Buying a home is probably the largest financial commitment you’ll ever make. And, on top of the price of your property, you’ll also face a raft of property fees and charges as part of the buying process.
To help you budget for your house purchase, we’ve outlined five of the costs you’ll encounter if you’re buying a home.
1. Mortgage fees and charges
If you’re buying your home with the assistance of a mortgage, then the chances are you’ll pay a fee to your mortgage lender. These days most fixed or tracker interest rate deals come with an ‘arrangement fee’, ‘product fee’ or ‘booking fee’.
For example, a lender might offer a cheap two-year fixed-rate deal with a £999 arrangement fee.
These fees now form part of the pricing of a mortgage deal, and it’s important to compare them when you come to take out a new mortgage.
Generally speaking, if you’re taking out a smaller mortgage, then you may be better with a higher interest rate and a lower fee. Conversely, you might be better off with a larger fee and a lower interest rate on a large loan.
You will normally be given the option to pay the arrangement fee upfront or you can add it to the mortgage. The disadvantage of adding the fee to the mortgage is you’ll pay interest on it, for the life of the loan. But, if you pay the fee upfront, there’s a chance you could lose it if anything went wrong with the purchase.
Typical amount: £0 to £2,500
2. Valuation/survey fee
If you are taking out a mortgage, then your lender will want to value the property to ensure it provides sufficient security for the loan. So, one of the property fees and charges you’ll face is the cost of a qualified surveyor to value the property.
In addition to this, your home is likely to be the most expensive item you ever buy and so you may want to instruct a more detailed survey. A survey can be useful as you’ll establish whether you’re buying a home in good condition. And, many buyers use the information gained in the survey to renegotiate on price.
You can normally arrange a more detailed Homebuyers Report or full survey through your mortgage lender. The cost will typically depend on the type of survey you want and the purchase price of the property.
Typical amount: £250 to £1,000 depending on valuation and property type
3. Legal fees
When you buy a home, you’ll need to instruct a solicitor or conveyancer to undertake the legal work involved. This includes:
- Organising searches at the local authority on your behalf, checking the results and communicating any problems
- Dealing with any questions you raise as part of the buying process
- Dealing with the transfer of ownership
- Checking your mortgage offer and ensuring all the conditions are complied with
- Dealing with your deposit and handing this to your seller’s solicitor
- Preparing the deed of transfer and mortgage deed and arranging for these to be signed
- Organising final searches
- Receiving and paying any Stamp Duty Land Tax that is due
- Registering your ownership with the Land Registry.
Some mortgage products come with free conveyancing, but you’ll typically have to use one of the lender’s chosen solicitors. Other lenders might give you cashback towards these costs.
Bear in mind that you may have to pay your solicitor in several stages, as they may need money from you during the process as they incur costs on your behalf.
Typical amount: £500 to £1,500 (depending on whether you are buying and selling and the complexity of the transaction)
4. Stamp Duty Land Tax
If you are paying more than £125,000 for your home, then you’ll pay Stamp Duty Land Tax (unless you’re a first-time buyer – see below).
Stamp Duty Land Tax is the tax you pay when you buy a property. You pay it to your solicitor who pays it to HM Revenue and Customs when you complete on the purchase of your home.
If you’re a first-time buyer in England then you won’t pay any Stamp Duty Land Tax on the first £300,000 of any home worth up to £500,000.
The Stamp Duty Land Tax rates are:
- Up to £125,000 – 0%
- £125,001 to £250,000 – 2%
- £250,001 to £925,000 – 5%
- £925,001 to £1.5 million – 10%
- Over £1.5 million – 12%
The tax rates are payable on that portion of the purchase price. So, for example, if you’re a second-time buyer purchasing a property for £300,000 your Stamp Duty Land Tax bill will be:
- The first £125,000 – £0
- £125,001 to £250,000 – £2,500
- £250,000 to £300,000 – £2,500
- Total = £5,000
Typical amount: Varies depending on purchase price, which country you are buying in, and whether you are a first-time buyer
5. Removal costs
If you have limited belongings and you’re moving a short distance, then you may be able to transport everything in the boot of your car when it comes to moving day.
If you have a lot of possessions, or you’re moving a long distance, then you may prefer to hire a removal firm to help with your move. While this adds a few hundred pounds to your property fees and charges, the advantages of using a specialist remover include:
- It’s easy and convenient – they will often pack and unpack for you
- They will take full control of the transportation, materials, packing, loading and unloading for you
- Your belongings will be insured during transit
- Your valuables may be safer as the firm has the proper equipment and expertise to move fragile or costly items
Typical amount: £500 to £1,000