When buying a house in the UK, there are a number of costs that you need to factor in. The main costs involved with buying a home are:
- Stamp duty
- Mortgage fees
- Conveyancing fees
- House survey fees
- Removal fees
- Deposit
- Redecorating/repairs
- Redirecting your mail
Stamp duty
During a house purchase, consider the stamp duty tax as it’s a significant expense. As a legal requirement, it forms an integral part of the transactional cost involved. Nonetheless, a remarkable shift took place on 23rd September 2022, when the legislation surrounding the stamp duty tax was restructured.
New rules state that you don’t have to pay stamp duty on the first £250,000 of your property. This can lead to significant savings. For those stepping onto the property ladder for the first time, the conditions are slightly more favourable. As a first-time buyer, you can enjoy a stamp duty exemption on the first £425,000 of your property value. Potentially relieving you of a substantial financial burden.
However, it’s essential to note that stamp duty rates can vary across different regions of the UK, and the specifics of your circumstances could also influence your tax liability. You are given a 14-day window to manage your stamp duty obligations, so prompt action is recommended. For more information on this subject, we have developed a comprehensive guide on stamp duty changes, which can be found here.
To give a clearer understanding of these changes, let’s consider two property price examples and analyse the stamp duty implications in different scenarios:
For a property valued at £375,000:
- As a first-time buyer, you would be exempt from paying any stamp duty.
- If you’re purchasing a subsequent home while owning no other properties, the stamp duty owed would be £6,250.
- If you’re adding a second property to your assets, the stamp duty charge increases significantly to £17,500.
For a property valued at £500,000:
- For a first-time buyer, you would face a stamp duty bill of £3,750.
- If this is a subsequent property purchase while you own no other properties, your stamp duty would amount to £12,500.
- For those acquiring a second property, the stamp duty obligation increases considerably to £27,500.
Mortgage fees
Acquiring a mortgage is a significant financial decision that goes beyond merely managing the monthly repayments. The mortgage process involves several additional fees that you’ll need to consider to fully understand your financial obligations. Let’s delve into the key charges associated with securing a mortgage:
Arrangement fee:
The arrangement fee is a charge levied by the lender for organising your mortgage. This fee varies, typically ranging between £1,000 and £2,000. In circumstances where you don’t have the required cash on hand, lenders may offer to add this fee onto your overall mortgage sum. However, this increases the principal amount borrowed, and consequently, you will pay interest on this additional amount over time. Therefore, while it might provide immediate financial relief, you’ll end up paying more in the long run.
Valuation fee:
Before approving your loan, lenders must assess your desired property’s value. This appraisal ensures that the house price aligns with its actual worth. While some lenders may absorb this cost themselves, others might pass it on to the borrower. Hence, you should always be prepared for this expense. Valuation fees can vary but they could be from as little as £150 all the way to over £1,000. Depending on the property’s size, location, and other factors.
Booking fee:
In some cases, mortgage lenders might require a booking fee. This fee secures your mortgage loan and fixes your interest rate. It guarantees the terms of your application. Usually, the booking fee ranges from £100 to £250.
Are you unsure of what mortgage you are able to afford? Take a read of our blog where we cover everything to help you make a decision.
Conveyancing fees
Purchasing a home is not simply a financial transaction; it also involves several legal procedures that must be accurately navigated. This is where the services of a conveyancer become crucial. A conveyancer is a legal professional specialising in property transactions. Their primary role is to facilitate the smooth transfer of property ownership from the seller to the buyer. They manage legal paperwork, contracts, and ensure that all details are in order, thereby minimising potential legal issues down the line.
Conveyancing fees, which cover the cost of these professional services, tend to range from £400 to £1,500 on average. However, this cost can fluctuate based on the complexity of the transaction and the specific services required. Therefore, it is advisable to budget appropriately for this essential expense when planning your home purchase.
Choosing the right conveyancer is a vital step in ensuring a smooth and stress-free home buying experience. To make an informed decision, it’s recommended to conduct thorough research, considering factors such as their expertise, reputation, and communication style. You could also seek recommendations from friends or family members who have recently purchased a home.
We have crafted a comprehensive blog post, which offers valuable insights and guidance to help you make the right choice. By taking the time to select the right professional, you can rest assured knowing that the legal aspects of your home purchase are in capable hands.
House survey fees
The house survey is an important cost to consider. This investigative process helps you uncover potential issues or structural problems with the property before finalising your purchase. While getting a survey is not a legal requirement, it’s highly recommended to avoid unexpected repair costs down the line. Undoubtedly, the house survey serves as an additional layer of protection, allowing you to understand the property’s condition in depth.
A RICS (Royal Institution of Chartered Surveyors) survey is regarded as one of the most comprehensive and reliable. RICS offers three levels of surveys, providing a varying degree of detail, allowing you to choose the one that best suits your needs and the property in question. A Level One survey is the most basic and consequently the most affordable, typically costing between £300 and £900. This initial survey offers a broad overview of the property’s condition, making it suitable for newer properties with no visible issues.
A Level Two survey is more detailed, providing a deeper look into any potential issues or maintenance requirements. This survey usually costs somewhere between £400 and £1,000, and is often recommended for slightly older properties or those with some visible minor issues.
Lastly, the Level Three survey is the most comprehensive and is tailored for larger, older homes or those in visibly poor condition. With prices ranging between £650 and £1,500, this survey type offers an in-depth analysis of the property, providing a thorough understanding of any significant issues, ongoing maintenance requirements, and potential renovation costs.
At homemove we can get you a RICS survey quote. Just go on our website and let us know what kind of survey you want, how many bedrooms your property has, the value of your home and your preferred dates for the survey and we can get it all sorted for you.
Removal fees
One important area to consider is the cost of removals. These costs can vary widely, typically ranging from around £400 to as high as £1,800, depending on several factors.
The type of removal service you opt for plays a significant role in determining the costs. If you’re comfortable with taking a do-it-yourself approach, you might simply hire a van, then handle all the packing, loading, and transportation of your belongings yourself. This option is generally more budget-friendly, but it does require significant time, effort, and coordination.
If, on the other hand, you decide to engage a full-service removal company, they’ll handle everything from packing your items to transporting them to your new home. This comprehensive service can make your move considerably less stressful, but it does come with a higher price tag.
Another factor that can significantly affect your removal costs is the size of your current home, and subsequently, the volume of items you have to move. Naturally, larger homes with more belongings to move will involve higher removal costs.
The distance between your current home and your new property also plays a role in determining the cost. Local moves are usually less expensive than long-distance relocations which require more time and fuel.
The accessibility of your home also influences the cost. If your home is difficult to access, for instance, if it’s located on a narrow street or in a high-rise building without a service lift, additional charges may apply.
Finally, optional services such as professional packing can also add to your removal costs. While such services certainly add to your convenience, they represent an additional expense.
Given the range of factors that can affect removal costs, it’s advisable to obtain quotes from several removal companies. This will ensure you find a service that best fits your needs and budget, while also allowing you to compare what’s included in each quote. To understand more about removal company costs, you can visit our detailed blog post here.
Deposit
One of the most significant financial considerations when purchasing a home is the deposit. This upfront payment typically constitutes about 10% of the property’s purchase price, although the precise amount can vary. Some buyers may find themselves in a position to contribute more, while others may only be able to afford a deposit of 5%, given their savings at the time.
However, it’s worth noting that a larger deposit can be advantageous in the long term. A substantial initial payment not only reduces your mortgage amount but also gives you access to more competitive mortgage deals, potentially leading to lower interest rates. Thus, you’ll end up paying less over the lifetime of the loan.
In case you need financial assistance, the government has initiatives in place to support prospective homebuyers. For instance, the Help to Buy equity loan scheme provides supplementary funding, making it easier for first-time buyers and existing homeowners to afford properties within the set price limit. With the support of such programs, home ownership becomes a more achievable dream.
Repair and decorating fees
Transitioning into a new home often brings with it the necessity for repairs or redecoration, making your new space truly feel like your own. If you have undertaken a thorough property survey before purchasing, you’ll already be equipped with knowledge about any immediate repair issues that demand attention. One common repair, for instance, could be the improvement of insulation. While the cost for such work can vary, you can typically expect an average expense of around £1,500. However, this does depend on the size and condition of the property.
Along with repairs, personalising your new home to mirror your style and preferences is usually on the to-do list of new homeowners. The extent of redecoration could range from a fresh coat of paint to comprehensive changes in flooring, fixtures, or furnishings. If you’re considering a complete home makeover and planning to hire a professional decorator for the job, you might face an average cost between £2,000 and £3,000. These costs can fluctuate based on the decorator’s fees, the size of your home, the complexity of the design, and the materials used.
However, if you’re on a tight budget, there are ways to bring down the redecorating costs. One popular strategy is to roll up your sleeves and embark on a DIY journey. By handling the painting and decorating yourself, or by enlisting the help of family and friends, you can significantly reduce expenses while adding a personal touch to your new home. Additionally, this can be a bonding opportunity, turning what might otherwise be a chore into an enjoyable and rewarding experience.
Redirecting your mail
In the hustle and bustle of transitioning to a new home, it’s crucial not to overlook your mail. To prevent your mail from being delivered to your previous address, consider using Royal Mail’s redirection service. This service ensures that all your letters and parcels are forwarded to your new address, keeping your communication uninterrupted.
The Royal Mail offers the flexibility to choose the duration of redirection according to your needs, with options for three, six, or twelve-month periods. However, it’s essential to note that if the redirection involves more than one person’s mail, an additional person’s fee will apply. This incremental cost is £8 for a three-month period, £9 for six months, and £10 for an entire year.
Lets break down the costs:
- For a three-month redirection service, the standard charge is £33.99. This duration can serve as a short-term solution, allowing you ample time to update your address details with all relevant parties.
- If you opt for a six-month period, the fee is slightly higher, at £47.99. This is a suitable choice for those who anticipate a longer time needed to fully transition their mail delivery to the new address.
- Lastly, if you foresee a need for an extended redirection service, a twelve-month option is available for £68.99. This option provides a full year of hassle-free mail redirection, ensuring all your correspondences reach you in your new home.
Remember, staying connected and receiving important mail is crucial during your move, making the Royal Mail redirection service a valuable consideration in your moving checklist.
Owning a home costs
Owning a home brings with it certain recurring costs that are important to take into account as you manage your finances. These include:
- Council tax: This is a local tax collected by local authorities. It’s used to pay for local services like waste collection, local schools, and maintenance of public spaces. The amount you pay depends on your property’s valuation band, which varies by location. If you want to find out your Council Tax band the best way is on the government website.
- Water, gas and electric bills: These costs can vary greatly based on your usage, the efficiency of your appliances, and the specific rates charged by your utility providers.
- Broadband service: Broadband costs can vary depending on your chosen provider, the speed of your service, and any additional services you choose to bundle with your internet package, such as TV or phone services.
- Building insurance: This is crucial for protecting your property from potential damage, such as fire or extreme weather. The cost can vary based on the size and location of your home, as well as the type and amount of coverage you choose.
It’s crucial to note that these costs could potentially be higher in your new home, particularly if you’re moving to a larger property or a different area. For example, a larger home might mean higher utility bills due to increased space to heat and cool. Similarly, moving to a new area might place your property in a different council tax band or affect the cost of building insurance.
Summary
There are many costs involved with buying a home but, hopefully this guide has helped you understand all the potential costs involved with buying a home and that with accurate planning and budgeting you can ensure a smooth and financially sustainable transition into your new home.
