While buying a house can be exciting, it’s also important to be smart with your investment and understand the real cost of buying.
It’s not as simple as just finding a house, getting a mortgage and moving in. Buying a property is guaranteed to cost more than you expect – so here are a number of things to consider before making your property purchase.
Stamp Duty
If your property costs more than £125,000, you will have to pay stamp duty. However, in November 2017 new rules were announced that if you’re a first-time buyer and your property costs under £300,000 you are exempt.
If you’re buying a second home or a buy-to-let property, you will need to pay an extra 3% and will be charged stamp duty on any house costing more than £40,000.
Estate agency fee
First-time buyers will not come up against this issue, but if you’re selling your previous home, you need to factor in agency fees. This fee is usually a percentage of the final sale price, and is subject to the price of the property you sell.
Valuation Reports
The Valuation Report (not to be confused with a survey) is carried out by your lender and looks solely at the worth of your potential home – it doesn’t cover issues and won’t highlight problems with the property.
This report allows your lender to check that the property offers an acceptable security for the loan. The cost will vary according to which lender you use.
Mortgage arrangement cost
Many mortgages come with arrangement fees and these can vary. In some cases, this is non-refundable, even if the purchase falls through.
If you cannot afford this, you can usually add these to your mortgage loan – but you will be paying interest on this also. If you’re laying down a deposit of less than 25% or less, you may have to fork out a higher lending fee.
Bridge Loan and Home Equity Loan
When a homebuyer is buying another property before selling their existing home a common way of providing the deposit is by taking on a bridge loan or home equity loan. Either of these has the potential to prove expensive and it is usually preferable to delay buying another home until you have sold your existing home and received the proceeds of the sale.
Conveyancing Fees
When it comes to buying a property, you’ll need to hire a property solicitor or a licensed conveyancer to handle all the legal aspects.
Your legal adviser will either charge you a flat rate or percentage of the cost of the property. You should prepare to pay between £500 and £1,500 depending on the property and style of transaction.
When you instruct a solicitor to carry out the conveyancing process, they will need to conduct a variety of searches before your purchase can go ahead, ranging from environmental and water authority searches, to location-specific searches. The main two searches conducted are the Land Registry and Local Authority searches.
Land Registry is a government department that keeps all the records of registered properties in England and Wales. It charges a fee for registering the property with you – the new owner. This fee also depends on the cost of the property – it can vary between £90 and £140.
Local Authority searches are arguably the most important search conducted by your solicitor. They will look through all the information held by the local authority on your potential home and the surrounding area, including potential plans for the area and development of roads. This can cost vary between £70 and £400 depending on the location.
Electronic Transfer Fee
Not many people factor in this cost. When buying or selling a house, it involves a large amount of money changing hands in a very short period of time. Your solicitor will make sure your deposit ends up where it needs to be, but a same day transfer costs between £20-£30.
Removal Costs
There is, of course, the cost of the actual move to think about. Remember to put aside some money for additional costs like:
- Removal insurance;
- Removal company;
- The potential requirement for temporary accommodation;
- Storage needs to be considered if there is a gap between your move-in date and when you leave your existing property.
Post Redirection
It is important to make sure your letters and packages make it to your new home, otherwise the purchasers of your old home will be receiving your mail which is annoying for everyone concerned. There are various services that do this for you, for example Royal Mail Redirection. The cost of this service varies depending on the distance between homes. The Royal Mail Redirection costs £31.99 (per surname) for up to three months and increases for longer periods.
Improvements, Repairs and Renewals costs
Whenever a buyer purchases a property it is quite common that they will then proceed to spend money on it very soon after. Typically such expenditure might be in the form of re-decorating, new carpets and furnishings or improvements such as a new kitchen or central heating system. It is sensible to budget for a contingency sum to cover such expenses including an allowance for “unforeseen costs”.
General increase in Living Expenses
If you are moving up the property ladder and purchasing a larger and more expensive property then do not be surprised to see a rise in certain living expenses. These might typically include an increase in your Council Tax, buildings insurance and utility bills expenses.
If you are moving into a leasehold property for the first time do remember that you will be responsible for paying a service charge and a ground rent, typically to a management company, which may run into several thousands of pounds annually.
Money well spent
Certain types of expenditure will save you money in the long run. Our three main surveys help you to identify any potential issues or defects, which may cause you a problem in future:
HomeBuyer Report – The RICS HomeBuyer Report is a survey that provides you with information on the condition of the property you’re thinking of buying, together with advice to your solicitor.
The RICS HomeBuyer Report uses the traffic light colour coding system to rate individual elements of the property and highlight areas of concern, such as damp or structural movement. The level of detail enables you to judge the value of purchase in line with the cost of any future maintenance, repair and restoration works.
RICS Building Survey – The RICS Building Survey is the most detailed survey we offer. It’s particularly suitable for older properties, those of unusual construction, properties with major extensions or alterations, or those that you already know to have significant defects that need attention.
Our report provides you with details on the materials and methods of construction, advice on defects, and the appropriate repair options.
Condition Report – The RICS Condition Report provides you with important information not covered by a mortgage valuation. It includes an inspection of all aspects of the property you’re thinking of buying, identifies the risks and legal considerations, and includes a section of advice for your solicitor.
The report uses a simple traffic light (red, amber, green) colour code to rate individual elements of the property and highlights any areas of concern.
An overview provides you with information on the construction of the property, details of any serious problems that require attention, and details of anything that should be investigated before you commit to the purchase.
e.surv Chartered Surveyors
At e.surv Chartered Surveyors, we’ve been helping people buy and sell houses for almost 30 years. We’ve answered just about every question and seen almost every property style.
Today, with our network of over 400 surveyors, we offer residential surveying expertise across the UK, combining national coverage with invaluable local expertise.
e.surv is regulated by the Royal Institution of Chartered Surveyors (RICS) and is part of the LSL Property Services Group, which includes household names Your Move and Reeds Rains.
To book a survey please contact one of our advisers today.