Buying a house is an exciting milestone to achieve. We plan, budget, view and then finalise or accept the offer. However, in terms of finances or budgeting, not everything we plan for is accurate. As far as buying a home in the UK is concerned, there might be some hidden charges that can catch you by surprise. So, what do you do? Understanding the complete breakdown of your costs beyond the purchase price of your new home is the Key.
Here’s a compiled list of all those extra costs that you should be aware of when buying a new home.
Stamp Duty & Other Government Charges
One should be extremely aware of the total costs of buying a house, including the Stamp Duty Land Tax (SDLT). Government tax and stamp duty makes up a larger portion of your additional costs in house purchase. Well, the amount depends on the property value and whether you qualify for certain benefits. Moreover, if you are a first time buyer, you typically pay a lower stamp duty than someone buying an additional property. For many buyers, tax must be paid immediately upon completion. Hence, it is advised to include this cost in your overall budget.
You can also calculate your stamp duty on the official government website.
Deposit Or Downpayment
Downpayment is the initial amount you pay on your property which usually is 0 to 15% of the total property value. It is not necessarily an added cost but you’ll need a deposit to buy a property. Sometimes it is possible to obtain 100% mortgages. This implies, you can buy a house without an initial deposit. Alternatively, if you manage to save at least 5 to 5% of the value, you will be able to have a wider choice of mortgage lenders.
For example, If you are buying a property worth £200,000, a 5% deposit would be £10,000. Likewise, 15% deposit amount would be about £30,000.
Now, saving up a deposit on a pretty tight budget can be concerning. So, you can check out your other options like inverting in ISA. There are different types of ISA, consulting with a Financial advisor will be your best option to explore. They will be able to help you figure out the best financial plan to invest and get sorted for your first home.
Obtaining A Mortgage
On an average, obtaining a mortgage can budget up to £1500. There are two ways to do this. A widely popular and secured way is to reach out to a mortgage broker or advisor. This is often recommended because of ‘broker-only’ access to sweet deals. They help you narrow down your options based on your financial situation. Furthermore, they ensure a successful application.
Alternatively, you may also reach out to the lender directly. Not widely recommended for a first time buyer. However, the best part is that the entire process is done online. Hence, you avoid the broker fee. Here, you’ll have to do your own research to get the best repayment plan (usually with limited knowledge). In this case, you can apply directly to the high street banks on their portals.
Do You Need To Pay The Estate Agent
Mostly, the estate agent fee is paid by the seller. But there can be a few exceptions. In some cases, there is a buying agent fee. This is usually 1%-3% of the purchase price. Some buyers choose to hire a buying agent who are the estate agents but work solely in the interests of the buyer. They usually find the best property for their clients that exactly suits them. Furthermore, they negotiate the best price and terms and conditions in buyer’s favour.
Sometimes, the estate agents provide in-house mortgage brokers. It is like a one stop shop. However, it is not a necessity to use them unless you are fully convinced. And therefore, always include the agent’s fee in your budget when buying a house.
Moving Costs
Removal companies, packing services, or temporary storage can significantly sore up your overall expense. Most commonly ignored costs are the packers and movers fees when buying a house. Ideally, this can range anywhere between £450 to £2000. Based on the region and the distance, you will need to compare the prices and pick the best fit for you when moving into your new home. Also, if you have minimal furniture to move, and a couple of helping hands, you can do it for free. Yet, hiring professionals to do the job is safe. Thus, ensure you have this covered in your home buying financial plan.
Conveyancing Fees Or Legal Charges
Conveyancing is the legal process involved in buying a house. And this is among the significantly crucial costs of all. The solicitors or the conveyancers usually charge anywhere between £800 to £2000 depending on the nature of the transaction. Sometimes, disbursements may add up in this cost. Which means your conveyancers can flag up any local issues you need to be aware of. Additionally, if change of ownership with the land registry is required, this will add an additional £300 to £400 in your conveyancing fee. Please note this is an average cost. You can get the exact quotation for your property here for free.
Also, before instructing any solicitor, it is always ideal to consult with them. You can reach out to the amazing team of Waterstone Legal conveyancers here.
Final Thoughts
Lastly, buying a house is not just about agreeing to a price with the seller. To ensure everything is on track, you need an expert at every stage of the process. And, these services come bearing added costs to the overall budget. Knowing and understanding the hidden costs of buying a house will help you plan and move into your new home with confidence. Afterall, a big milestone should come with smiles and not shocking surprises.
