The cost of buying a house is likely to be one of the largest sums of money you will spend, but what about all those extra expenses that might not have crossed your mind?
Buying a property is a big step, whether you are a first-time buyer or on your fourth home. While you will be well aware of how expensive it is to buy a home, you may not have thought through all of the smaller costs.
It’s not just your mortgage that you will need to keep on top of - among the additional costs that need to be covered are legal fees, surveyor’s fees, stamp duty and moving costs. This guide will help walk you through the expenses of buying a home so that you don’t get caught out.
How much does a deposit cost?
One of the biggest costs that you will have to account for is the deposit you will need to pay for your property. Deposits typically range between 5 per cent - often available through schemes such as Help to Buy - and 20 per cent. Generally the bigger the deposit you can pay the more likely you are to secure a mortgage with a lower interest rate. The larger the deposit, the more preferential your rates are likely to be.
What does a valuation cover?
If you are arranging to get a mortgage, the lender will send a valuer to check out the property and make sure it is worth the amount they are lending you. Lenders do this so that in a worst case scenario where a borrower fails to pay their monthly mortgage payments, they can repossess the property and still get some money back from it when it is sold.
There is a good chance you will have to pay for a valuation. Typically, they start from about £150 and can rise to as much as £1,500 depending on the value of the property. Not all lenders will charge you for a valuation as they are sometimes included in your mortgage deal.
In Scotland valuations work differently as sellers have to supply a home report that comes with a valuation included. The lender may ask for the mortgage valuation to be updated if it is older than three months or if it was completed by a surveyor that is not on their approved panel.
What are mortgage arrangement fees?
You will have to pay your lender (the bank or building society) a fee for arranging your funds for your mortgage. This varies according to the lender, meaning that you may not have to pay anything at all or could end up paying tens of thousands of pounds depending on the mortgage deal chosen. Arrangement fees can be added to your mortgage, but keep in mind that you will then have to pay interest on that amount. Some arrangement fees are now charged as a percentage of your overall loan and it is also worth noting that often deals with the highest fees have lower interest rates.
How much are conveyancing fees or solicitor fees for buying a house?
To help you through the property buying process you will need to hire a solicitor to handle the legal aspects of the purchase, otherwise known as conveyancing. Their responsibilities usually include drawing up contracts, dealing with Land Registry, sorting out the payment of stamp duty and transferring the payment for your property.
Fees for these services vary, but you should allow from between £500 to £1,500. It is advisable to get a quote upfront before the solicitor does any work. Some solicitors charge by the hour, while others will do the job for a set amount or calculate their fee as a percentage based on the price of your property.
Additionally, your solicitor will also carry out searches to check that there aren’t any planning issues like new roads or developments being planned that could affect your new home. These searches also include checks for any issues with rights of way, the environment and clauses linked to the use of the property.
Costs are usually included in the solicitor's fee, and unless there's something seriously amiss or time consuming, estimate from about £200 to £300.
What is the Land Registry fee?
Your property has to be registered with the Government's Land Registry department. A small fee is charged, depending on the value of the property and can range from £40 and £910.
What are the costs of surveys?
There are several different surveys available that come at prices relative to how comprehensive they are. The three types are: a condition report, a homebuyer report and a buildings survey. The type of survey required tends to vary in accordance with the age of a property. The older the building is, the more important a detailed survey becomes.
A lender usually wants a survey carried out, particularly if the property is listed, in a tired state or is in an area where there are concerns about flooding, subsidence or anything else that could affect the stability of the property.
A condition report would be the most appropriate option for a newly-built property or a property in excellent condition and normally costs around £250. Modern properties and standard older properties that have been maintained fairly well are best suited to a homebuyer report. Prices will typically start at £400, but will rise in accordance with the value of the property. If you are buying an old or unusual property or planning to do extensive building work, then a full building survey is likely to be required. A building survey is the most expensive but detailed option and prices usually start from £600.
How much are stamp duty fees?
Stamp duty land tax is a tax charged on all purchases of houses, flats, land and buildings in England, Wales and Northern Ireland. Purchases that cost less than £125,000 are exempt from the tax. In Scotland you have to pay a Land and Buildings Transaction Tax when you buy a property instead. Scottish property purchases up to £145,000 are not taxed.
Stamp duty can be a fairly hefty charge, so it's important to factor it into your budget. The amount of stamp duty buyers pay varies depending on the price of the property. Following an overhaul of the system in December 2014, stamp duty rates now only apply to the amount of the property price that falls within each tax band. For example, on a property costing £195,000 you would not pay any tax on the first £125,000 and 2 per cent on the remaining £70,000, meaning that you would pay a total of £1,400. Go to Zoopla's stamp duty calculator to work out how much tax you will need to pay on your property.
|Property price||Stamp duty rate|
|£0 - £125,000||0%|
|£125,001 - £250,000||2%|
|£250,001 - £925,000||5%|
|£925,001 - £1,500,000||10%|
|£1,500,001 and over||12%|
(correct as of July 2015)
|Purchase price||LBTT rate|
|Up to £145,000||0%|
|Above £145,000 to £250,000||2%|
|Above £250,000 to £325,000||5%|
|Above £325,000 to £750,000||10%|
(correct as of July 2015)
Note, that for purchasers of second homes, Stamp Duty costs will be higher from 1 April, 2016. Find out more with our Q&A.
How expensive it it to use a removals company?
Moving can cost anything from about £1,000 to hire a small van, right up to several thousand pounds, depending on how many services - packing for example - you sign up for and how much of the moving you can do yourself or with friends and family.
If you go down the route of using a removals company, a useful tip to save money is to de-clutter as much as you can before you get an estimate from them. They charge you according to how much stuff you have, so losing a good amount of it before they come around to assess your belongings could save you a good deal of cash.
What extra costs need to be considered?
Depending on your current living situation, you may need to buy a lot of furnishings. The cost of a new bed, sofa and dining room table can easily add up. It is also easy to overlook items such as curtains, carpets and paint. It is also worth double checking if there are any white goods (washing machine and fridge for example) included in the sale of the property and making sure they are noted in the contract.
Is it worth having home insurance?
There are two types of home insurance: buildings insurance and contents insurance. Most lenders will require that you have buildings insurance so that you are covered in the event of structural damage occurring to your home. This type of insurance typically protects you from having to pay out against events such as flooding, a fire or subsidence.
Contents cover is also worth investing in and will ensure that your furniture and personal belongings are protected in the event of incidents such as theft or a fire.
The amount that you have to pay for home insurance will generally depend on factors such as the size of the property, its location and how much cover you want for your possessions. If you are buying a leasehold property, it is possible that the cost of building insurance will be included in your service charges. To find the best deals on home insurance shop around on comparison websites like uSwitch.
How much is council tax?
If you are older than 18 and own or rent a home you will have to pay council tax annually. The money you pay towards council tax funds local services such as the police, the fire brigade, rubbish collection, libraries and transport.
The value of your property determines which tax band your home will fall into
The amount of tax you pay is determined by the valuation band your property falls into and the area you live in. In England and Scotland there are eight different tax bands, while in Wales there are nine. Northern Ireland does not use this system at all, as they work out their domestic rates based on rental value. To find out how much tax you will have to pay, check the Government website.
In some instances your tax band may be re-evaluated and it could change. Among the reasons for a tax band change are if you make major alterations to your property such as adding an extension or an annex - although the band will not be updated until the property is sold. Other potential changes could occur if you split your property into self contained flats, or convert flats into a single property, if you start or stop working from home, or if there is a significant change to your local area.
Discounts may be available on the amount of council tax you have to pay. Reductions are typically available for those that are single, disabled, on a low income, not living in their home or using the property as a furnished holiday home. To find out if you qualify for a discount or a reduction have a look at the Government websites.
Some properties are exempt from council tax entirely. The tax does not have to be paid when:
- the property is only occupied by full-time students or people under 18
- the property is unoccupied following a death (exempt for six months)
- the property is unoccupied due to major renovations (exempt for 12 months)
- the property is repossessed
- the property is used as accommodation for those in the armed forces.
What are leasehold costs?
If you buy a property with a lease, you will have to pay ground rent and service charge to the owner of the freehold. These fees normally fund the upkeep of the property and its communal areas.
How expensive will the utility bills be?
The main components of utility bills are gas, electricity and water. The cost of these services will vary depending on the size of your property and how much they are used. It is a good idea to check with the previous owners or tenants how much they were spending on their utility bills each month to give you a rough idea of what you will pay. Other bills you will need to account for include internet, phone and TV licence.
While every effort has been taken to ensure the above information is up to date, some inaccuracies may occur. All information was correct at time of publication and is provided in good faith.