When it comes to buying a house, it’s easy for you to think of spiraling costs and fees that seem to pop up out of nowhere. If you’re looking at getting your first mortgage on a new home, then the costs can appear even more daunting. To help you get to grips with the fees you can expect to come across, we’ve put together a guide of the costs involved in buying a house.
Getting your mortgage in place is one of the biggest parts of buying a new house. If you’d like some advice on how the whole procedure works, then check out our mortgage guide which explains the mortgage process in full. There are obviously costs involved with securing your mortgage, beyond what your monthly repayments are going to be.
Below are the main mortgage fees you’re going to have to pay. You might be able to spread them over the course of your mortgage term, but remember that you’ll be paying interest on them if you decide to go down this route.
• Booking fee – around £100
• Arrangement fee – up to £2,000
• Valuation fee – around £300 – £400
When you buy, there are various up front costs you need to pay for. As long as you budget for these fees, you can readily include them in your plan.
There’s little escaping the deposit, and getting this together is usually the toughest part of getting yourself on the property ladder. Generally, the bigger deposit you’re able to put in, the easier it is to get a mortgage. The minimum you’ll need is between 5% and 20%, so this is the equivalent of £10,000 to £40,000 if you were to buy a £200,000 home. The bigger deposit you put down, the better rates you can access on your mortgage.
• Stamp Duty Land Tax
If this is your only property, then this government tax must be paid on all properties that cost over £125,000. If your home costs less than £250,000, then you’ll pay 2% on the difference between £125,000 and the price of your property. So if you’re buying a house for £200,000, the Stamp Duty Land Tax will be 2% of £75,000, which is £1,500.
If your house is costing between £250,000 and £925,000, the rate on this band is 5%, while anything above that is 10%. So if you’re buying a property for £500,000, you pay 2% on £125,000 to £250,000 and 5% on £250,000 to £500,000, for a Stamp Duty of £15,000.
If you’re buying a second home, then Stamp Duty’s owed if it costs more than £40,000. You also must pay an extra 3% on top of the rate for each band.
At the Autumn Budget in November 2017 the Chancellor announced relief from Stamp Duty Land Tax (SDLT) for first-time buyers. The relief applies to purchases of residential property for £500,000 or less, provided you intend to occupy the property as your only or main residence. As long as you and anyone you are buying with are first time buyers you will pay 0% SDLT on the first £300,000 of the purchase price and 5% on the remainder up to £500,000.
Carrying out a survey on the house you’re buying is crucial. When you have one completed by the Royal Institute of Chartered Surveyors, you can be confident that your new home’s going to be looked at by a reliable expert. If there are any problems with the condition of the property, identifying them before you complete your purchase could save you huge amounts of money further down the line.
• Valuation survey
Your mortgage provider will carry out a limited survey to ensure the property you’re buying is valued correctly, and this is mandatory. The cost of the survey often depends on the price of the house you’re buying. For a property valued at over £200,000, you can expect to pay at least £250 for this.
• RICS Home Condition Report
If you’re buying a relatively new home that’s been conventionally built, the basic level of survey could be okay for you. Any potential risks and urgent defects will be highlighted, and you can expect to pay around £250 for this report.
• RICS HomeBuyer Report
This survey’s more comprehensive than a basic valuation, and suitable for conventional properties that are in a reasonable condition. With this report, you can choose to add a valuation, helping you to save on having two separate surveys done. The typical cost of this survey is around £400 and up.
• RICS Building Survey
The most detailed survey you can get is the best option if you’re buying a larger or older property, or one that’s unconventional in some way. If the property has a thatched roof, for example, or you’re looking at carrying out extensive renovations, this should be the survey for you, and usually costs £600 and up.
Your conveyancer will complete all of the legal work for you and will also act for your mortgage lender during the home buying process. Typically, you can expect to pay in the region of £850 to £1,500 for this. They’ll also carry out any property specific searches which are required to check on any plans or problems that might affect you.
• Electronic transfer fee
This covers the cost of transferring funds from your lender to your conveyancer, and you’ll usually pay around £40-50. Some lenders may have this fee included as standard.
As well as the main upfront costs involved in buying a house, it’s worth checking with your conveyancer to see what other fees you may have to pay. They should have a fees guide which details the things you’ll have to pay an extra charge for. From transferring freehold and leasehold titles to arranging the payment of government Help to Buy incentives, you can see any additional costs that might crop up.
When the big day comes and you can finally pick up your new keys, you might need the help of a removal team. This typically costs from £500-2000, but you could rent a van for a day or two and reduce this substantially. Get plenty of comprehensive quotes so you can weight up what you require from them to suit your needs.
It’s a good idea to have a decent understanding of what the ongoing costs will be as a homeowner. Once you’ve completed your purchase, you’re fully responsible for all of the costs involved in running the property.
• Maintenance and repairs
It’s very common for new homeowners to carry out repairs, and in fact the average spend is almost £6,000. This is one of the reasons why it’s really important to get a good survey done.
• Building, contents and life insurance
If you’ve rented a property in the past, then you’re likely to be familiar with contents insurance. But when it comes to owning your own home, you’ll need to insure the building too, as soon as you’ve exchanged contracts. It’s also a good idea to take out a life insurance policy that pays off your mortgage in the event of your death before it’s been fully repaid. Make sure you discuss this with your financial or mortgage adviser before taking action.
• Council tax
Of course, you will take over council tax payments, and you can check which band your new property’s in before you complete. Remember that if you’re a single occupier, you should receive a discount.
• Running costs
You’ll also be responsible for all your new home’s running costs. When it comes to energy bills, you should receive your property’s Energy Performance Certificate (EPC) from the seller. This will give you potentially useful information on how well the property performs at present, as well as the level of efficiency you can expect if you address any issues that may be restricting performance. As well as energy bills, you’ll need to factor in things such as your phone, TV and internet packages.
If you’re buying a leasehold property, you’ll owe ground rent and service charges to the owner of the freehold. Ground rent will be defined within the lease and could be anywhere from nothing to over £1000, while service charges vary depending on the property. Make sure you find out what they are before moving in, to avoid any nasty shocks.
Top tips to keep the cost down
There’s no getting away from the fact that buying a house is an expensive thing to do. This is hardly a surprise as there’s a good chance that it’ll be the biggest financial commitment you ever make. As you’ll want to make savings where possible, here are our top tips for keeping the cost of buying a house down.
• See if you qualify for any government schemes
If you’re early on in the house buying process, check if you can benefit from any government schemes. Incentives such as the Help to Buy ISA are a great way to make your money go even further when you’re saving up for your first home.
• Do your research
When it comes to house prices, there are lots of online resources that can help you figure out if you’re paying a fair price for your property. Use them to match up sold prices with what the properties were actually like and you may be able to negotiate on the cost of your new home if it’s not had any recent renovations, for example.
• Look after your credit score
Do everything you can to boost your credit score, and make sure you check it with an agency prior to applying for a mortgage.
• Get a mortgage pre-approval
If you get a mortgage in principle from a lender, you’ll be in the best position possible to proceed quickly once your offer is accepted. Plus, you’ll have more strength when it comes to negotiating the price of your new home.
• Ask the seller to take the property off the market
When you submit your offer, make it a condition that the property’s taken off the market. This makes it less likely that you’ll be gazumped before you exchange, where you can lose out on any money that you’ve already spent.
• Don’t get too far ahead of yourself
This applies to a wide range of things. Make sure you don’t book things in too early, as you can lose out if there are hiccups. For example, don’t organise for a survey on a property until you’ve been approved for finance by your mortgage lender. Wait until you’ve exchanged contracts and have a completion date before booking a removal service or pet and child care. Don’t change things like your driving licence before completing, and if you’re moving out of a rented property then try to time your notice period as well as you can to avoid losing out.
• Ask the seller lots of questions
Don’t be afraid to grill the seller about everything and anything you can think of. From asking how many viewings there’s been to help you decide what offer to make, to checking how long the property’s been on the market and what’s included in the price in terms of fixtures and fittings, there are lots of ways to make some savings. Find out things like what renovations have been done, when the house was last rewired and how old the boiler is.
Disclaimer: The article above is only a rough guide to give you some idea of costs involved when buying your house. It Is important note that costs may differ for individual cases.