The real cost of buying a home

What are the hidden costs when buying a home? While buying a house can be exciting, it’s also important to be smart with your investment and understand the real cost of buying.

It’s rarely as simple as finding a house, getting a mortgage, and moving in. Buying a property is guaranteed to cost more than you expect – so here are a number of things to consider before making your property purchase.

Stamp Duty

If the value of your chosen property means Stamp Duty applies, you will need to factor this into the overall cost of buying your new home.  

Stamp Duty charges differ across the UK and are therefore dependent on where you’re purchasing your property. If you’d like to understand how much Stamp Duty you may need to pay, please select the link below. 

England: https://www.gov.uk/stamp-duty-land-tax/residential-property-rates 

Wales: https://gov.wales/land-transaction-tax-guide 

Scotland: https://www.gov.scot/policies/taxes/land-and-buildings-transaction-tax/ 

Northern Ireland: https://www.nidirect.gov.uk/services/stamp-duty-land-tax-calculator

Estate agency fee

First-time buyers will not come up against this issue, but if you’re selling your previous home, you need to factor in agency fees. This fee is usually a percentage of the final sale price and is subject to the price of the property you sell.

Valuation Reports

The Valuation Report (not to be confused with a survey) is carried out by your lender and looks solely at the worth of your potential home – it doesn’t cover issues and won’t highlight problems with the property.

This report allows your lender to check that the property offers an acceptable security for the loan. The cost will vary according to which lender you use.

Mortgage arrangement cost

Many mortgages come with arrangement fees, and these can vary. In some cases, this is non-refundable, even if the purchase falls through.

If you cannot afford this, you can usually add these to your mortgage loan – but you will be paying interest on this also. If you’re laying down a deposit of less than 25% or less, you may have to fork out a higher lending fee.

Bridge Loan and Home Equity Loan 

When a homebuyer is buying another property before selling their existing home a common way of providing the deposit is by taking on a bridge loan or home equity loan. Either of these has the potential to prove expensive and it is usually preferable to delay buying another home until you have sold your existing home and received the proceeds of the sale.

Conveyancing Fees

When it comes to buying a property, you’ll need to hire a property solicitor or a licensed conveyancer to handle all the legal aspects.

Your legal adviser will either charge you a flat rate or percentage of the cost of the property. You should prepare to pay between £800 and £1,500 depending on the property and style of transaction.

When you instruct a solicitor to carry out the conveyancing process, they will need to conduct a variety of searches before your purchase can go ahead, ranging from environmental and water authority searches to location-specific searches. The main two searches conducted are the Land Registry and Local Authority searches.

Land Registry is a government department that keeps all the records of registered properties in England and Wales. It charges a fee for registering the property with you – the new owner. This fee also depends on the cost of the property – it can vary between £90 and £140.

Local Authority searches are arguably the most important search conducted by your solicitor. They will look through all the information held by the local authority on your potential home and the surrounding area, including potential plans for the area and development of roads. This cost can vary between £70 and £400 depending on the location.

Electronic Transfer Fee

Not many people factor in this cost. When buying or selling a house, it involves a large amount of money changing hands in a very short period of time. Your solicitor will make sure your deposit ends up where it needs to be, but a same day transfer costs between £20-£30.

Removal Costs

There is, of course, the cost of the actual move to think about. Remember to put aside some money for additional costs like:

• Removal insurance
• Removal company
• The potential requirement for temporary accommodation
• Storage needs to be considered if there is a gap between your move-in date and when you leave your existing property.

Post Redirection

It is important to make sure your letters and packages make it to your new home, otherwise the purchasers of your old home will be receiving your mail which is annoying for everyone concerned. There are various services that do this for you, for example Royal Mail Redirection. The cost of this service varies depending on the distance between homes. The Royal Mail Redirection costs £33.99 (per surname) for up to three months and increases for longer periods. 

Improvements, Repairs and Renewals costs

Whenever a buyer purchases a property it is quite common that they will then proceed to spend money on it very soon after. Typically such expenditure might be in the form of re-decorating, new carpets and furnishings or improvements such as a new kitchen or central heating system. It is sensible to budget for a contingency sum to cover such expenses including an allowance for “unforeseen costs”.

General increase in Living Expenses

If you are moving up the property ladder and purchasing a larger and more expensive property then do not be surprised to see a rise in certain living expenses. These might typically include an increase in your Council Tax, buildings insurance and utility bills expenses.

If you are moving into a leasehold property for the first time do remember that you will be responsible for paying a service charge and a ground rent, typically to a management company, which may run into several thousands of pounds annually.

Money well spent 

Certain types of expenditure will save you money in the long run. If you’re buying a property via a mortgage lender, your lender will have requested a property valuation to assess the level of risk to them. But a valuation is not the same thing as a survey. Only an independent residential survey is designed to provide buyers with an accurate assessment of the condition of the property they are thinking of buying. 

To find out more about the HomePlus Digital Home Survey, click here.