There are quite a few costs to consider when buying your home
WHEN MULLING OVER the things to consider when buying a home, the process can become increasingly daunting. There are, after all, a lot of things to consider. Beyond the purchase price, there are a number of additional costs to buying your property which can add more than 10% to the total bill.
Knowing what to expect and how to go about it the right way is crucial.
When it comes to putting down a deposit to buy a property, the more you can save up, the better. But saving up a deposit for a mortgage is one of the biggest hurdles property hunters face. Prior to the mortgage guarantee scheme being announced by the UK government as part of the 2021 Budget, to secure a mortgage you were likely to need a minimum deposit of between 10-15%, which would mean you’re borrowing at least 85-90% of the purchase price from a lender.
The new mortgage guarantee scheme provides support for banking institutions to offer new 91% – 95% LTV residential mortgages up to a maximum property value of £600,000. The scheme will initially run to 31 December 2022, although this will be reviewed before the end date.
Mortgages issued under the scheme are partially backed by the UK government to encourage lenders to offer higher LTV’s to certain borrowers.
A larger deposit can also mean your mortgage repayments are lower, depending on your repayment term. It’s worth saving up as much as possible towards your deposit to give you a better chance at securing a good deal.
Stamp Duty Land Tax (SDLT) is a government tax paid by the buyers of a UK residential property.
This includes investment property purchases such as buy to lets, holiday lets, airbnb, second homes and holiday homes. These second properties also attract an additional tax levy which is payable on top of the standard stamp duty.
First time buyers can claim a lower rate of stamp duty.
Read more about Stamp Duty Land Tax (SDLT).
SOLICITOR AND CONVEYANCING FEES
Conveyancing is the name given to all the legal formalities and paperwork involved when you buy, sell, remortgage or transfer equity from a property or piece of land. This is carried out by a qualified conveyancer (property lawyer) or solicitor, and the charges for these services are known as ‘conveyancing fees’.
No two transactions are the same and fees will reflect the particular details of a sale and purchase. For example, dealing with the purchase of a flat with a short lease or buying a property in a brand new development will often involve much more work than buying a freehold terraced house.
You will also be required to pay disbursements for a number of required legal searches, such as electronic ID verification, bankruptcy searches and local authority searches.
To give you a general idea, here are some of the typical conveyancing and/or solicitor costs that could be included in your final bill:
- Solicitors’ fees
- Stamp Duty Land Tax (in England, Land Transaction Tax in Wales)
- Land Registry fees
- Electronic bank transfer fee
- Management pack for leasehold properties
- Estate agent costs
- VAT at 20%
Buying a property for the first time, moving home or adding a property to your portfolio can all be equally stressful and exciting. It’s a big move with huge financial consequences, and you need to know that you have an experienced professional working for you, properly handling all of the legal issues.
When you apply for a mortgage, you will incur some costs.
Mortgage fees often include:
- Arrangement fee. A fee you pay for the lender to set up your mortgage, sometimes referred to as a booking fee or product fee. You can usually choose between paying upfront or adding it to the mortgage, but it will ultimately cost more to do the latter as you will pay interest on it. Some arrangement fees are charged as a percentage of the loan, rather than a flat fee.
- Higher lending charge (HLC). Commonly charged on mortgages where the loan to value – or LTV is 75% or higher.
- Property valuation fee. The lender will need you to pay to have the property valued.
Confusingly, a survey and a mortgage valuation are not the same thing.
A mortgage valuation is for the mortgage lender and shows the lender that the property is worth what you’re paying for it. It will not find structural problems with the property.
A survey is for you, the buyer, and will confirm the structure is sound and highlight any potential problems. The survey you need usually depends on the type and age of the property you want to buy. There are various types of survey, each with their own benefits, and they are organised by level. The higher the level, the more in-depth the survey is.
Property surveys are carried out by Chartered Surveyors, who should be accredited by RICS (Royal Institution of Chartered Surveyors).
Read more on the different types of property survey.
Moving house can be an expensive task and it’s easy to sometimes overlook the costs involved. Unless your possessions are easily movable, it’s always worth hiring a professional removals company to help you move rather than the DIY alternative.
Your overall moving expenses certainly increase with the scale of the move and depend on a number of different factors. The amount of goods being transported is a key consideration, but the distance travelled, size of crew and speed of packing will also play a role in deciding the total cost.
Use a company with a good reputation, which generally comes by being part of the British Association of Removers. Check that they have insurance, otherwise your possessions could be at risk.
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