Other fees and considerations
What is the higher lending charge?
A higher lending charge (HLC) is a charge made by mortgage lenders when the loan-to-value (LTV) ratio of a mortgage is higher than they’re prepared to accept at standard rates. Typically, HLCs are applied to loans in excess of 90% of the property value.
The fee may be used by the lender to purchase an insurance policy designed to protect themselves against loss in the event of you defaulting and ceasing to repay your mortgage. Some lenders may insist upon the fee at the start of the loan - others may not.
HLC fees are typically charged at up to 8% of the amount of the loan being advanced over the threshold. So, for example a 100% loan of £200,000 with an HLC threshold of 75% might have an HLC premium of £4,000 (£50,000 x 8%). Such premiums may be paid as a one off or added to the mortgage advance.
What taxes are payable when buying a home?
Tax is payable when you purchase a property above a certain value. Different rates apply in different parts of the UK.
As of 17th October 2018
If you’re buying your home in England, Stamp Duty Land Tax and is payable for house purchases above £125,000, though first time buyers are exempt on the first £300,000 of a property worth up to £500,000. The percentage you will have to pay increases, depending on which brackets the value of your property falls into:
- £0 to £125,000: 0%
- £125,001 to £250,000: 2%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Over £1.5 million: 12%
For example, to buy a property worth £400,000 an existing home owner would need to pay £10,000. This would consist of:
- 0% tax on the property value up to £125,000 = £0
- 2% tax on the property value between £125,001 and £250,000 = £2,500
- 5% tax on the property value between £250,001 and £400,000 = £7,500
To buy a property worth £400,000 a first time buyer would need to pay £5,000. This would consist of:
- 0% tax on the property value up to £300,000 = £0
- 5% tax on the property value between £300,001 and £400,000 = £5,000
What are disbursement fees when buying a house?
Disbursements don’t form part of your solicitor’s own costs or charges - they’re all the fees and taxes your solicitor will have to pay out to other organisations as part of the house-buying process. In most cases, the organisation concerned will only accept payment through a solicitor.
Some of these fees can be determined when you ask for a quote, as they are either a fixed amount or are calculated by reference to the purchase price. Other fees may depend upon other factors – councils each set their own fees for local searches and some searches only need to be made if the property is in a particular area or if the buyer wants one made.
When your solicitor collects payment for these disbursements, they’re not making any additional charge to the buyer for making the search or payment and neither to they receive any commission or discount when making payments.
These tend to include:
- Bankruptcy search - £2 to £4 per person taking out the mortgage
- Land Registry office copies - £4 to £8
- Electronic ID verification - £2 to £18 per person taking out the mortgage
- Local authority searches - £100 to £200
- Water and drainage search - £30 to £40
- Environmental search - £30 to £35
- Telegraphic transfer fee - £25 to £45
- Mortgage handling fee - £60 to £80
- HMLR final search - £3 to £7
- Land Registry Charge - £20 to £910