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 is important to be aware of the extra costs associated with buying a house before you jump onto the property ladder.
This guide provides all the information you need to know about the costs of buying and moving house, as well as the ongoing costs of owning a home.
The Upfront Costs of Buying a House
It is extremely important to make sure that you have saved enough money to cover all the costs associated with the initial process of buying a house.
Stamp duty is a tiered tax on land and property transactions. Rules around stamp duty are changing in the UK. From 1st October, you will need to pay Stamp Duty on properties costing more than £125,000 for residential properties in England and Northern Ireland.
First-time buyers who are purchasing properties costing up to £300,000 do not need to pay any stamp duty in England and Northern Ireland. However, stamp duty will need to be paid on properties priced between £300,000 and £500,000:
- Homes priced between £301,000 and £500,000: 5% on the amount over £300,000
- Homes priced more than £500,000: You will pay stamp duty at the normal rate
If you are buying a property which will be your main residence and it isn’t your first property, you will be required to pay standard stamp duty rates on any property which costs more than £125,000. The amount you pay depends on the value of the property:
- £0 – £125,000: 0%
- £125,001 – £250,000: 2% to pay
- £250,001 – £925,000: 5% to pay
- £925,001 – £1,500,000: 10% to pay
- £1,500,001+: 12% to pay
If you are buying a second home, you will need to pay an extra 3% stamp duty on properties costing more than £40,000 at the relevant rate at that time.
It is important to keep in mind that stamp duty rules differ in Scotland and Wales.
The deposit is the amount of money you put towards the cost of the property when you buy your home. You will need a deposit to bridge the gap between the cost of the property and the amount your mortgage lender is willing to loan to you.
Typically, if you contribute more towards the deposit, you are more likely to be given a mortgage and have a lower interest rate. This is why it’s prudent to contribute as much as you possibly can towards the deposit.
You will usually need to provide a deposit of between 5% and 20% of the cost of the property. So, for a property with a value of £225,000, you will pay between £11,250 and £45,000.
When you apply for a mortgage, the mortgage lender will assess your property to establish how much they are willing to lend you. Not all mortgage lenders will charge a fee for conducting a valuation, but many will.
Valuation fees are based on the value of the property and can cost anything from between £500 to £1,500.
A lender’s valuation is not the same as a structural survey, so you shouldn’t expect a detailed assessment of defects in the property.
Conveyancer and Legal Fees
Usually, you will need to hire a licensed conveyancer or a solicitor to deal with the legal work involved with buying and selling a property. This legal process is known as conveyancing.
Conveyancing fees include:
- Standard legal fees: Your solicitor will charge you a flat fee or a percentage of the value of the property. The amount you pay depends on a number of factors including the type of property and its location. Fees range from £500 to £1,500
- Land registry fees: HM Land Registry charges a fee for registering a property with a new owner. You can expect to pay between £90 and £140 for Land Registry fees
- Money transfer fees: This fee is for the transferring of cash among buyers, sellers, conveyancers and mortgage lenders
- Searches: Local searches are carried out by your conveyancing solicitor. They will flag up anything in the local area which might negatively affect the home you are buying
It is important to keep in mind that you will also need to pay a fee if the property you are buying is a leasehold property.
Whilst it is not a legal requirement, we would always recommend undertaking a survey on the property you are buying. A property surveyor will assess the state of a building’s construction and its condition before you buy the property.
A lender’s valuation survey will only consider how much the property is worth, whereas a house survey will thoroughly check the whole structural condition of the property.
There are different levels of surveys ranging from a basic home condition survey at a fee of around £250, to a full structural survey which costs £600 and upwards.
A house survey can provide welcomed reassurance that there is nothing untoward with the property and that your future home is in good condition.
If you receive a bad survey report, you may wish to use that information to renegotiate on the price of the house.
As well as monthly repayments, there are a number of other mortgage fees which buyers ought to take into account.
Mortgage arrangement fees are often charged by mortgage companies. The fee can range from a few hundred pounds to up to £2,000.
Also, some mortgage brokers may charge a fee of up to 1% of your mortgage. This is not a universal fee, and it can be avoided if you opt for a fee-free mortgage broker. Whilst fee-free mortgages may seem like the obvious choice, it is important to note that these mortgages will usually come with higher rates.
The mortgage valuation fee, as described above, is another cost associated with your mortgage which you need to consider.
Generally speaking, it is better to pay mortgage fees upfront rather than adding them to your mortgage. This is because you will pay interest on any fees which are not paid at the time of the purchase of the property.
Find out more about our recommended mortgage provider here.
Estate Agent’s Fee
Estate agent fees are paid by the seller rather than the buyer. However, properties which are bought at an auction or online auctions will usually come with additional administration fees which the buyer will need to pay.
Also, if you are selling at the same time as buying your new home, remember to factor in the estate agent fees.
The moving process itself is exciting and stressful in equal measure. To ensure you don’t add any more stress, you ought to factor in the costs associated with moving to your new house.
The costs for removals can vary quite considerably based on how much furniture and belongings you have. It also depends on the distance the furniture and belongings will travel in getting to your new property, as well as whether you have chosen extras such as professional packing. If you do not have too many items, you may wish to rent a van to take all your belongings instead.
The cost of a professional removal service can range from around £300 to thousands of pounds. Make sure that the removal company is suitably insured.
Other Moving Costs:
- Cleaning costs: If you are moving from a rental property, you will need to leave it clean and tidy. You might want to think about hiring a professional cleaner if the property is not in good condition
- Storage costs: You may need to keep your belongings in storage during the moving process
- Mail redirection costs: Royal Mail’s Redirection service ensures that your mail will be redirected to you when you move
- Moving day costs: You may need to factor in the costs for extra childcare or kennels/catteries on moving day too
Moving In Costs
Once you have moved into the property, there will be changes which you may want to make immediately.
Buying Furniture and White Goods
Firstly, you may need to think about purchasing furniture and white goods. You could choose to purchase second-hand goods if you do not have a big budget to spend on furniture.
Redecorating, Alterations and Extensions
Moving into a new home is always an exciting time. Still, there is usually some redecorating to do, and you may wish to make changes to the living space and make other alterations to the property. If you carried out a house survey, you may have already discovered the problems which need fixing right away too.
You could always carry out the work yourself to save money, but it is worth remembering that almost everyone ends up spending more than they anticipated.
Buyers with money to spare may even think about building an extension, conservatory or garden office, or converting a loft room or garage. Of course, extensions and conversions will add to the overall spending on your new home considerably.
Ongoing Costs of Owning a House
Mortgage repayments are only one part of the ongoing costs of owning a home. Keep in mind the following costs.
Leasehold Property Charges
If you will be moving into a leasehold property, you will need to pay annual ground rent and a service charge to the person who owns the freehold. Ground rent is around £50-£100 per year, and service charges differ depending on the property.
Your mortgage lender will require you to take out buildings insurance to protect against damage to the property. You may also wish to take out contents insurance to protect against your possessions.
Life insurance provides a source of money which your family can rely on to cover debts such as mortgages in the event of your death.
Utilities, Council Tax and Other Running Costs
It is a good idea to ask sellers how much they spent on gas, electricity and water annually in order to calculate your finances accurately.
Council tax is an unavoidable cost for any homeowner or renter. The amount you pay depends on the location of the property and the valuation band it is in.
Remember to factor in costs such as broadband, phone and tv packages too.
Other ongoing costs:
- Maintenance and building work: Regular maintenance work is part and parcel of owning a property. It is important to keep this in mind as a homeowner, as some maintenance costs can be in the thousands
- Resident parking: You may need to pay an annual fee if you want to park your car in the street. This is most common in towns and cities
- Service charges: If you are moving into a serviced apartment, you will need to pay a regular service charge
Are you Looking to Buy a House?
Chancellors is a leading estate and lettings agents with a glowing reputation. We are passionate about property and take great pride in delivering an outstanding service.
If you are thinking about buying a house, you need to be sure that you are dealing with reputable estate agents. Chancellors is committed to a clear, professional and transparent approach, providing you with peace of mind.
To find out more about our services and how we can help you to find that perfect property, please do not hesitate to contact our friendly team today.