
The True Costs of Buying a House
Before you start house hunting, youâll most likely analyse your finances to determine how much you can afford to spend on your new home. However, what can be a surprise is all the additional fees, taxes and hidden costs that must be covered when making a purchase. Combined, these can add up to thousands of pounds. So, what is the actual cost of buying a house?
Costs When Youâre Buying a New House
1. Stamp Duty
One of the highest costs to factor into a purchase is Stamp Duty Land Tax (SDLT). In England, youâll be liable for SDLT on properties over ÂŁ250,000, and the rate youâll pay is determined by how much you paid for the property. So, if the price is between ÂŁ250,001 and ÂŁ925,000, the SDLT rate is 5%. It rises to 10% for values between ÂŁ925,001 and ÂŁ1.5 million and 12% for any amount above that. Youâll usually need to add 3% to those values if you own another property.
So, if youâre buying a home at the UK average price of ÂŁ288,000, you can expect to pay ÂŁ1,900 in stamp duty. If you pay the London average of ÂŁ553,000, this will rise to ÂŁ15,150.
If youâre a first-time buyer, the rates differ, and you can spend up to ÂŁ425,000 without paying stamp duty. You then pay 5% between ÂŁ425,001 and ÂŁ625,000. You canât claim the relief if the property is over ÂŁ625,000.
You can work out how much stamp duty youâll have to pay using the governmentâs SDLT calculator.
2. The Property Deposit
Before you offer on a property, you will also have to make sure you have enough of a deposit saved up. Most mortgage lenders will require you to put forward at least 10% of the propertyâs purchase price, although some will accept 5%. Last year, the UK government extended its mortgage guarantee scheme, offering lenders the financial guarantees they need to provide mortgages covering 95% of the purchase price until the end of December. The scheme is open to first-time buyers and current homeowners buying properties worth up to ÂŁ600,000. It should be noted, however, that the more you can save towards a deposit, the more choice youâll have when it comes to mortgage lenders and the more chance youâll have of securing an attractive interest rate. Twenty per cent is often cited as the deposit figure to aim for; however, this equals a whopping ÂŁ57,600 for a ÂŁ288,000 property and more than ÂŁ110,000 for an average-priced London home.
3. Mortgage Arrangement Fee
While youâre saving enough deposit money to be able to secure a mortgage, itâs also important to remember that there will be additional fees to factor in here. One of these will be the arrangement fee charged by your lender. On average, youâll be looking at around ÂŁ1,000 for this, but rates can vary. Youâll have the option of paying this upfront or adding it to your mortgage, but be aware that if you do the latter, you will pay interest.
4. Mortgage Valuation Fees
Once youâve found a property, most lenders will send a valuer to assess it and check itâs worth what youâve offered to pay. Some lenders will charge you for this, so ask the question when arranging your mortgage. The fee will depend on the value of the property youâre buying, and it can vary by lender but factor in at least a few hundred pounds.
5. Survey Fee
While a valuation is for the benefit of the lender and ensures that if you default on your mortgage payments, they will be able to cover their costs by selling the property, a survey is purely for the benefit of the buyer as it gives you all the information you need about the property, its condition, any areas of concern and much more. There are a few survey options depending on the propertyâs age and condition. In almost all cases, a Building Survey will be the sensible choice. Also known as a Full Structural Survey, this in-depth and comprehensive report provides a detailed picture of the propertyâs construction and condition. It will highlight significant issues, wear and tear defects, and any areas of poor condition and explain the implications of these faults. It will also examine structural integrity, property build and construction materials in detail, highlight any repairs that have already been made or works that have been carried out, and share future maintenance issues.
If the property youâre buying is built after 1990 and appears to be in good condition, you may consider a Level 2 HomeBuyer Survey, but be aware that even immaculate homes can hide worrying problems, so a building survey could well save you money in the long run. In terms of costs, expect to pay up to ÂŁ1,000 for a Building Survey and from ÂŁ750 for a HomeBuyer Survey.
6. Legal Costs
As well as finding a surveyor, youâll also need to hire a solicitor (also called a conveyancer) to ensure all the legal work with buying a house is completed correctly. This will include carrying out searches â including environmental searches to check for risk of flood or subsidence, and planning searches to identify any existing planning consents or planning applications within a 250-metre radius of the property â and transferring ownership of the property. Youâll be billed as costs come up, but final expenditure will likely be in the region of ÂŁ1,500-ÂŁ3,000.
The âhiddenâ Costs of Buying a House
This may feel like more than enough costs to cover, but unfortunately, many âhiddenâ costs are also associated with buying a house. For example, youâll probably need help moving your belongings into your new home, so you should budget for removal costs. How much youâll need to spend will vary depending on how far youâre moving and how much you have to take, but it could be ÂŁ1,500 or more to move the belongings from a four-bedroom property. Itâll be significantly more if you opt for professional packing. If there is a delay between moving out of your old house and into your new one, you may also need to pay storage costs.
You should also ensure your belongings are insured, so youâll need to have contents insurance in place, and youâll have to have a building insurance policy confirmed when you complete. There are many options here, so shop around for the best price, but make sure you have an adequate level of cover for both.
If you opt for a building survey, youâll have an idea of any projects that need doing sooner rather than later, along with a view of expected costs, so these can be added to your budget. You may also want to redecorate and/or buy new furnishings to make your new home fit your style. This can be done on a budget and over time, but itâs worth putting some money aside if you can.
Youâll also want to make sure you donât miss any important posts, so consider paying to redirect your mail â six months costs ÂŁ33.99.
Finally, be aware that your first mortgage payment may be slightly higher as youâll have to pay interest from when the lender released the funds.
Novello offers timely, accurate, cost-effective building surveys by expert, impartial surveyors. To find out more, contact us or arrange a free quotation now.