The extra costs of buying a home
When you’re squirrelling away money for a deposit to buy a home, you might need to save more than you think. There are lots of companies and people you’ll need to pay to see your purchase run smoothly.
What do I need to save for?
On top of your deposit, you’ll need some cash saved up to pay for these extra costs of buying a home.
- Surveyors – before you can get your mortgage, your lender will want to value the property, and you’ll need to pay or this. Valuation surveys tend to cost around £200 - £300. However, unless the home is a new build, you should also arrange your own survey to reduce the chance of nasty surprises later. A homebuyer’s report can cost between £250 and £1,000 (depending on size of property) and a more detailed building survey can cost up to £1,500 – but both of these can include a mortgage valuation too, so you won’t have to pay for both.
- Mortgage fees – when you take out a mortgage, you’ll have to pay certain fees to the lender depending on the type of mortgage deal. Fees may be as low as a couple of hundred, but could run into a few thousand – so check with your mortgage adviser.
- Mortgage term life insurance – if you have a partner, dependents, or a co-holder of the mortgage, it's highly advisable to take out mortgage term life insurance. This means that if you die before the mortgage is paid off, the insurance will pay off the debt in full.
- Conveyancing fees – the conveyancing process ensures your home purchase is fully legal and watertight, and is usually carried out by a solicitor. Fees for this are typically between £850 and £1,500. Your conveyancer should also conduct a range of ‘searches’ to prevent any unpleasant surprises like mine-shafts under your property – these searches cost around £300.
- Stamp duty land tax – How much you pay is worked out through a tiered system. You pay 0 per cent on the first £125,000, 0.2 per cent on the next £125,000 - £250,000, and 5 per cent from £250,000 to £925,000, and the tier continues with more tax for properties over higher thresholds. N.B. If you're a first-time buyer you may have no stamp duty to pay at all, as properties up to £300,000 are exempt for first-time buyers, and in some high-cost areas (such as London) properties up to £500,000 have no stamp duty to pay on the first £300,000.
Adding it all up, you can see that for a property costing just over £200,000 the average total of these fees would be around £3,000.
These costs will vary depending on the home you’re buying and other circumstances. Luck plays a role too, especially with surveys - if a major issue is discovered, you may have to start all over again.
Removal costs, furniture and decoration
Most people moving home use a removals company, which will cost between £500 and £1,000. If you’re a first-time buyer and don’t yet own much furniture it’s possible to do it yourself – but then of course you’ll want to buy some furniture! You can expect to spend around £2,000 on furnishings and an extra £1,000 on white goods such as fridge, washing machine and cooker – as a minimum. But you can save by buying second hand, looking at sites like Freecycle, and seeing if friends and family have items they no longer need.
Depending on the state of the property you’re buying, you may also need to factor in costs such as redecoration and/or home improvements too.
What about selling costs?
If you’re not a first-time buyer, you’ll also have to factor in the cost of selling your current home. The main one here is the estate agent’s fee, which comes directly out of the money your home fetches (usually between 0.5 per cent and 3 per cent).
You’ll need to shell out for your home’s EPC rating certificate upfront, which costs between £60 and £120. If you’re selling a second property (i.e. not your main residence) then you may also have to pay capital gains tax if its value has risen.
Can I put these costs on my mortgage?
The short answer to this is yes, you can add many of the costs of moving to your mortgage. However, in most cases you should resist the temptation to do so, as you’ll pay much more over time – and you can usually get better value finance deals elsewhere. Talk to your mortgage adviser to find out more about this.
Need help saving up a lump sum for buying a home? Then see our page on deposits.
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