If you’re buying a property this year, congratulations! Whether you’re moving in with someone, getting married or finally leaving a flat-share or the family home to live in your first place, it’s a big deal.
But, amidst all the excitement, remember the importance of budgeting properly for what is probably the largest sum of money you’ve ever spent.
And beyond the price of the property, the various other charges can add over 10% to your overall bill. Here, we offer an overview of the costs involved for which you need to plan:
1.) Deposit
Strictly speaking, a deposit isn’t an extra cost, but you’ll typically struggle to purchase a home without one. And although 100% mortgages are available, if you can get your hands on, ideally, a 10% downpayment or higher, you’ll likely have more options when it comes to interest rates plus a greater choice of lenders, especially when buying your first home.
While saving up for a deposit, look for all possible sources of help, for example Lifetime ISAs. If you’re buying and selling simultaneously, you can put the equity from your existing home against your new mortgage.
Use an online mortgage calculator to work out how much you can afford.
2.) Stamp duty
This will probably be your biggest extra cost. Assuming you own just one residential property, you pay no stamp duty on places worth up to £125,000. Then you pay as follows:
· The portion from £125,000 to £250,000 = 2%
· The portion from £250,001 to £925,000 = 5%
· The portion from £925,001 to £1.5m = 10%
· Any portion above £1.5m = 12%
As one example, on a £295,000 house, you’d pay nothing on the first £125,000, 2% on the second £125,000 (i.e. £2,500) and 5% on the final £45,000 or £2,250. So total stamp duty would be £4,750.
3.) Legal costs
Usually, you’ll need around £1,800 in your budget to cover these expenses, for what’s called conveyancing. How much you pay will depend on the value of your home-to-be plus whether it’s leasehold or freehold, and the particular searches you order.
The fees come in two parts:
· Legal fees: Ranging from £500 to over £1,000, these are what a solicitor charges for doing the work.
· Disbursements: These include various local searches which allow your solicitor to identify any issues you need to know about, costing £250-£400, plus registering change of ownership with the Land Registry, typically costing £200-£300. In all, this element alone could require a budget of £700.
4.) Professional survey
A professional survey provides peace of mind that your future home is in a decent state and helps avoid unpleasant surprises further down the line. If you receive a below-par report on the property you want, you can use it as a negotiating tool. Expect to pay between £300 and £1,500, depending on the type of survey you choose.
The Royal Institution of Chartered Surveyors (RICS) offers three levels of survey, from the basic to a full structural report, which you may want for a property that’s older, or in poor condition.
5.) New builds: snagging survey
A snagging survey identifies issues with new builds from smaller, cosmetic problems to serious structural ones. Opt for a pre-completion inspection, or a full snagging survey. Budget from £300 for this service.
6.) Mortgage-based charges
You could face various mortgage-related charges when you buy a home. Mortgage lenders often apply arrangement fees to give you access to the best mortgage rates. These could cost up to £1,500. Alternatively, a no-fee mortgage broker could identify the best overall deal for you. They’ll explain your options, for example, if you’re transferring (porting) a current mortgage to a new place.
At the same time, your mortgage lender will want to carry out their own mortgage valuation survey, to confirm the property is worth the sum they’re lending. You may not be charged a mortgage valuation fee but, if this does apply, it could cost up to £300.
Finally, while some mortgage brokers don’t charge a fee, those who do could ask for up to 1% of your mortgage.
7.) Estate agent expenses
Most of the time, the seller pays estate agent fees, not the purchaser. The two notable exceptions to this are if you’re buying via the Modern Method of Auction, a type of online property auction.
Equally, if you’ve chosen to use a buying agent (like an estate agent but who will act exclusively in your interests), this will come at an extra cost.
8.) Removals
If you do this yourself with some help and a hired van, great. But most people will need a specialist removals company. Depending on distance and house size, this can cost from £350 to thousands.
9.) Insurance
Not every property transaction goes through as it should. Home Buyer Protection insurance allows you to claim back some of your outgoings if this happens to you. Policies cost from around £75. You may also want to consider life insurance, while you’ll also need contents and probably buildings insurance, too.
10.) Other expenses
These include furniture and white goods, redecorating, potentially a parking permit in your new home, cleaning fees and storage expenses.
Buying a home in Salisbury with Carter & May
Leading, award-winning Salisbury estate agents Carter & May covers the Salisbury city centre and the New Forest, Amesbury, Ringwood and Fordingbridge. We love our neck of the woods and know it well.
We’re here to help whether you’re selling your first property or you’re an old hand, and our way of doing things is highly personalised.
Get in touch today and book a free valuation.