Buying a house, or any kind of property will quite possibly be one of the biggest financial decisions that you make in your lifetime, so it’s important to be aware of the extra costs when buying a house, before you jump onto the property ladder.
One of the largest costs of buying a house that you’ll have to find is for the deposit. The exact amount depends on the price of the property that you are purchasing, but in the current market, buyers typically need a deposit of at least 5% of the purchase price. A mortgage lender would then lend the buyer the remaining 95%, subject to terms and conditions. However, the larger the deposit you are able to put down, the better mortgage deals you will be eligible for.
Stamp Duty is a tax that is calculated on part of the property purchase price over £125,000 (or £40,000 for a second property). Stamp Duty must be paid within 14 days of completion of the purchase of your new property, and is usually the responsibility of your solicitor or conveyancer to pay on your behalf. There are some exemptions from paying Stamp Duty, for example if you are a first time buyer. If you are a first time buyer in England or Scotland, you will pay no Stamp Duty on properties up to £300,000 in value. If the property is over this threshold, you will pay Stamp Duty on the remaining portion over the £300,000 up to £200,000. However, if the property you are buying as a first time buyer is over £500,000 then you will get no Stamp Duty relief at all and will pay the standard rates.
When applying for a mortgage, you will probably choose the one that best suits you based off of the interest rates. You will pay back repayments each month until you have cleared your mortgage debts, as well as an interest rate on top. These can be considered an extra ‘cost’ on top of the purchase price of the house, as these rates are likely to change over time and can become a cost that perhaps you had not budgeted for.
Along with interest rates and mortgage repayments, there are also other expenses hidden costs of buying a house.
An arrangement fee is what you must pay for the mortgage itself and can cost up to £3000. You may be given the option to include this payment in your mortgage payments themselves, which avoids an upfront cost but will mean that your mortgage payments and interest rates are likely to be higher than initially planned.
This may be included with the arrangement fee, but can also be separate. This is the cost of actually applying for the mortgage itself, which means that this payment is non-refundable whether you decide to go ahead with the mortgage or not.
The amount of this payment will depend on the overall price of your property. It is charged for the mortgage provider assessing the value of your property, to ensure that it is worth the amount of money that they are going to lend to you. At Chancellors, our in-house financial experts are on hand to provide advice and guidance on your mortgage, protection and general insurance needs.
It is likely that you will have to pay your solicitor for their services in arranging the mortgage, and this can also include the cost of the Land Registry fee and the mortgage lender’s legal costs. When you choose to use one of our panel solicitors at Lifetime Legal, this creates a level of communication and control which can deliver a smoother and more successful transaction. We have dedicated case handlers working together with your conveyancer to achieve your property goals to your timeframes.
The valuation fee mentioned previously only covers the value of the property, so you’ll have to pay for your own survey to be carried out. The exact price of this will depend on how detailed you want the survey to be. It covers the property itself as well as any structural issues that it may face, or planning problems.
The Moving Process
The moving process itself is also bound to cost at least a couple of hundred pounds, but it all depends on how much you have to move and how far you have to travel. There is also the cost of home and contents insurance for an extra level of security.
To ease the stress of moving, Chancellors has formed key partnerships with two leading removal companies who are ideally placed to support you in your moving process. For more information on this, talk to one of our team who will be able to advise.
If there is anything that you are unsure of, or for more information on buying a house, contact Chancellors for help.