First-time buyer



Extra costs when buying a home

June 9, 2022
Information published was correct at the time of writing

What to consider before jumping onto the property ladder

BUYING A HOME, or any kind of property, will quite possibly be one of the biggest financial decisions that we make in our lifetime, so it is important to be aware of the extra costs associated with buying a property before jumping onto the property ladder. Whilst you may be aware of the bigger expenses, there may also be some additional costs you need to consider. For example, the legal fees, stamp duty or the actual cost of moving.

It’s crucial to make sure you have budgeted for all the different costs involved. Here’s what you need to know.

STAMP DUTY
Stamp duty – or Stamp Duty Land Tax (SDLT) to give it its full name – is a fee charged by the Treasury that’s paid on property purchases. It applies to residential properties involved in sales over £125,000, and all non-residential properties or land in sales over £150,000. If you’re buying a property in Scotland, you’ll pay Land and Buildings Transaction Tax (LBTT) rather than stamp duty, over £145,000.

Conversely, you might have to pay an even higher rate than most homebuyers – it all depends on your own circumstances. In any property sale where it’s required, stamp duty must be paid by the buyer rather than the seller and is liable from the point that the transfer of ownership is completed.

CONVEYANCING
Conveyancers transfer the ownership of a property from one party to another, and you will need one when buying or selling a home. A few common conveyancing fees include land registration fees, transfer fees and local authority searches. The cost of conveyancing fees can vary depending on a number of factors, such as the value of the property, whether it’s freehold or leasehold and the local searches that need to be completed.

SURVEYS AND VALUATION FEES
Your mortgage lender will carry out a valuation survey that will look solely at the property’s worth – it doesn’t cover structural issues and won’t highlight any problems with the property, and you may be liable to cover the costs as part of your mortgage
product. How much a property survey costs can vary hugely depending on the type of survey you get.

A house survey is a detailed inspection of the condition of a property. It’s completed by a surveyor who visits the property, carries out an inspection and prepares a report on what they’ve found. Home buyers generally have a survey done on a property after their offer has been accepted by the seller (but the system works differently in Scotland).

Depending on the property’s value and what type of report you go for, this could cost anywhere from a few hundred pounds to over a thousand pounds.

MORTGAGE ARRANGEMENT AND OTHER FEES
The number of fees and costs associated with buying a property can be overwhelming. There are various mortgage arrangement and other fees you will be required to pay at different stages of the purchasing process. These can range from small administration fees and electronic transfer fees to larger charges that will cover essential services, and they can all have an impact on the true cost of your mortgage.

Any fees associated with the mortgage are set out clearly in the documents your lender provides before you commit to any specific mortgage. All lenders will take a different approach with regard to costs, which is why obtaining professional mortgage advice is essential.

ESTATE AGENT FEES
Estate agents’ fees vary enormously, and can add thousands of pounds to the cost of selling a home. If you sell your property using a traditional high-street estate agent, fees will usually be calculated as a percentage of the price paid by your buyer. This kind of estate agent’s fee is called ‘commission’.

While an estate agent’s fee can seem like an eye-watering sum, it’s not always advisable to choose the company offering to sell your home for the lowest fee just so you can save money. But, if you’re a first-time buyer, don’t worry, the seller will cover these costs!

INSURANCE
A property is likely to be the biggest purchase you’ll ever make. Having insurance can give you a safety net – and peace of mind – if things go wrong. So, it stands to reason that you’ll want to make sure you protect yourself and your home should the worst happen. Buildings insurance is usually compulsory if you have a mortgage, and could save you a fortune if something damages your home, like a fire or flood. General insurance is used to protect the economic value of your assets against accidents, damages or loss.

Contents insurance protects your belongings too. It may be cheaper to buy buildings and contents insurance together – but you can also buy them separately. Life insurance covers the cost of paying off your mortgage, if you die before it is paid off. Critical illness cover helps cover the cost of paying off your mortgage if you are diagnosed with a specified life-changing condition. Income protection helps cover your mortgage payments each month if you are unable to work due to an accident, sickness or redundancy.

REMOVAL SERVICES
Moving day can be hugely stressful. You can reduce that stress by booking a professional removals company early in the process. When it comes to removal services, prices range depending on a number of factors. The cost will vary greatly depending on the size of your property, the amount of items you want moved and how far it needs to be transported.

If you are moving locally removal companies are likely to charge you per hour. It is very unusual to be charged by weight of your belongings or distance travelled. Alternatively, if you opt for the DIY approach, this will increase the amount of time required, however can reduce the total cost of moving.

Don’t forget, our professional, friendly advisers are on hand to support you and can help you explore all of your options.

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