Buying your first home is exciting. For many people, it’s a lifelong dream, and the feeling of having finally saved enough for your deposit is unbeatable. However – this isn’t where the work stops. Too often, people have thought about their mortgage, deposit, and potentially stamp duty along the way. But those aren’t all the real costs of buying a home. They forget to research the hidden costs of mortgage fees, valuation costs, surveys, legal help…and much more.
None of these things should stop you in your tracks, but preparing ahead is always a good idea. So that when it’s time to move you can avoid any nasty surprises along the way. Read on for our full breakdown of the real costs that are involved with buying a home.
Let’s start with the basics (and the one that everyone focuses on, because it takes so long to save!). Your deposit is the amount you will pay when you buy your property, which will be a percentage of the total cost of your home or flat. For most people, the deposit is the biggest cost of buying a home.
Usually, you are able to take out what’s called a low-deposit mortgage, where you’d only need to pay 5-10% of the mortgage upfront. However, a result of the pandemic is that these deals are disappearing from the market, so you if you plan to buy within the next six months or so, expect to have saved at least 15-20% of the total cost. We would advise you to ideally save as much as possible regardless of this new rule, because the more you put down initially, the less you will be paying interest on long-term – so think carefully before you buy!
So you know you want to take out a mortgage…but did you know that more than half of mortgages require you to pay certain charges just to set up your loan? Don’t sweat it! We’ll help to break down the costs for you.
The three standard fees that might accompany your mortgage are a booking fee, arrangement fee and mortgage valuation fee, which we’ll cover later.
A booking fee is what lenders charge you to apply for their mortgage, and typically costs between £100 – £250.
An arrangement fee is what you are charged for the process involved in setting up your mortgage, which can cost anywhere between £1,000 – 2,000. If you can afford it, we recommend you pay this up front instead of trying to add it onto your mortgage, as you’ll end up paying interest on it for the lifetime of the mortgage.
Stamp Duty Tax
Stamp Duty Land Tax. You’ve heard of it, but how exactly does it apply to you? Well the good news is, up until 31st March 2021 it might not apply to you all! As a result of the government’s Stamp Duty Holiday, buyers won’t be required to pay a penny of Stamp Duty tax on properties under £500k. This applies to both first-time buyers and those who are buying an additional property. Buying a property over £500k, or past the March cut off date for the Stamp Duty Holiday? No problem, why not try out our handy Homefinder tool. Not only will it help you to compare housing prices in different areas, but it has a built-in Stamp Duty Tax calculator that will save you doing any guessing.
Heard the term conveyancing? It refers to the process of hiring a property solicitor to help you manage the legal aspects of buying a home. We recommend putting aside around £1,000 to cover this. Your solicitor will sort out all the paperwork to make you the legal owner of the property, and run searches on the property to make sure there aren’t any problems with ownership, or neighbour disputes or the land it sits on.
Valuation fees are what you pay your mortgage lender to confirm the value of your new property. This valuation check is important, because it assesses that the size and condition of your home is worth the amount that you’re going to be paying for it. You may not always be required to cover the costs, but it’s best to be prepared just in case. Valuations usually begin at around £250, and can go up to anywhere around £1,500 depending on the property itself. It’s important to note that this is not the same as a survey – it only evaluates the worth of the property for the purposes of your mortgage, and is not a complete inspection of its condition.
Getting your property checked by a surveyor is essential to understanding the condition of your home – checking for things like subsidence or dry rot. It’s the kind of decision that your future self will thank you for! If you’re buying an older property, you will want to be extra thorough when checking if it’s in good shape, to avoid anything (literally) coming out of the woodwork further down the line. If you want a more basic check, a HomeBuyer report will review the condition of the property you’re interested in. A full building survey is a more detailed alternative, which provides you with a complete structural review of your future home.
Once again, surveyor fees are usually dependent on where you live and the size of the property (a bigger house will take longer to survey!). A basic home survey can cost around £250, whereas a building structural survey can go up to and over £600. But remember, parting with this money now can save you huge amounts doing repairs and refurbishments in the future! It’s well worth it.
So you finally have the deposit, mortgage, stamp duty and surveyor fees under your belt. What could possibly be left to think about? The move-in itself. First you have to consider the condition of the property you are leaving behind. If your property requires a full clean, you may want to factor in professional cleaning costs. Then you need to consider the expenses of hiring a removal service, which can cost anything between £200-500.
If you don’t have anything too heavy like lots of furniture, hiring a self-drive van might be a cheaper option for you. If you decide to hire a removal company, it might be worth getting insurance for the day, to cover any damaged or missing property.
And once you’re finally moved in…
You’ve made it! You’re in your new home, so what’s left to do other than unpack?
If you’re a first-time buyer, we’d suggest getting only the essential furniture first that you need to make your house feel like a home. After this, it might be worth buying some things second hand, or budgeting for them and buying slowly over the next couple of months.
Check online with your local authority which council tax ‘Band’ you are in, so that you can work out how much your council tax will come to per month. What about utilities and broadband? Have a scout around for the best providers available; it’s worth not settling so that you can get the best deal possible.
If you’re feeling a little overwhelmed, we don’t blame you. Buying a home is a million decisions and costs all rolled into one. But it’s also an adventure! If you want to see the real costs of buying a home, use of our clever Homefinder property buying calculator, which will help you work out the initial costs and then some browse areas that you’d like to settle down in.
Did you know that our membership plans give you everything you need (apart from the actual money – sorry!) to get on the property ladder? For a simple monthly subscription, we’ll walk you through each step of your home buying journey, no matter where you’re starting. Say goodbye to overwhelm and get on the fast track.