All the Costs to Consider When Buying a Home
Since the government announcement of a temporary stamp duty holiday for people in England and Northern Ireland, and lenders bringing back mortgages for borrowers with a 10% deposit, there has been a surge of interest in buying homes. Although a recession might not seem like the best time to buy, property experts claim that first-time buyers should only wait to buy if they are concerned about their finances or issues arising with their jobs. Otherwise, buyers can continue to look around as the supply may shrink and demand will continue.
While the decision of whether right now is a good time to buy or not ultimately lies with you, one thing you should be aware of, which is also something that could influence your decision, is the overall costs involved in buying a place. We don't mean to rain on your parade — buying a house is a super exciting time in your life — but you gotta be in the know so you're not left reeling from unexpected costs.
Besides the monthly mortgage repayment (which, in London, stands at an average of £2,168), here are all the other costs associated with buying a home:
Deposit
The first essential cost of buying a home is the deposit. If you’re a first-time buyer you will normally have to find about 5% of the purchase price in cash, so, for example, £12,500 for a £250,000 property. The more you can save up for a deposit the better, because it will reduce your loan-to-value ratio. A loan to value (LTV) ratio compares the size of the loan you're requesting to take out compared to the appraised value of the item you want to buy.
Valuation Fee
The mortgage lender has to assess the value of the property to determine how much they are prepared to lend you. The cost can be anywhere around £150-£1,500 based on the property’s value.
Stamp Duty
Stamp duty is the tax you pay on transactions involving property and can be as high as 12%. However, on 8 July, the government announced a temporary change to the minimum threshold for stamp duty, raising it from £125,000 to £500,000. You can calculate how much stamp duty you'd have to pay in your property purchase here.
CONVEYANCING/Legal Fees
Conveyancing fees cover the amount you’ll pay to make sure the legal side of a house sale or purchase is handled correctly, without any flukes. Conveyancing fees can be split into two parts: the legal fees (what the conveyancer or solicitor charges for doing the work), and the disbursements (what third parties charge for certain services). Conveyancing fees vary but are typically between £850-£1500, plus the cost of disbursements. Legal fees for leasehold properties tend to cost more. Some conveyancing fees apply to sellers only, and some only need to be paid by buyers.
Surveyors Fee
You can pay for a qualified surveyor to check a property before you buy it. They will look at the condition of the property and let you know if there are any issues that could cost you money after your purchase. Generally speaking, a basic survey could cost around £250, but an extensive buildings survey on, say, a £2 million home could cost £2,000.
Removal/Moving Costs
You're likely to need to pay to hire a removals company or to hire a van, armed with friends who are willing to do some heavy lifting. Moving home usually costs between £300 and £800 (depending how far you're moving and how much stuff you're moving with you, of course).
Insurance
Most lenders require you to have buildings insurance as part of the mortgage agreement, and it's advised to have contents insurance as well. The cost can vary depending on the level of cover you want, as well as the condition of your home. The average cost of home insurance in the UK is £163.
Mortgage Fees
Mortgages can come with several fees, which lenders have to include when they show the cost of a mortgage. These can include: a booking fee of £99-£250 / an arrangement fee of up to £2,000, and a mortgage valuation fee (£150 or more).
adviser/broker
Some people choose to get advice from a broker or independent financial adviser when they take out a mortgage. Brokers help you find a good deal and even save money (if they get you a better mortgage than you could find yourself). The average cost of a mortgage broker is £500. Some brokers are free because they are paid on commission.