Costs of getting a mortgage

Before you take out a mortgage you need to make sure you can afford to meet your monthly repayments, as well as all the other costs you'll need to cover. Here's a handy list of what you'll need to plan for:

The deposit

A deposit is the percentage of the property's value that you pay upfront when you buy. Unless you can pay for the property outright, the rest of the cost of the property is usually covered with a mortgage loan. The size of deposit you require will depend on a number of things including your mortgage provider's lending criteria, your income, and your credit history.

The bigger the deposit you're able to put down, the better the interest rates you're likely to have access to. Most lenders will require a deposit of at least 5-25%. If you can only afford a smaller deposit, you could be at risk of falling into negative equity if the value of your property drops. Negative equity is when the mortgage loan is bigger than the value of the property.

There may be some options available to help you get a mortgage with a smaller deposit, such as using a guarantor, or government schemes like Help to Buy.

Find a mortgage that suits you with our mortgage calculator.

Other costs

A deposit is not the only upfront cost involved in buying a house, there may also be various fees and charges associated with your mortgage:

  • Booking fees (could be up to £250), arrangement fees (could be up to £2,000) and a valuation fee (usually £150 or more) may be charged when you take out a mortgage. If you can afford it, it may be most cost effective to pay these charges upfront rather than adding them to your mortgage loan. If you do add them to your mortgage loan they will accrue interest, costing more over time.
  • Electronic transfer fee (£40 - £50) – may be charged to cover the cost of transferring mortgage money from the lender to the solicitor.
  • If you want to make overpayments, or you miss a payment, there may be further charges. Check with your lender before you proceed.

Other upfront costs

  • Stamp duty (if your property is worth more than £125,000) – try our stamp duty calculator to see how much stamp duty you'll pay, and visit our guide for more details on how it works.
  • Surveyor's fees (from around £250 for a basic survey to £600+ for a full structural survey)
  • Legal fees – this may include the cost of local searches (typically £250-£300) as well as your solicitor's fees (usually £500 to £1,000). Be aware that VAT may be charged on top.
  • Removal costs (typically £300 - £600 if using a removals company). Removal companies tend to charge more at weekends and at the end of the month.

After you've moved in

These are some of the regular costs of running your home, which you will have to deal with when you stop renting:

  • Repairs and maintenance – from everyday wear and tear to anything highlighted by your survey, you should regularly budget the cost of repairs and have a contingency fund.
  • Insurance – your lender may require you to take out buildings insurance to cover things like a fire or flooding. You may also want to take out contents insurance for your possessions and life insurance to cover your mortgage repayments should you die before the end of the term.
  • Council tax – based on where you live and the valuation band your property falls into.
  • Utilities and running costs – this includes gas, electricity, water, and the cost of a phone line, internet and TV packages.
  • Leasehold properties – if you're buying a leasehold property (such as a flat) you will need to pay service charges and ground rent, which is usually around £50-£100 per year. You may also have to contribute to repairs and maintenance work carried out in communal areas.

Crucially, you'll also need to meet the cost of your monthly repayments, or your property could be repossessed.

Regular repayments

Mortgage providers may look at things like your spending habits, your savings and attitude to money before agreeing to lend to you. You should also make sure that you think you'll be able to meet your repayments too. If you don't keep up with mortgage repayments you could lose your home.

If you want to work out how much a mortgage is likely to cost you each month, try our repayments calculator.

Getting the right deal is essential to make sure your monthly repayments are as low as possible.

Last updated: 19 May 2015