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What Costs Do You Need To Consider When You Buy Your First Home

Costs of buying a house - Piggy bank with coins

Buying a house costs a lot of money… If this wasn’t, everyone would be doing it. But just how expensive is stepping on the property ladder? What costs can you expect? 

We know, costs are not fun to think about, but they are necessary to discuss. If not, your budget can run out very quickly and leave you short. Luckily, this guide will help you get a clear picture of all the house buying costs.

Check out the list below for a summary of all the most important costs you can expect. We will go into more detail on each of these costs later.

House buying cost Approximate amount Note
Deposit Min. 5% of the purchase price
Stamp Duty Differs per region Check out our guide for more info
Mortgage booking fee £100 – £250
Mortgage arrangement fee £0 – £2,000
Mortgage valuation fee £150 – £1,500  Depends largely on the house price
Mortgage telegraphic transfer fee £25 – £50
Mortgage account fee £100 – £300 Only applicable if your account is new
Solicitors fees £850 – £1,500
Property surveyor £250 – £600 Only for second-hand homes
Reservation fee £500 – £1,000 Only for new builds
Other costs: Building insurance, moving costs, council tax, maintenance and repairs, running costs

The Big-Ticket Items

Let’s start with the elephant in the room – the biggest costs you’ll need to pay upfront. These include the deposit, any money to bridge the gap between that and your mortgage, and the Stamp Duty. 

Luckily, first-time buyers can expect some relief.

Deposit

The deposit is the biggest amount of money you will have to put on the table. The average deposit is around 15% of the purchase price of the house you wish to buy. This is driven by the economic environment. Due to COVID, only a few low-deposit mortgages were available. However, there is a light at the end of the tunnel. 

First-time buyers can take advantage of the Help to Buy: Equity Loan government scheme. With the help of this loan, the deposit you need can be as low as 5%. Keep in mind though that this can only be used by people who haven’t bought a property before. Moreover, the houses you can buy can only be a new build that fits in the price limits. More information about this in our guide on the Help to Buy scheme.

If you are not looking for a first-time buyer, we have good news for you too. Starting from April 2021 the British Government will issue a guarantee to the mortgage providers on loans with a 5% deposit. The only limit of this government scheme is the maximum price of the property you can use the mortgage for – this cannot be over £600,000. 

Stamp Duty

The Stamp Duty (Land and buildings transaction tax in Scotland and Land transaction tax in Wales) is the tax you pay the Government after your property purchase. It is a progressive tax, which means that the rate is different after a certain bracket of the house price is reached.

The Government is supporting first-time buyers with the Stamp Duty as well. The limit price from which they have to pay the tax after is higher for them. Check out our in-depth guide on this topic.

Mortgage Fees

On top of your interest fees and your monthly payments, you need to add to your budget additional fees. You are better off paying these items upfront, as should you add them to your mortgage, you’ll pay interest on these costs as well.

The most common mortgage fees include:

  • Booking fee – From £100 to about £250
  • Arrangement fee – From £0 up to £2,000
  • Valuation fee – From £150 up to £1,500 (depends largely on the house price)
  • Telegraphic transfer fee – From £25 to £50
  • Mortgage account fee – From £100 to £300 (only applicable if your account is new)

Yes, taking out a mortgage is more than just the interest fee. Make sure you have a plan about financing these costs ahead of completing your mortgage.

Other Costs To Keep In Mind

Solicitor Fees

The solicitor or conveyor fee is part of the legal fees associated with buying a house. You cannot avoid these costs, unfortunately. Bureaucracy sucks but you need it for the legal mechanisms to run smoothly.

Solicitor fees

You need to keep these legal fees in mind ahead of time as they can get quite expensive… A solicitor can charge you anything in the range of £850 and £1,500

Our best advice is to hire someone that comes recommended. You don’t want to be paying all this money for someone whom you can’t trust will do a great job.

Property Surveyor

Before you make an offer on a property, it is a good idea to get it inspected by a surveyor. This is not the same as the survey that your mortgage provider will do. They are focused on the valuation and ultimately have the bank’s best interest at heart. 

If you want to be thorough and have a clear idea about what parts of the house will need renovation, hire your own surveyor. This way, you can get an idea about potential major red flags the house might have. Plus, you can also save on repair costs in the long run. Future-you will be eternally grateful…

Now, let’s turn to those infamous numbers. Property surveys vary in the depth the surveyor will inspect the house. For a basic home condition survey, they would charge you ca. £250. A full structural survey is more expensive – it can be £600 or more.

Of course, if you buy a new build, this cost can be avoided.

Reservation fee

If you have your eyes set on a new build, you will need to add an extra cost to your list: the reservation fee. Once the home builder accepts your offer, you’ll have to pay them to reserve the property. 

This reservation fee is usually between £500 to £1,000. However, in most cases, after the completion is done, the sum is deducted from the purchase price. Keep in mind though that the fee is non-refundable. 

Buildings insurance

The mortgage provided will most probably require you to pay building insurance. This will protect you from financial burdens caused by a fire, flood, or other damages to your new home.

Heads up, you need to have an insurance contract ready by the Exchange date. From that moment on it is your responsibility to cover any damages to the house.

Moving Costs

It is easy to only focus on the actual purchase when you are planning your finances. You can’t forget the moving cost, however. It is not only fun and games after you get the Exchange. Arranging the actual moving can be expensive as well.

You need to factor in the removal company and the other smaller things you need for your move (e.g. cleaning out your old place, packaging material, etc.). And we haven’t even touched on the new furniture and decoration you already put into your cart on IKEA…

After Moving In

Moving step

Council Tax

Starting from the Completion Date, you are responsible for your new home. This brings with it some admin & financial duties as well. 

One such chore is registering yourself as the owner of your new home on the website of the Council Tax. You don’t need to do it exactly on the day you move in but make sure to complete the registration within the first 2 weeks.

What exactly is the Council Tax? It is an annual sum you need to pay your local council for their services (e.g. police and fire departments, rubbish collection, etc.). If you prefer to pay in smaller sums, you do have the option to pay in 10 monthly installments (this way you go 2 months without charge). 

The amount you need to pay varies by location. Click on the links below to find the rate that applies to you:

We do have some good news though for you. There are some instances where you can get a discount on the Council Tax. For example, if your income is below a certain figure or you are a single-adult household. Check with your local authority to find out whether you are eligible.

First mortgage payment

The timing of your first mortgage payment differs depending on your mortgage provider. Make sure you know when the bank will deduct it though so it doesn’t take you by surprise. Not having enough money in the bank when the payment is due because you spent all your money on furniture is not what you want.

Maintenance and repairs

By the time you move into your house, the charges add up and your bank account can seem a bit on the emptier side. That is why we would suggest waiting a few months before doing any major house improvements. 

Of course, it can happen that you simply just cannot wait for a certain repair. A thorough surveyor helps with this. They can flag any parts of your new home that needs instant care so you can add the repair costs to your budget ahead of your move.

Running costs

Finally, the costs of living… Of course, you paid for utilities in your last place as well. But the sum you see on your first check for your new home can be quite surprising. Especially if you size up house-wise.

Summary

Overall, house buying is expensive. This is no surprise. What can be shocking though is the charges that come on top of the purchase price. You need to do some thorough research. There are some costs that can be reduced if you are smart about it.

We suggest first investigating the prices in your local area. Make sure you add this to your budget before you settle on a house price you can afford. 

If you are looking for houses perfect for first-time buyers, browse our properties. Our amazing selection of new builds will sure help you find your dream home. And the best part: you can save some hard-earned cash with the Help To Buy: Equity Loan.

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