Legal fees and expenses
You have to pay the legal costs when you buy or sell your home. It's possible to reduce your legal expenses by doing the legal work yourself, but most people hire a solicitor. As solicitors' fees vary, ask how fees are calculated before you hire someone. It may be a percentage of the sale price (such as ½ to 1%) or a fixed amount.
Legal fees aren't normally refundable, even if the sale falls through. If the buyer pulls out, you can ask them to help with your legal costs, but they don't have to.
Fees for services
Solicitors charge for their time. Ask how fees are calculated before you hire someone. It may be a percentage of the sale price (such as ½ to 1%) or a fixed amount. As a guide, you should expect to pay around £1,000 in legal fees if you are buying a property for £100,000.
The amount you have to pay will also depend on how much work is involved in the sale and whether you are selling your previous home at the same time.
You will also have to pay your lender's expenses for the legal work involved in paying off your mortgage or setting up a new one. If your lender agrees to use the same solicitor for this, all the fees will probably be included in one bill.
You will pay the expenses that are part of the process of buying or selling a home. These may include:
- paying stamp duty when you purchase a property for more than £125,000;
- paying a deposit to the seller (usually 10% of the purchase price);
- searches to check that are no problems in the area or outstanding payments the seller has to make;
- registering your ownership of the property with the Land Registry.
You may also have to pay capital gains tax if you sell a property that has increased substantially in value since you bought it. You should only have to pay it if the property is not your main home, or it has been rented out
Stamp duty is a tax that you must pay to Her Majesty's Revenue & Customs (HMRC) if you spend more than £125,000 on the property.
The amount of stamp duty is graded into bands and is based on the price of the property. The rates are a percentage of the total property price:
- 1% for properties sold for between £125,001 and £250,000
- 3% for properties sold for between £250,001 and £500,000
- 4% for properties sold for more than £500,001
- 5% for properties sold for more than £1,000,000.
For example, you can expect to pay £1,800 in stamp duty if you buy a property worth £180,000.
You pay stamp duty on the price of the property itself. You don't have to pay it on fixtures and fittings such as curtains or appliances. If you arrange to pay for these items separately, you may be able to pay less stamp duty.
Paying a deposit to the seller
When you exchange contracts with the seller, you usually have to pay a deposit. This is often 10% of the price of the property but it may be possible to agree a smaller amount before contracts are exchanged.
You will have to pay the deposit before your mortgage loan comes through, so you will need enough savings to cover it. If you don't have enough savings, you may be able to arrange a separate short-term loan.
This is known as a bridging loan. You will probably have to pay a high rate of interest on this loan. When the sale is completed, the deposit will be paid to the seller, along with the rest of the purchase price.
Some fees and expenses are paid in advance, and the rest are normally paid on the completion date. Any bills you receive should be clearly itemised and you should ask your solicitor to explain anything you don't understand.
If you think your solicitor's bill is too high, you should contact her/him immediately and ask for an explanation of the costs involved.
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