What Are the Different Costs of Buying A House?

Man Holding A House

When buying a home, people can quickly become aware of the hidden “fees” that are associated with purchasing a property. If this is uncharted territory for yourself, you may not expect or understand why you have to pay these additional fees, charges, and taxes before and after you move into your new house.

We understand this and decided to make a comprehensive guide on all the extra costs you need to consider when buying a home.

12 Costs Involved In Buying A House

Below you can see 12 different costs involved in buying a home that you may or may not have expected:

1. The Deposit

Let’s start with the obvious and work our way down. Back in the day, you used to be able to get a 100% mortgage without any down payment. This is now a thing of the past. Now you need a deposit to get a mortgage.

Typically, this is around 10% – 15% of the overall loan value. For example, if you were to apply for a mortgage for a home that costs £200,000, you’ll be expected to pay around £20,000 – £30,000 before they consider giving you the loan.

“This scheme will make a real difference in enabling more first-time buyers and home-movers, with a minimum of 5% deposit, to get the keys to their new home”

Michelle Andrews, HSBC UK

If you cannot afford such a large amount, there are other options available. This includes the government-backed 5% deposit scheme, that is helping first-time buyers get on the property ladder.

Apart from this, you’ll also need to pass their mortgage affordability test, consisting of such things as your income, debts, credit scores, etc.

2. Stamp Duty

Something most are not aware of is Stamp Duty. You’ll have to pay stamp duty on your home if you fit one of the following criteria’s:

  • You are purchasing a home in England or Northern Island, and the property’s value is more than £125,000 (from Oct-2021)
  • You are purchasing a home in Scotland, and the property’s value is more than £250,000.
  • You are purchasing a home in Wales, and the property’s value is more than £180,000

If the property you’re purchasing is below the above amounts, you will not need to pay stamp duty. Also, if you are a first-time buyer, you will either pay no tax or will be eligible for a discount if the house is below £500,000.

To find out how much stamp duty you may need to pay, check HMRC’s official website.

3. Survey Cost

This is optional, but I highly recommend any buyer to factor in a survey costs when purchasing a home. In short, a survey is when a surveyor inspects your property for any “hidden” problems that may be hard to spot by the eye.

Getting a survey will give you peace of mind knowing that your property hasn’t got any structural, electrical, or plumbing issues before you move in. If a problem does creep up within the survey, this could also be the perfect opportunity to renegotiate the price.

4. Conveyancing Fees

Fees that nobody wants to pay, but all homeowners have to. Conveyancing is simply the legal process that is encountered when purchasing a property. There are two types of conveyancing fees that you have to pay, these are:

  • Disbursements – This can include several local searches that your solicitor may perform for you, such as ownership of Land Registry or registering change.
  • Legal Fees – These are the fees you’ll be charged by your conveyancer or solicitor for the work they’ve done for you.

Depending on your property’s value and size, these fees will vary from house to house. However, you can estimate that you’ll pay around £850 – £2,000, also dependent on the conveyancing solicitor you choose.

5. Mortgage Valuation Fees

When applying for a mortgage, your lender will want to perform a valuation survey on the property. This just ensures them that the mortgage value you’re requesting is suitable for the building, and if the worst was to happen, they can repossess the house and claim their losses back.

6. Mortgage Arrangement Fees

This fee can occur from mortgage companies and can range massively. Here you’ll have to pay from a few hundred pounds to (in some cases) 1% of your overall mortgage. Usually, they’ll give you two options, either pay this fee outright or add it to your mortgage but pay interest on it. 

7. Mortage Broker Fees

Depending on the mortgage broker you choose, they may slide in a hidden fee that is entirely unnecessary. Beware that some brokers won’t pass this fee on and try to opt-in for a fee-free mortgage broker when you’re looking for the best mortgage deal. 

8. Removal Costs

Something you may not need to pay if you have light furniture and very helpful friends or family. But if this isn’t the case, you may need to hire a removal team to help you. This won’t be a significant expense. Depending on the size of your house and location, you can expect to pay around £250 – £600.

9. Insurance

Apart from buildings insurance which is often required by most mortgage lenders, insurance is optional. However, if you want to be fully covered, you should consider life insurance, home insurance, and contents insurance (depending on the value of goods inside). If you are worried about not being able to make your mortgage payments, you could also consider mortgage protection insurance.

All insurance types can range greatly in price, depending on the overall value or location of the building.

10. Furniture 

If this is your first home, you’ll need to purchase furniture. Be sure to factor this into your budget, as you’ll need some essential items upon buying your property. Items such as a bed, fridge, and maybe some cooking appliances will all have to be purchased and can certainly rack up the costs of buying a home. When moving in, for the time being, try to stick with second-hand furniture unless your budget doesn’t require you to do so.

11. Redecorating

If you’re lucky, you may be moving into your dream home and therefore won’t need to redecorate anything. However, there’s a highly likely chance that something will need to be changed as you don’t like it. Although this will hopefully only be minor, cheap renovation works, it’s something to consider when budgeting for a home.

12. Emergency Fund

Once you’ve factored in all of the above, you’ll need an emergency fund in case any unexpected fees or pay-outs are required to inhabit your home. Although this isn’t something you must consider, it’ll certainly provide you with a much smoother transaction with becoming a homeowner. It’s always good to have enough saved to cover 3 – 6 months of your usual home running costs.

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