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When you have been told how much your lender will let you borrow, add any savings you may have to this to work out what price range you can look in. But you should take into account other costs involved in buying a house when working out how much you can afford.
Giving you an idea of the costs involved in buying is complicated. More and more lenders these days are charging various fees, such as arrangement fees, booking fees and early  repayment fees, for their mortgages, particularly their fixed rate or discounted offers. These can vary hugely, from £99 to £9999, so it is worth shopping around. The following give examples of the most common charges associated with buying your home.
Arrangement fees
This is the upfront fee charged by the lender in order to ‘buy’ the mortgage. Some lenders call this a booking fee - although some lenders charge both an arrangement fee and a booking fee! This tends to be around £500, although they are getting more expensive and there was a recent case of a lender charging £9,999 for a mortgage!
This fee can often be added to the loan and it may be wise to say that you will do this as it is non-refundable and so if, for some reason, you don’t get or use the mortgage you may still have to pay it anyway. If you say you will add it to the loan, you won’t pay it. You can, of course, then pay it off on completion.
Higher lending charge
This is charged by some lenders where the mortgage required is more than 75 per cent of the value of the property. If you have a deposit of 10 per cent or more it is unlikely that you will have to pay this, although it does vary. Some lenders don’t impose it and yet some lenders charge as much as £1,500.
It basically covers the lender should you default on your mortgage and is to pay for the additional risk involved. It is normally paid on completion.
Redemption penalties
Redemption penalties are charged if you wish to repay the mortgage or remortgage within the period of a discount, capped rate or fix - or sometimes even after the special offer has ended. Again shop around because these penalties can vary greatly from lender to lender but a typical penalty is a payment to the lender of three to six months’ worth of interest.
Valuation fees/survey
Your chosen lender will need to conduct a valuation of the property you want to buy in order to ensure it is worth the money it is lending to you. You pay the fee for this and it varies from lender to lender and on the size of the property, although £300 is a reasonable benchmark figure for this.
Don’t forget, though, that you may have to undertake a more detailed survey such as a Homebuyer’s Report (approximately £500) or Building survey (approximately £800). If you do, make sure it is done by a surveyor the lender approves of and that they carry out the valuation at the same time. You may end up paying for both separately otherwise.
Legal fees
Your solicitor or conveyancer will carry out a local search of the area the property is in to ensure that there are no special building restrictions on it - or any plans to build a motorway through it! (The cost of search fees varies by the borough in which a property is located rather than by the value of the property.) They will also register you with the local Land Registry so your rights as the legal owner of your new home are recognised.
Legal fees can vary between £300-500 plus VAT. You will most likely end up paying for your lender’s legal fees as well, although the lender does not set the fee for this - it is set by the solicitor working for the lender.
Stamp duty
This is one of the biggest costs incurred when buying. You pay this to your solicitor who then transfers it to the Stamp Office. There is no stamp duty to pay on properties below £175,000; you pay 1 per cent of the price of properties costing between £175,000 and £250,000; 3 per cent for properties costing £250,000 to £500,000; and 4 per cent on properties costing more than £500,000.
Deposit
Remember that most lenders currently only offer mortgages of up to 75-85 per cent (90 per cent at the most, if you’re really lucky) of the value of the property, or its purchase price, whichever is lower. Therefore you will need to save up a huge deposit before you buy – a major cost.
Buildings insurance
This is to cover you in the event of serious damage to your home, for example from fire or flooding. All lenders insist that you have this insurance for your new home. As with all insurances, premium costs and level of cover can vary enormously, so it's worth shopping around.
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