Costs to consider when buying a home

Costs to consider when buying a property

Don’t overlook additional fees and costs when buying a property

In recent months we have all heard about the rising costs of living. Prices of utilities, food and petrol all went up significantly. The price of properties also went up, with an average of just above 10%  year on year (Feb 2022, ONS).

The trend is not stopping and we expect the prices to keep going up as the demand for properties continues to be high. Even the increase in the interest rates has not slowed down the property purchases. The mortgage rates are going up and people are trying to get an attractive mortgage as soon as possible to avoid increasing costs.

As a buyer, you might think that a deposit is the main expense when buying the property but it is important to remember other costs associated with the property purchase. While you might already know that you will need to pay legal fees, stamp duty, and survey fees, there are other fees that you should be aware of. It is vital to go into buying a property with some extra cash set aside. Here we will explain what costs you might need to consider.

Deposit

You would need at least 5% of the property price in cash deposit. The deposit can be a gift from the immediate family but has to be transferred to your bank account and available to use (instant savings account). You will need to afford the mortgage for the rest of the price of the property. You can check how much you can afford using our mortgage affordability calculator.

Lender mortgage fees

Many lenders would charge fees for arranging the mortgage. In most instances, the fees can be added to the loan but you need to be aware that you will pay the interest on that and it will increase your overall borrowing. Some mortgage deals have no mortgage fees and are available through selected lenders.

Valuation fees

Valuation fees are fees you would pay to the lender to have the property valued. The fee is not refundable if the valuation took place, even when the offer was not issued. The valuation is a simple report that confirms the value of the property. It is not designed to detect any issues with the property. Some lenders offer valuation with a survey at an additional cost.

Mortgage adviser fees

Make sure you also budget in mortgage adviser fees. As mortgage advisers, we can help you get the best deal on the market and save you money in the long run. Our minimum fee is £500 for less complicated cases and remortgages. Our fees depend on how complicated is your case and will be assessed at the time of the first appointment.

Conveyancer fees

Conveyancer fees, otherwise known as legal fees, cover all the legal costs associated with the purchase of the property. It is carried out by a qualified solicitor or conveyancer. The cost of the solicitors varies greatly but you do not need a local one! With the digital platforms and e-signatures widely used, your cheapest and best solicitor can be 100s of miles away. One thing you need to consider when choosing the solicitors is if they are on the lender panel to be allowed to act on your behalf. You can always ask the solicitor after you get the decision in principle from the selected lender. The typical cost is between £850 – £1,500. Contact us for a free no-obligation quote.

Searches

Searches are additional costs that your solicitors will charge you as part of their property due diligence. These are local authority searches including drainage searches and an environmental search (for example flooding areas), and a planning search if you want to find out about any development planned for nearby. Local authority search range in cost between £250-£450.

Land Registry fees

When changing the ownership of the property, the solicitors will need to submit the request to Land Registry. There is a fee for the update on the register which will vary depending on the value of the property. You can find the breakdown of the fees on the government’s website here.

Leasehold fees

If your property is a leasehold, you will pay additional leasehold charges to your solicitors. This is because with leasehold properties there are additional checks and admin work.

Stamp Duty Land Tax

Stamp Duty Land tax will be added to the overall legal fees when you get a quote. You can calculate your stamp duty using our handy calculator here.

Survey costs

If you are buying an older property (not a new-build), you might consider arranging a property survey. This would look at the property from the structural point of view and let you know if there are any visible defects. You can read about the different kinds of surveys in our blog post here.

Removal costs

It is hard to establish how much you will need to pay for the removal company. It will depend on the distance travelled, the amount of possessions that need to be transported, and if you go for a full service of packing and unpacking. Do check a few companies and get quotes before you commit.

Painting and decorating

When moving to a new home, you might need to do some painting and decorating. If it is a new-build, you might not like the white walls throughout and want to inject some colour. If the property was lived in, expect wear and tear. The walls may be dirtier than expected, the flooring discoloured from the sun and/or furniture and will not look nice with your furniture. Just painting some of the rooms might make the property nicer and yours. Do it before moving in or unpacking as it would be much easier and cleaner (your furniture and belongings are already protected!).

Furnishing  

If you are moving to your first home or a bigger home, you will need to get some furniture to fill up the rooms. Whether a sofa, bed or just some cupboards, they will cost additional money. Look for a used one in the marketplace or second home shops. You might be surprised what you can find for a cheap!

Storage

When moving homes, you might need to temporarily hire a storage space. These are not cheap so search for one that has a special offer to sign up. A free first month is a good way to start.

Cleaning costs

If you live in a rented property and moving into your own, you will have to arrange for your property to be cleaned to a high standard. These costs vary but can set you off between £100 and £500.

Home insurance

When you get a mortgage, you will need home insurance in place. The insurance is normally required to be arranged on the same day as the exchange of contracts. This is typically before you complete the purchase and can move in. At the exchange of contracts, you become legally responsible for the property and you will be liable for any costs associated with potential accidents (for example, a fire in the kitchen). Contact us for a free quote.

Life insurance

Many lenders would ask you to arrange a life policy to pay off the mortgage in case of your accidental death. It might not be a legal requirement just yet, but it is a good way to have one in place to provide a tax-free repayment of the mortgage and allow the property to be easily inherited. Contact us for a free quote.

Postal redirection fees

Last but not least, when you move home, don’t forget to redirect your mail. Check the Post Office website for the latest fees.

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