The Cost of Buying a House, by Matt Stevens
For the vast majority of people, the purchasing of a property marks the biggest investment they’ll make throughout their life. This is true especially today, given that the price of homes collectively has soared over recent years.
However, while the market value of a property you may be thinking of buying provides an indication of its price, it doesn’t actually represent its true cost. Indeed, beyond the cost of a house on the surface, there are many other additional costs that get added on both during and after the final sale.
These sums are not insignificant either, evidently making it important for you to factor them into your calculations. So that you can get a comprehensive understanding on the matter, we’ve put together this article which covers the cost of buying a house in the UK.
The up-front costs involved with buying a house are typically the largest direct expenses and include:
1. Your Deposit
Your mortgage deposit is the amount you initially put towards the value of a house you want to purchase, the rest being made up by a mortgage lender. As a general rule, if you have a sizable mortgage deposit, you’ll be entitled to the most competitive deals on the market, such as those which come with 60% LTV mortgages. The minimum amount required for a deposit is around 5-10%, in turn giving you a 95% LTV mortgage or 90% LTV mortgage, respectively.
2. Stamp Duty
If you’re buying a residential property in the UK which is valued at over £250,000, then you will have to pay Stamp Duty Land Tax. Albeit, if you’re a first-time buyer, then the threshold is extended to £425,000. On the other hand, if you’re buying a second home, then you’re required to pay an additional 3% stamp duty on top of the according standard rate for a property costing more than £40,000.
See our guide to second home taxes for further related information.
3. A Valuation Fee
A valuation fee is charged by your mortgage provider to assess the value of your chosen property in order to thereafter determine how much they are willing to lend you. Being based on a certain property’s value, a valuation can cost anywhere between £150 to £1,500 although for some mortgage types lenders will not charge you.
4. A Surveyor’s Fee
Prior to buying any home, it’s essential that you have a survey carried out on it. A surveyor will perform a structural assessment of a property so as to detect any outstanding issues with the condition of it. Surveys range from £250-£600 in cost, but are worth it in case any costly repairs will be needed in future.
5. Legal Fees
For all the legal work involved in buying a home, you’ll usually need to pay a licenced solicitor or conveyancer. The total required for legal fees can range from around £850-£1,500, but is often well worth the cost for the assurance it affords you.
These bodies also carry out local searches for you. For more details on this topic, read our piece on what searches are done when buying a house.
6. An Electronic Transfer Fee
You’ll be charged a fee for the transfer of the mortgage money from the lender to the solicitor. This cost is relatively negligible, being between £40-£50.
7. Mortgage Broker Fees
A mortgage broker will charge for acting as an intermediary between you and the lender. Yet, despite any associated cost, a broker will offer invaluable advice, assistance, and find products which are the most financially advantageous for you, i.e., those with the best interest rates for your position. Meaning, you inevitably end up negating the cost for a broker through the long-term savings you make.
Moreover, brokers have access to a pool of mortgage providers, and so this means you won’t have to go from lender to lender before finding the perfect deal, nor risk rejection.
If you want to wholly avoid rejection you should get an idea of your current eligibility before you apply for a mortgage, you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you to seek out any possible mistakes or fraudulent activity on your file, so that you can deal with such problems right away and improve your credit score. The trial and subscription can be cancelled at any time.
It’s almost universally known that getting a mortgage entails a series of monthly payments for the set length of its term, yet this doesn’t constitute all the mortgage fees you’re expected to pay.
Specifically, there is a booking fee which will run you between £99-£250, an arrangement fee of up to £2,500, and a mortgage valuation fee of between £100-250. Having said this, you might not need to pay a mortgage valuation fee or a booking fee depending on your location and the type of mortgage you applied for.
If you have the option to add these fees to the overall cost of your mortgage, we recommend instead paying them up-front because it’ll mean you’ll have to pay interest on them otherwise.
Unfortunately, the costs for buying a house don’t end after all we’ve mentioned, but will continue throughout your home ownership. Such costs refer to:
There are various types of insurance, but the one you’ll be required to pay for is buildings insurance. This works to safeguard your new home against any potential damage caused by things like from subsidence, fires, and floods.
Lenders stipulate the need for home insurance because it not only protects your investment in the property, but likewise their interest. While buildings insurance is mandatory, homeowners can also opt for contents insurance, redundancy insurance, life insurance, and critical illness cover for further protection.
2. Council Tax
The degree of council tax you’ll have to pay is determined by where your chosen property is located, as well as the valuation band it falls under and if you’re eligible for a discount. This applies to England and Scotland, but properties are rather taxed on an individual basis in Northern Ireland.
3. Maintenance and Repairs
The previously discussed survey should have outlined any costs you were likely to have had to pay in future for maintenance and repairs on your new home. For renovations and decorating, it’s prudent to take these into account before completing your property purchase.
Utility costs are integral to keeping your home running, they comprise those bills for your electric, gas, and water. If you want to get an idea of how much you’ll spend on home utilities each year, simply ask the current homeowner. Bear in mind that utilities don’t include your broadband or TV package either.
As shown throughout, the cost of buying and owning a house is a great deal higher than the asking price. There are many different fees you’ll have to pay in order to acquire a property, and then more still when you eventually get it.
We at The Mortgage Genie understand that these costs mount up considerably, and is exactly why we are dedicated to helping prospective homeowners get the best mortgage product for their personal situation and financial circumstances, all while guiding them through the entire process with sound advice. If you’re in need of a team of expert mortgage brokers, then be sure to reach us at 01915809890 today. And why not see how much you could borrow up to right now by using our mortgage calculator?