Costs of Buying A House
Buying a new home can be even more expensive than you expect. There are lots of hidden costs that can add more than 10% to the total bill, which you need to budget for. Running a property also costs more than many former renters expect. If you don’t prepare for it, the first few years of owning your own home can be a time of real hardship.
Paying for your new home is the overwhelming cost, of course, but there are many other costs which are rather hidden until you start the process of buying a home. Here we set them out so you can budget for these costs:
1. Stamp duty
This can an add many thousands of pounds, as much as 7%, to the cost of buying a home. Stamp duty is a government tax on homes costing £125,001 or more. First time buyers are exempt from the tax on the first £300,000 for properties worth up to £500,000. See our guide on How much is stamp duty and when do I have to pay it, which includes a stamp duty calculator
This is the legal process involved in buying a property, including various local searches so your conveyancing solicitor can flag up any local issues you need to be aware of, and registering change of ownership with the Land Registry. How much conveyancing fees cost also depends on the value of the home you are buying, whether it is freehold or leasehold and the local searches you have done. Conveyancing costs can range from £500 to £1500, plus £250-450 for disbursements (local searches etc). Solicitors tend to be more expensive. For more, see Conveyancing made easy for buyers and How much should conveyancing fees cost?
It’s well worth getting a professional survey of the state of your building’s construction and condition before you buy it. Surveys can prove expensive, from £400 to well over £1000, depending on what type of survey you have. See What sort of survey should I have?
4. Valuation fees
Your mortgage lender will also want to conduct a valuation survey. This doesn’t look at the condition of the property but is produced for the lender who wants to know the property is worth at least what they are lending you. Some lenders don’t charge a mortgage valuation fee but if they do they are usually around £200.
5. Mortgage Arrangement Fees
These fees are often charged by mortgage companies, and can range from a few hundred pounds to 1% of the mortgage, although the average is £1000. Some lenders insist you pay the fees up front which means you won’t be paying interest on it; others add it to the mortgage, which might be better if you can’t afford yet another financial outlay at the time of buying your home.
6. Mortgage broker fees
We recommend using a mortgage broker as they can find you the best deal from a wide selection of lenders. Some mortgage brokers charge no fee, while others charge between a few hundred pounds up to 1% of your mortgage. For fee-free mortgage advice we have teamed up with London and Country.
7. Estate agent fees
Do not fear – the seller rather than buyer pays these, but watch out for dodgy Sale by Tender tactics where the Estate Agent tries to get the vendor and you to pay fees. If you are selling at the same time to fund your new home, remember to factor in fees – See How much should I pay the estate agent?
8. Life Insurance
This provides a source of money your family can rely on to cover any debt such as a mortgage in the event of your death. Many people purchase it when they take out a mortgage, but you should watch for the commission and cancellation fee – See Do I Need Life Insurance?
If you have little furniture and energetic friends, you can do this for free. But if you have a lot, then hiring a professional removals firm can cost anywhere from £350 to many thousands of pounds, depending on the size of your house and how far you are moving. Hiring a man or two and a van might be a more reasonable way forward
- Furniture and white goods – unless you are prepared to sleep on the floor and drink warm milk, you will need a bed and a fridge, and all the other furniture. It is possible to cut costs buying second hand, but it is easy to spend thousands and the sky is the limit
- Redecorating – few new homes need no work done to them. Most need some redecoration or other minor building works. Doing it yourself can cut costs, but most new homeowners spend far more than they expect on doing up their new place. Again, how much you spend completely depends on how much work you are having done
The Hidden Costs of Owning a Property
Once you have moved into a property, it obviously isn’t just the mortgage you have to worry about about paying. There’s all those other things:
- Water, gas and electricity bills can be expensive monthly costs, adding up to a few hundred pounds a month for large properties. They are pretty much impossible to avoid, although energy bills can often be reduced (see How can I reduce my water bills? and How can I cut my gas bill?)
- Council tax has to be paid by occupants of properties, and can range from a couple of hundred pounds a year for a small property in low cost local authorities to several thousand for bigger houses in expensive councils
- Buildings and contents insurance can come to anywhere between a few hundred and thousands of pounds a year, depending upon what you are insuring, how much your home is worth, when it was built and from what material, the rebuilding costs, the locks on your doors, your job etc. See How should I insure my home?
- Ground rent & service charge – if you live in a leasehold property, you may have to pay an annual ground rent and service charge to the freeholder. You may also be liable for special contributions to work on common areas or the structure of the building (such as a new roof). For more information, see Leasehold v freehold – what’s the difference?
- Service charges – If you live in a serviced apartment, you may have a regular service charge to pay
- Residents’ parking – in many towns and cities, you have to pay an annual fee to be allowed to park your car in the street, and then buy permits for your visitors
- Maintenance and building work – repairing the roof, redoing the wiring, or fixing subsidence all add major costs. If the boiler kicks in, there is a leak, or the fridge packs in, you will need to pay
- Television, broadband, cable and telephone add to the monthly bills
- Mortgages made simple
- Top tips: how to save for a deposit
- How to improve your credit rating before getting a mortgage
- How the government can help you buy a home. An overview of schemes
- How do I know I’m not paying too much?
- The legal side of buying a home explained
- Top tips: getting to the front of the buyers’ queue
- Do I need life insurance?
- How much should conveyancing fees cost?
- Getting a mortgage on a leasehold property
- Leasehold charges – what to know before you buy
- How to buy and sell at the same time