Purchasing a property or moving home is a highly stressful life event. This is because it takes time to choose a property, or put your house on the market and to get all of the necessary legal stuff out of the way. And of course the deal can always fall through, due to the chain effect. As well as this, there are the costs – both initial and ongoing – which can be punitive if you’re not prepared. This is why it’s essential to work these all out when it comes to your budget.
Here’s a breakdown of what to expect:
On average you’ll need at least 5-20% of the purchase price (with schemes such as Help to Buy you won’t need as big a deposit as you would normally). In general, the higher your deposit the more likely you’ll be to get a mortgage and a better deal when it comes to interest rates.
This is the most annoying of costs as it can be very onerous and stall movement in the market. This makes the lives of first-time buyers specifically difficult, which is why there were changes made to the stamp duty rate back in December’s Autumn Statement, where the ‘slab’ nature of the tax was altered in favour of a more ‘progressive’, income tax style. You’ll now pay nothing on the first £125,000 of the property price and those with properties worth less than £925,000 (after that the percentage goes up to 10%); will save money on stamp duty in comparison to what they paid before.
Valuation and mortgage fees
The mortgage lender will sometimes charge a valuation fee in order to assess the value of your property to establish how much they’ll lend you. The cost can vary from a couple of hundred pounds to over a thousand. Not all lenders do this, but it’s quite common. There are also mortgage fees to take into account, which include arrangement fees (up to £2,000) and booking fees (often a couple of hundred pounds).
Before you purchase a house you need to get it checked out by a surveyor. This is key to ensure that you don’t end up with repair problems further down the line. Surveys range from a basic home condition survey costing around £250 to a full structural survey which costs from around £600 plus.
You’ll also need a solicitor or a licenced conveyancer to carry out legal work when you’re buying and selling your property. They do local searches to check if there are any local plans such as major works in the pipeline. Overall, these costs tend to be £1,000, although this can vary.
Estate agent costs
These fees are paid by sellers, not buyers and range from 1% to 3% of the sale price (plus of course 20% VAT). This will take a large chunk of your budget, so you need to consider this when choosing your estate agent.
These vary, but if you can get a good deal, or know a ‘man with a van’ this could be the best route to go down. Average costs usually amount to a few hundred pounds.
Repairs: It’s not all about what you pay initially; there are also ongoing costs to bear in mind. The average repair bill for new owners is £5,750, although your survey should highlight problems that need fixing immediately.
Insurance: It’s also important to take out building insurance to protect your new home – although this can be included in the service charge if you’re a leaseholder. As well as this, remember contents insurance for your possessions, as well as life insurance to pay off your mortgage in case you die before you’ve repaid everything.
Council Tax: This can be really high depending on where you live and the valuation band the property is in. Make sure you take this into account before you purchase a property as you may end up in a high council tax area such as Surrey.
Running costs: How much are monthly utility bills? Water bills? Broadband? These can add hundreds per month onto your costs.
Leaseholders’ costs: If you’re a leaseholder you will have to pay ground rent (around £50-£100 a year) as well as service charges to the freeholder. These can be very high, so you must check the small print before you buy the property. There are many stories about people buying properties and then ending up being lumbered with big bills and being ripped off by the freeholder, so make sure you prepare yourself by researching previous costs and how much on average you’re expected to pay. If you try to negotiate with your freeholder and feel that you aren’t getting anywhere, you can seek redress through a Leaseholder Valuation Tribunal.