When you buy a house, it’s not just the asking price you need to think about, there are a number of extra costs that can soon add up.
For a start, there is Stamp Duty to pay, plus solicitor’s and mortgage arrangement fees. Then there are moving costs, insurance premiums, as well the cost of furniture to fill your home. And if you aren’t buying a new build home and anything goes wrong, such as your boiler breaks or your windows start to leak, it is you that will have to foot the bill – not a landlord.
So it is essential that you ensure you have a sensible budget that considers more than just your monthly mortgage costs, as well as an adequate emergency fund.
The good news is that if you have a pre-approved mortgage then you will at least be aware of the arrangement fee – some lenders have been known to charge as much as £2,999. This can be added to your mortgage amount but you will have to pay interest on the amount if you decide to do this.
Some lenders charge a mortgage-booking fee to reserve funds on a fixed or capped rate product and this can range from £99–£250, according to the Money Advice Service. It may be refundable if the mortgage application falls through before completion.
Before granting you a mortgage, your lender may also require you to pay for a valuation of the property when you submit your initial application. This is to ensure that the house in question will form sufficient security against their loan. The amount varies (usually between £150-£1,500) and is largely dependent on the size of the property.
It is sensible to have a building survey in addition to the valuation, which may well save you money in the long run by flagging up any problems with the property. Prices vary depending on how comprehensive you want the survey to be, but they can cost as much as £600. If a survey determines that work needs to be done on the property, you may be able to negotiate a reduction on the house price.
Then, depending on the price you pay for the property, you may be required to pay Stamp Duty Land Tax of between 0 and 12%. This tax is payable to the government and what you pay depends on the property price, and it can add a significant amount to your bill. For instance, on the average selling price of £275,000 for a family home, you will be required to pay 1.4% or £3,750.
You will also be required to take out life insurance so that, in the event of your death, the mortgage lender can recoup the value of the loan. Similarly, you will need buildings insurance.
But brace yourself, there’s more. You will also have to shell out solicitor’s fees of an average of £500–£750 – remember to budget for VAT on top of the price quoted.