Your conveyancer will take care that all the legal conditions and obligations are met and the new mortgage goes into place without problems. He will also act on behalf of your current lender, making sure your existing mortgage is repaid (if you are not a first time buyer).
During the conveyance, you will be told what is happening, what you have to do next and be given a number of documents to sign and return allowing the next stage to go ahead. It is important to respond to any requests promptly, so that you do not delay the whole process. It is not unusual for a chain of home movers to be all lined up and ready to go, only to discover that one of them is guilty of dealing with a request to act on something and the whole process grinds to a halt. Don’t let it be you. A break in the chain is unpleasant and stressful for all concerned.
He will obtain a purchase contract from the sellers’ solicitors, with details of the property and its ownership.
He will sort out any pre-contract enquires and obtain copies of any existing guarantees, planning consents, etc.
He will obtain the sellers’ fixtures and fittings list to see what they will be leaving in the property, and you will get a copy to check.
When your mortgage offer has arrived, he will arrange for you to sign the contract and hand over your deposit for him to hold in readiness for “exchange”.
When the mortgage conditions have been met and the sellers are ready to proceed, a completion date is agreed that suits everyone in the chain. Contracts can now be exchanged and the transfer deed effected.
Once this has been done your conveyancer can call down the mortgage advance from your lender and send you a final completion statement.
On completion day, your conveyancer pays the required amount to the sellers’ solicitors in exchange for the title deeds. You can now move into your new home.
Your conveyancer will now register your name and mortgage at H.M. Land Registry and send the deeds to your lender for them to hold as security for their mortgage advance.
Arrangement fees became more popular amongst lenders in the 1990s and are now a feature of most mortgage applications. In most cases, the arrangement fee is added to the loan on completion and so is not charged if the mortgage does not proceed. In some cases, the arrangement fee can be requested upfront, and is called a booking fee. This is common with some fixed rate mortgages, where you are paying the lender to secure funds for your application at a certain interest rate. Upfront arrangement fees and booking fees are usually not refundable. Arrangement fees vary in cost, often between £199 and £399. In some circumstances, they can be as much as 1% of the mortgage advance.
Legal fees for the cost of the conveyancing are payable to the solicitor or licensed conveyancer. The fee charged by a solicitor is based on his time and the costs of legal registrations and miscellaneous costs (known as disbursements).
Solicitors’ fees vary from practice to practice, although 1% of the purchase price is not an unusual figure. People selling an existing property have an additional charge to pay for the conveyancing of their existing property to a new buyer.
There are various conveyancing costs, which are usually itemised by the solicitor on completion. These costs include the following:
Once a solicitor has the basic information, he can often give an estimate of costs.
*From end of 2007, all homes in England and Wales with 1 or more bedrooms will need a Home Information Pack (HIP), which includes a sale statement, searches and evidence of title. The average pack is taking around 5 days to compile, with costs in the region of £300 plus VAT.
Before exchange of contracts
Nothing is legally binding on either side and, generally speaking, there is no refund for a wasted survey, search fees and legal costs if the sale falls through.
Between exchange of contracts and completion Both sellers and buyers are legally bound to complete on an agreed completion date.
On completion day
Monies change hands through the conveyancers, deeds are handed over, sellers move out and buyers move in.
Stamp duty is a ‘purchase tax’ charged by the Government. It is charged when documents are legally completed in the UK.
Stamp duty is charged when you buy a property costing more than £125,000. The cost is worked out as a percentage of the purchase price of the property and the rate is charged on a scale.
In marginal situations, it may be possible to reduce payment of stamp tax. For example, if a purchaser buys a house with curtains and carpets for £128,000 and the curtains and carpets have a value greater than £3,000, then, if the purchaser buys the property, separate from the curtains and carpets, the purchase price of the property falls below £125,000 and there is no stamp duty. However, the sale documents would have to show this and the borrower may then only be able to borrow the lower amount.
This is the cost of an insurance taken by the mortgage lender, but charged to the borrower, when the amount borrowed is a high percentage of the value of the property.
When a mortgage lender agrees to lend against the security of property, the lender’s major consideration is to avoid losing money.
In order to reduce this risk, mortgage providers take out insurance to cover loans where a high percentage of the purchase price is to be loaned.
Typically, if someone borrows less than 90% of the purchase price of a property, the provider does not seek further security, other than the property itself, as the likelihood of loss is low. Above this percentage and the provider is likely to insure against loss.
The following examples show how the higher lending charge is calculated; based on different percentage amounts borrowed.
Purchase price £108,000; mortgage of £93,000. £108,000 x 90% = £97,200. Since the mortgage required is less than this amount, insurance is not taken.
Example two Purchase price £108,000; mortgage of £100,000. £108,000 x 90% = £97,200 £100,000 – £97,200 = £2,800 (higher lending charge of 8.5% only applicable on this amount). £2,800 x 8.5% = £238.
The higher lending charge premium is paid by the borrower, though it can often be added to the loan if the lender allows.
Please Note: Not all lenders make the borrower pay the higher lending charge. Many lenders pay the higher lending charge premium themselves.
Since the Building Societies Act 1986, building societies are required to arrange a report and valuation of every property on which a new advance is made. Whilst lenders other than building societies are not legally required to arrange valuations, they all insist on them.
A survey fee is charged for such a valuation. The survey fee is, therefore, another cost that will usually be paid with the mortgage application. The valuation offers some benefits to both the lender and the borrower in giving a professional opinion as to the market value of the property and security for the loan.
A qualified valuer has a duty of care and a contractual liability to provide an accurate valuation.
The lender wants to know of any defects that may affect the property’s marketability. The inspection may also reveal other aspects, such as undeclared occupants, or a suspicious connection between the vendor and the purchaser.
The borrower is also concerned with the market valuation of the property and any major defects it may have. Some of the surveyor’s findings may enable the purchaser to renegotiate the price.
The surveyor is either a staff valuer, working in the direct employ of the lender, or a panel valuer. Most lenders operate a panel system, whereby local valuation firms are requested to perform the survey.
There are three main types of survey available. These vary in depth of information and, therefore, in cost:
A basic valuation costs the least of all surveys because it is the most basic. Normally, a mortgage lender will insist you have this survey because it gives them basic information about the value of the property. It will advise them about some basic conditions of the property (e.g. what type of construction it is, what type of roads service the property). This type of survey should cost around £100 – £500 depending on the property value.
The RICS homebuyer report is in a standard format and is designed specifically as an economical survey and is a cost-effective way to minimise risk. The homebuyer report focuses on essentials: defects and problems that are urgent or significant and will affect the value of the property.
The homebuyer report, unlike a building survey, provides not only a survey but also a valuation as an integral part of the service.
This type of report is much more detailed than the basic mortgage valuation, which most people choose to commission, and is normally instructed by house/flat buyers for their own use giving them a direct link with their own Chartered Surveyor. The surveyor’s main objectives in providing the service are to give guidance on value and to assist the prospective homebuyer to:
The surveyor will also give a professional opinion about the particular features of the property that affect its present value and may affect its future re-sale. The report format is standard, compact, and easy to understand. It covers the building inside and outside, the services and the site. It focuses on the defects and other problems that the surveyor judges to be urgent or significant. It also covers:
Matters not judged to be significant are generally not included in the report, but where necessary, the surveyor may also provide some extra service which is considered outside the scope of the standard package – perhaps for a schedule of minor defects (for later discussion with a contractor).
Internally, the condition of service installations, such as wiring and drainage and central heating, will also be examined but not tested.
The building survey used to be called a structural survey and it is the most detailed of the three reports. There is no standard form, but all surveyors have developed their own detailed report format.
The surveyor will examine and report on chimney pots and stacks, the roof cover, soffits and fascias, gutters and downpipes and look at all external walls to see if there is any current evidence of settlement or subsidence.
The surveyor will examine windows and external timbers and endeavour to identify a damp proof course. He will lift inspection chambers to examine the drain runs, advising on the necessity or otherwise of a drains test if there is visual evidence within the inspection chamber or around it , or on the building, of drainage problems.
The surveyor will also examine the site, identifying any visually apparent problems with the boundaries. He will also advise if he considers that trees represent a threat to the stability of the building. Inaccessible roof surfaces are examined from the ground with the aid of binoculars. Inside the property, the surveyor will go into the loft, if access is available, to inspect the structure of the roof, the insulation, any water installation and examine chimney stacks, checking that there is adequate support. The composition of ceilings may be noted together with the condition of any wiring found within the loft.
The surveyor will then examine the underside of the ceilings and check for signs of movement which may indicate roof spread and then inspect all internal walls to see if there are any signs of settlement or subsidence. The surveyor may recommend immediate remedial action, or monitoring of cracks within internal and external walls.
A damp test will be carried out to accessible ground floor areas. This can give an indication of whether sub-floor timbers are at risk from dry or wet rot problems.
The surveyor will then inspect timbers, plumbing, electrics and heating. If there are obvious problems here, he may recommend specialist reports.
The report may result in a schedule of repairs on a separate page that you could give to a building contractor to obtain a quotation for any works that need to be carried out before you exchange contracts on the property.
The building survey can include a valuation on the property and a reinstatement value (what it would cost to build the property from scratch in the event of say, a fire). The surveyor will confirm exactly what is and what is not covered under a building survey by confirmation letter when you ask for a quotation.