Starting the journey to buying a new home is a big step, and one worth preparing for, especially when it comes to understanding your expenses. While most people plan for the deposit, it’s the hidden costs of buying a home that sometimes take people by surprise.
Knowing what to expect early on can help you feel more prepared and budget accordingly. This guide breaks down the key costs to be aware of when buying a new home.
1. Deposit and Loan-to-Value (LTV)
Both first time and existing buyers will need to pay a deposit when buying a new home. Buyers can pay as little as 5% towards a deposit, but generally, the larger the deposit, the lower the monthly repayments.
What percentage deposit is expected
Your deposit makes up a percentage of your homebuying costs, and you will usually need a minimum of 5% of the property value. For example, if your new home is worth £300,000, a 5% deposit will be £15,000. The larger your deposit, the lower your mortgage repayments, which can be beneficial in the long term.
For buyers of new-build homes, schemes like our Deposit Unlock scheme can offer 95% mortgages with a 5% deposit option. That means you can borrow 95% of your property price and only pay the 5% for your deposit upfront.
How LTV works, and how it affects your mortgage
Loan-to-value (LTV) is a helpful percentage that reflects the value of your mortgage compared to the value of your property. The loan-to-value you land on can impact the mortgage rates you are offered.
The larger your deposit, the lower your LTV. For example, if you have an LTV of 80%, that means your mortgage is worth 80% of the value of your property. Lenders may view you as lower risk and offer better rates on your mortgage.
If your property is worth £300,000, an 80% LTV means you are borrowing 80% of £300,000, which is £240,000, and paying a 20% deposit, which is £60,000.
To find your LTV percentage you can divide your mortgage amount by the property's value and multiply by 100.
2. Mortgage fees and associated costs
When applying for a mortgage, there are additional costs to consider beyond your deposit. These can vary by lender, but here are the ones you’re most likely to see:
- Valuation fee – this covers the cost of your mortgage lender valuing the property to make sure it’s worth the amount you’re planning to pay. Valuation fees usually range from £300 to £600, based on the property’s estimated value
- Broker fee – most mortgage brokers earn a commission from lenders. However, some may charge a set fee of around £500.
- Reservation fee – this is one of the hidden costs of buying a new build home, but this fee secures the property and takes it off the market for you during legal checks and mortgage arrangements. You’ll normally pay £500 to £1,000, but it’s often deducted from the final price upon completion.
- Early repayment charge (ERC) – a penalty that may apply if you pay off your mortgage early, switch lenders or change your deal before your current one ends. An ERC can cost £1,000s, so make sure to read the terms of your mortgage agreement carefully.
Arrangement and booking fees
There will also be arrangement and booking fees to consider when arranging a mortgage for your new home.
- Arrangement fee – charged by most lenders to set up your mortgage, this fee typically ranges between £1,000 and £2,000. You may be able to add this to your mortgage, but this will increase your monthly payments.
- Booking fee – some lenders charge £100 to £250 to lock in your mortgage deal while they process your application. This usually confirms your rate and terms, giving you peace of mind throughout the application process.
3. Legal and conveyancing fees
Conveyancing is the legal process of buying a home, and it comes with a few associated costs.
Most solicitors or licensed conveyancers charge a basic fee for services like reviewing and exchanging contracts, communicating with the seller’s solicitor and providing legal advice throughout the process. This fee is generally £1,200 to £1,500.
Third-party fees and disbursements
You’ll be responsible for extra costs to cover third-party fees. These are called disbursements, and include:
- Search fees – your solicitor will carry out various searches to ensure there are no legal, environmental or planning issues with the home or the land that it sits on. The exact cost varies based on location and the specific searches required, but it is usually around £200 to £500.
- Land registration fee – this covers the cost of registering the home in your name with the Land Registry. The amount depends on the property type and value, with most costing £45 to £300. Check your price band on GOV.UK to see how much you might need to pay.
- ID Check fee – to comply with anti-money laundering laws, your solicitor will need to verify your ID using secure electronic checks. This can cost up to £25.
- Bank transfer fees – your solicitor or conveyancer will normally handle bank transfers on your behalf and ask you to cover the transfer fee for securely sending large sums of money, such as your deposit or final balance. You might pay between £20 and £50 per transfer, depending on the amount.
4. Stamp Duty Land Tax (SDLT)
Although it’s one of the more significant costs of buying a home, Stamp Duty often catches first time buyers off guard. Stamp Duty Land Tax is a tax you pay for purchasing residential properties in England and Northern Ireland. No Stamp Duty needs to be paid on residential properties up to £125,000
| Purchase price | Stamp Duty % |
| Up to £125,000 | 0% |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
For homeowners buying a second home in England or Northern Ireland, there is an extra 5% on top of the standard rate, and 6% in Scotland.
To help you understand how SDLT works, we’ve broken down what you would pay on a property worth £375,000:
- 0% on £125,000 = £0
- 2% on the portion from £125,000 to £250,000 = £2,500
- 5% on the portion from £250,001 to £375,000 = £6,250
- Total Stamp Duty = £8,750
First time buyer relief in England and Northern Ireland
First time buyers are eligible for first time buyer relief on homes up to £300,000, or on the first £300,000 if the property costs more. First time buyer relief also involves paying only 5% Stamp Duty on properties up to £500,000. After this, standard rates apply.
| Purchase price | Stamp Duty % |
| Up to £300,000 | 0% |
| £300,001 to £500,000 | 5% |
| Over £500,000 | Standard rates |
Scotland and Wales land tax
In Scotland, you’ll pay Land and Buildings Transaction Tax on homes over £145,000. First time buyer relief in Scotland applies properties up to the value of £175,000.
In Wales, the Government applies Land Transaction Tax to properties worth over £255,000.
Each nation has different rates and thresholds, so check what you might need to pay with Revenue Scotland or the Welsh Revenue Authority.
5. Property surveys
A property survey is optional, but it can offer peace of mind, especially if you’re buying an older home. It’s a useful way to check the property’s condition before you commit to the purchase.
There is no fixed price for a survey, as the cost depends on the type you choose and the value of your property.
Types of surveys and costs
The three types of surveys include:
- RICS Level 1 Home Survey – provides a general overview of the property’s condition. It’s the most basic and affordable type, usually costing £300 between £900.
- RICS Level 2 Home Survey – a popular choice for standard properties in good condition. It covers everything a Level 1 survey does, but also checks roofs and cellars, and looks for issues like subsidence. While it’s not as comprehensive as a Level 3 survey, it offers a detailed visual inspection and advice on any problems. This tends to cost £400 to £1,000.
- RICS Level 3 Home Survey – an in-depth inspection of the property’s structure and maintenance. Ideal for properties over 50 years old, they can cost £630 to £1,500
6. Home insurance costs
Insurance isn’t legally required when buying a new home, but it may be expected. Don’t be surprised if your mortgage lender asks you to arrange buildings insurance once you exchange contracts to protect their financial investment in your property.
Contents insurance
It’s also a good idea to take out contents insurance when you move in, as this protects your personal belongings. The average combined buildings and insurance policy is around £375, and most providers give you the option to pay either monthly or annually.
Life insurance
Some lenders may also ask for mortgage life insurance for larger mortgages. This ensures the lender can recover their investment if the borrower passes away before repaying their mortgage. Mortgage life insurance usually costs about £25 per month, but this may be higher depending on your age, health, lifestyle and the amount of coverage you need.
7. Moving costs
People can underestimate the cost of moving; there are a few important expenses to consider.
Removal and redirection costs
Removal costs depend on the size of the property, the distance you’re moving and how many belongings you’re taking. It’s best to budget around £1,000.
If you’re arranging the move yourself, keep in mind that you’ll likely still need to pay for van hire, fuel and packing materials.
Temporary storage costs
You may need to pay for temporary storage if there’s a gap between selling your current home and moving into your new one. Depending on the size of your home and the number of belongings, this can be anywhere between £25 and £60 or more per week. Some moving companies may offer storage for your items.
8. Ongoing homeownership costs
Some property costs are likely to be consistent from month to month, including council tax and overall maintenance.
Council tax
The amount of council tax you pay depends on your property’s valuation band and your local council rate. Council tax goes toward local services like rubbish collection and road maintenance. You can check your council tax band in England or Wales by looking up your address or postcode.
Maintenance and service charges
It’s a good idea to budget for ongoing maintenance costs, such as boiler servicing and gutter cleaning. It’s highly recommended to set aside around 1-2% of your property’s value each year for general upkeep and unexpected repairs.
If you’re buying a leasehold property, like an apartment in a building that somebody else owns, you may need to pay service charges to the landlord for the upkeep of communal areas and services.
Interest rate changes and long-term mortgage costs
You’ll need to set up your gas, electricity, water, and internet providers when you move into your new home. Some providers may charge a setup or connection fee.
If your home has a low EPC rating, you may have higher energy bills each month. New-build homes are designed with energy efficiency in mind to help keep your bills lower and reduce your carbon footprint.
Additional considerations
Several other factors can influence your homebuying costs, including schemes that may reduce your overall costs or whether you have a freehold or leasehold property.
Leasehold vs freehold
What’s the difference? Leasehold properties involve ongoing ground and service charges. Freehold properties give you complete ownership, but you’re responsible for all maintenance costs. Leasehold purchases can also be more complex, so some solicitors may charge you extra for this type of purchase.
Affordable homeownership schemes
You may be eligible for various schemes designed to help you buy a home. Check out what government schemes you may be eligible for.
How to budget and prepare financially for a new home
It’s important to prepare financially and create a checklist of the costs to consider when buying a new home. It can be easy to overlook the additional costs and focus solely on saving for your deposit.
- Cut unnecessary spending. Track your spending by monitoring your outgoings on a monthly basis. This will also give you an idea of how much you can afford to spend on your new home per month.
- Check and improve your credit score – lenders will look at your credit score, so it’s important to review your credit report a few months before applying and make any adjustments to your habits to improve your score if needed. Improving your credit score can be as simple as paying bills on time.
- Look for high-interest savings accounts – savings accounts can be perfect for saving for a deposit and gathering some cushion for new home costs. There are many accounts on the market, so make sure to shop around for one that suits your needs.
- Factor in ongoing charges – homeowners should budget for maintenance, aesthetic upgrades, and potential interest rate rises. The goal is to be able to pay comfortably for anything that is thrown your way.
- Assess your affordability with a Mortgage in Principle – how much you can borrow for a mortgage depends on a lender’s assessment of a few factors, including your credit score and income. A lender will then provide a Mortgage in Principle to outline how much you could potentially borrow.
Looking to move into a new home? Explore our range of new-build homes designed for modern living. Check out our offers to help you get started. Our Sales Advisers are on hand to guide you through your homebuying journey.
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