to 95% of the property value.

Use this table to give you an approximate idea of the costs of buying and moving home. Select the relevant figures for legal, mortgage and removals costs and then add together for the total cost. If you are using an estate agent to sell your property, take the value of your property and multiply it by 1.8 per cent to gain an idea of the fee you are likely to have to pay to an estate agent.

Mortgage

You'll need to factor in the extra costs associated with setting up a mortgage which may include any of the following:

• Valuation fee. The lender will arrange for a survey to value the property for mortgage purposes. This can be anything from £175 to £420, depending on the value of the property.
• Arrangement fee. The mortgage arrangement fee pays for the lender's time and administration costs for the credit check, review of application and personal details. This type of fee is also sometimes used to reserve mortgage funds for a customer, especially for special deals such as fixed-rate and discounted mortgages. You may have to pay a one-off fee or a percentage of the mortgage which can be added to your mortgage, however, this incurs extra interest for the life of the mortgage. It's also worth noting that all or part of it may be non-refundable if the mortgage is declined or withdrawn.
• Redemption penalty. When moving house, you will be paying off your existing mortgage and taking out a new one. Repaying some or all of your existing mortgage may incur early repayment charges (also known as redemption penalties) so check your mortgage small print. This can be as much as several months' worth of mortgage payments as a penalty for redeeming earlier than your mortgage agreement. However, if your mortgage is what's called 'portable', you can transfer this loan to the new property.
• Higher lending charge. This may be applied if you've paid a deposit of less than 10% or where the mortgage exceeds a certain percentage of the property value. The lender charges the fee in order to purchase an insurance policy that's designed to protect the mortgage in case you default on mortgage payments, as the house may end up being repossessed by the lender and sold at a loss. The fee may have to be paid at the start of the loan.
• Banking services. The nature of house purchases involves the bank/building society's movement of money (a deposit and mortgage) that will incur a fee somewhere between £20 and £50. Arranging simultaneous transfers may be one way to avoid multiple charges.
• Advisors' fees. If you decide to use an intermediary such as a mortgage broker or an independent financial advisor, you may have to pay a fee for their services. Sometimes this is covered by the lender who pays the advisor commission for introducing your custom. However, it's best to check as fees can be up to 1.5% or £75 per hour. There may be some satisfaction in knowing you've probably got yourself a favourable deal that you wouldn't have been able to get yourself.
• Complementary financial products. It's worth considering financial protection in case of illness, death or a change in income. Life insurance means that if you die, a lump sum, normally the amount of the mortgage, becomes available to pay off the loan. Critical illness cover (CIC) will cover the policy amount if you suffer one of the covered severe illnesses such as a heart attack or stroke. You can also take out Income Protection or Accident, Sickness and Unemployment cover that removes the worry if you become ill, have an accident or get made redundant. Both provide a regular income that will cover your mortgage while you're not working. Check the small print for full terms and conditions detailing restrictions and limitations.
  Premiums for these products vary depending on the amount insured and the person being insured – in respect of their age, health etc.

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