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Calculating the cost of buying a new home

Feb 12, 2018
Calculating the cost of buying a new home

Key Takeaways

1. Deposit: The initial lump sum that goes toward the home purchase. For first-time buyers in London, the average deposit is £90,000 (16% of the total home cost). A larger deposit means lower mortgage borrowing and potentially better interest rates.
 
2. Mortgage: The long-term loan you borrow from a lender, based on the home’s cost, your deposit, and interest rates. Explore different mortgage types (e.g., fixed rate, variable rate) and use mortgage calculators for estimates.
 
3. Conveyancing and Surveys: Factor in legal costs (conveyancing) and property surveys. For new builds, a snagging survey typically costs between £300 and £600.
 
4. Stamp Duty: If your home costs over £125,000, you’ll pay Stamp Duty. First-time buyers get reduced rates for properties under £500,000. Use an online Stamp Duty calculator to estimate the amount.
 
5. Cost-Saving Tips:
  • Save a larger deposit.
  • Shop around for mortgages.
  • Seek solicitor recommendations.
  • Choose the right property survey.
  • Consider adjusting your budget to save on Stamp Duty.
If you’re buying a new home, you’ll want to know exactly how much it will cost. To give you an idea of what you will need to consider, here’s a quick overview of how to calculate the cost of a buying a new home.

Your deposit

The first cost you’ll be considering is the deposit - a lump sum that goes towards the purchase of your home. For first-time buyers in London, the average deposit is £90,000, which equates to 16% of the total cost of an average home. The bigger your deposit, the lower the amount you’ll need to borrow for your mortgage. In return you’ll usually benefit from lower interest rates. For first-time buyers, deposits are usually in cash, whereas current homeowners can use the equity in their existing home, plus any additional cash they want to put into the sale.

Your mortgage

Next is your mortgage - the amount of money you borrow from a mortgage lender, plus interest and any other fees. The loan is long-term, usually lasting around 25 years, with the value depending on the cost of your new home, the type of mortgage you choose, and your deposit amount.
Interest rates, borrowing periods, and any charges will all play a part, as will the type of mortgage you choose, whether that’s interest only, fixed rate, variable rate or tracker. Take your time to find out how mortgages work. You can start by using a mortgage calculator to figure out a rough cost, before getting more specific with your research with different lenders.

Conveyancing and surveys

When you buy a new home, you’ll need to consider the cost of conveyancing, this is the legal help you’ll need with the purchase, and also the cost of any property surveys. For new builds, you’ll only need a snagging survey, usually priced between £300 and £600.

Stamp duty

If you’re buying a home costing over £125,000, you’ll need to pay Stamp Duty. If you’re a first time buyer, Stamp Duty is reduced for properties under £500,000, following legislation introduced in November 2017. You can calculate how much you’ll owe in advance by using an online Stamp Duty calculator. Buyers have to pay Stamp Duty within 14 days of buying a new home or face a heavy fine, so factor this into your budget.
 

Reducing the cost of buying a new home

There are lots of ways you can make cost savings when buying a home. They include:
  1. Save a larger deposit
  2. Shop around for your mortgage
  3. Ask friends and family for solicitor recommendations
  4. Make sure you choose the right kind of property survey
  5. Consider lowering your budget, to save money on Stamp Duty
You can find even more detail on the cost of moving at the impartial Money Advice Service website. This guide to buying a new home was produced in collaboration with L&C Mortgages, the UK’s largest fee free mortgage broker and adviser.

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