Thursday, April 25, 2019

What Does it Really Cost to Buy Your First Home

by Becky (writer), , January 17, 2017

Take a look at some of the hidden costs to buying a home that most first time buyers are surprised by

Buying your first home is such an exciting step. But whether you are looking for a city-centre flat or a cottage in a village, you need to think about the cost of the actual buying process when you’re doing your sums.

On top of finding the cash to cover the sale price of the property – usually by saving a deposit and borrowing the rest from a mortgage lender – you will need to pay a solicitor or conveyancer and there are additional costs that might surprise you.

If you’re buying a house or flat worth more than £125,000, you will also have to pay for stamp duty – a tax which can add thousands of pounds to the overall cost of your purchase. To avoid nasty surprises, you need to do your homework first.


The high cost of housing in the UK and the fact that the majority of mortgage lenders ask you to put down at least 10% of a property’s value, makes raising a deposit the biggest obstacle to homeownership. With the average cost of a UK home now at around £170,000, that’s means saving a total of £17,000.

On top of the interest you are charged on your mortgage, most lenders impose a range of fees when you take out a mortgage.

However, if you want to access the better interest rates, you’ll need at least 25% to put down which means saving a whopping £42,500.

Speak to a mortgage broker or financial to advisor to make sure you get the best deal available to you.

Budget for: Between £17,000 and £42,500

Lender’s valuation

Once you’ve found a property you like and had your offer accepted, your mortgage lender will want to carry out a valuation to ensure that the house or flat is worth at least the amount they plan to lend you. And this cost will usually fall at your door. The cost of a lender’s valuation will typically depend on the cost of the property you are buying.

Budget for: Between £200 and £500

Your own survey

A lender’s valuation however, is not a survey and won’t tell you about the condition of the home you are considering buying. To find this out, you will need to commission your own survey from an independent surveyor. You can find one at the Royal Institution of Chartered Surveyors.

The cheapest and most basic survey is the home condition survey. It’s generally only recommended for new-build and convention homes and costs about £250.

For greater peace of mind, you can choose a homebuyer’s report, which includes a valuation. This costs around £400.

If you have any concerns about the property or it is old, listed or an unusual structure, it may be worth paying for a full structural survey that typically costs anything from £600.

Budget for: Between £250 and £1,000

Local Authority Searches

You will have to pay for searches to be done on your home to check that there are no planning issues – for example a major road, supermarket or property development is going to be built nearby, as these could affect your purchase. Searches will also show whether your new home is properly serviced by underground drains.

Budget for: About £300

Mortgage fees

On top of the interest you are charged on your mortgage, most lenders impose a range of fees when you take out a mortgage. The main fee to look out for is the arrangement fee, which have been increasing in price recently.

Arrangement fees are now typically between £1,000 and £1,500, but some are charged as a percentage of the loan so they could work out even more. You will usually be given the choice of adding the arrangement fee to the loan. Although this can help alleviate the upfront costs, it does mean you will be paying interest on it for the length of your deal - unless you overpay on your mortgage by that amount at a later date.

Other fees to look out for include product fees, administration fees and even exit fees to leave the mortgage.

Budget for: Around £1,500

Solicitor’s fees

You’ll need to hire a solicitor or licensed conveyancer to handle the legal aspects of your purchase, such as the payment of stamp duty and transfer of the property funds to the seller’s solicitor. The cost of this will usually be somewhere between £500 and £750. You can fix the price upfront, but even if you do, there may be complications with the purchase which will increase the price.

Budget for: Between £500 and £1,500

Stamp duty

Stamp duty is the cost that hurts the most when it comes to buying a home as the tax is charged a flat rate of the purchase price. The rate you pay is tiered. Purchases of properties worth up to £125,000 are stamp duty-free. You’ll pay 1% on properties priced at up to £250,000; 3% on those worth between £250,000 and £500,000, and 4% on homes with a price tag of between £500,000 and £1million. If the home you are buying is over £2million, you’ll have to pay 7% in stamp duty.

Buy a house or flat for £250,000 then, and you will therefore have to factor in stamp duty of £2,500. Or on a £300,000 home, you will pay £9,000.

Budget for: Between £1,250 and £9,000

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