Arrangement Fees

The size of an arrangement fee can vary from a couple of hundred pounds up to one percent of the mortgage value, which can be a sizable sum. Nowadays, if you require a fixed rate or discounted mortgage you will probably have to pay an arrangement fee.

Arrangement Fees – Options

Before you decide upon a mortgage uk offer, you should look very carefully at any conditions associated with the arrangement fee. Some lenders expect you to pay the arrangement fee when you submit your mortgage application (and may be reluctant to refund it if you decide not to proceed with their mortgage offer). Other lenders add the arrangement fee to the loan, which means that you will be paying more interest.

If you are using a Mortgage broker to obtain a mortgage, it is likely that the broker will also charge a fee, so be sure to ascertain how much of the arrangement fees go to the broker and how much to the mortgage lender. Bear in mind that you may end up paying two separate lots of fees, one to broker and one to the mortgage provider. You may be able to reduce the broker’s fee by obtaining life insurance cover via the broker, with the broker’s commission on the life insurance policy offsetting some or all of the cost of the broker’s fee.

Arrangement Fees and Interest Rates

In today’s competitive mortgage market some financial institutions are using a combination of higher arrangement fees and lower interest rates to manipulate mortgage comparison web sites’ best buy tables. Some mortgage providers are offering loans at rates below the Bank of England Base Rate in order to improve their ranking in the comparison tables. They then attempt to balance the effects of this low rate by charging a high arrangement fee.

Borrowers requiring large mortgages (over £200,000) may be able to use this strategy to their advantage, but other borrowers would usually be better taking a mortgage with a lower arrangement fee and a slightly higher rate of interest. Whatever they decide, borrowers need to do their mortgage calculations carefully in order to obtain the best deal for their own personal circumstances.

What is the Land Registry

The Land Registry is a British government agency that administers the Land Register, which records all land registrations in England and Wales. Whenever land is sold, transferred or mortgaged, the details must be registered, compulsorily, with the Land Registry.

The Land Register

Each entry (known as the register of title) in the Land Register comprises several elements:

• description of the property;
• name of the property owner;
• name of the mortgage lender (if the property is mortgaged);
• price of the property (if registered since April 1st, 2000);
• plan showing the location and dimensions of the property;
• information about rights of way, covenants and known conditions affecting the property.

Land Registry Funding

The Land Registry is funded by the fees it charges to register changes in property ownership and also by fees for enquiries about individual properties. The level of fees charged for registering a change of ownership depends on the price of the property.

Land Registry Registration Fees

The current fees levied by the Land Registry for registering the purchase of a property are as follows:

• Price up to £50,000 Fee = £40.00;
• £50,001 to £80,000 Fee = £60.00;
• £80,001 to £100,000 Fee = £100.00;
• £100,001 to £200,000 Fee = £150.00;
• £200,001 to £500,000 Fee = £220.00;
• £500,001 to £1,000,000 Fee = £420.00;
• Price over £1,000,000 Fee = £700.00.

The current fees levied by the Land Registry for registering the re-mortgage or transfer of a property are as follows:

• Price up to £100,000 Fee = £40.00;
• £100,001 to £200,000 Fee = £50.00;
• £200,001 to £500,000 Fee = £70.00;
• £500,001 to £1,000,000 Fee = £100.00;
• Price over £1,000,000 Fee = £200.00.

The registration fee is normally paid by the purchaser’s (or borrower’s) solicitor, on their behalf.

Legal Fees

When purchasing or re-mortgaging a property you cannot avoid legal fees - but you may be able to reduce them under certain circumstances. Legal fees will normally be higher for a property purchase than for a re-mortgage.

Legal Fees – Property Purchase

Your solicitor or licensed conveyancer will charge you for administrative work carried out and will also arrange for payments to third parties, in order to facilitate the purchase of the property. Some or all of the following could be included:

• local authority search fees;
• environmental and drainage search fees;
• Land Registry fee;
• telegraphic transfer fee;
• solicitor's administration costs;
• stamp duty (currently for properties over £120,000).

Legal Fees – Re-mortgaging

From a legal standpoint, re-mortgaging should be a much simpler process than purchasing a property. Your solicitor’s costs should be considerably lower, as less administration is required than for a property purchase. However, the following items need to be covered:

• local authority search fees;
• Land Registry fee;
• solicitor's administration costs.

How to Reduce Legal Costs

Much of the legal work that has to be undertaken during a property purchase is at the behest of the mortgage lender, in order to safeguard their interests. Therefore, it makes sense for the same solicitor to act for both the purchaser and the mortgage provider. Otherwise the purchaser will have to pay for the same work to be carried out by both their own solicitor and the mortgage lender’s solicitor, leading to a duplication of effort and unnecessary additional costs for the purchaser. Under normal circumstances, having the same solicitor acting for the purchaser and for the financial institution should not be difficult to arrange.

When re-mortgaging, the same principle holds true. However, because the re-mortgage market is very competitive, lenders will often include the cost of legal fees as a part of the package offered to encourage borrowers to choose their re-mortgage proposal.