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Buying your first home is one of the most exciting experiences of your life. But the process is also filled with administrative requirements - and, of course, expenses.

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  • The total cost of buying a house is often underestimated. And this is something that can lead to the whole process being far more stressful than you first envisaged.

    In addition to the price tag of the property, there is a vast array of financial outlays, from solicitor’s fees to stamp duty. Even the most experienced of buyers can be caught out by something they have failed to budget for, be it a mortgage arrangement fee or removal cost. So it pays to be prepared. In fact the more prepared buyers are, the less likely they will be to trip up due to an unexpected demand for a chunk of cash along the way.     

    Preparation is particularly important for first-time buyers who may be so keen to move into their first home that they overlook the true cost of stepping over the threshold. They will have no personal experience of the process and so cannot rely on past experience to remember what needs to be paid for. This guide about the cost of buying a home will help them throughout the buying process.

    How much do you need for a deposit?

    If you’re buying a property using a mortgage - as opposed to buying it outright with cash - you’ll need to find a deposit of typically between 5 per cent and 20 per cent before a lender will consider giving you finance.

    To secure the best rate on your mortgage, try to find the largest size deposit as possible. Lenders see buyers with larger deposits as lower risk and so try to tempt them with more attractive finance deals. It means those with a deposit of just 5 per cent could pay double the rate of those with a larger deposit of 40 per cent of the value of their home. 

    What does a valuation cover?

    A lender will organise a valuation of the property being bought to check that it is worth the money being paid for it.

    In the event of borrowers being unable to repay their loan, a lender may have to repossess the property and sell it in order to recoup the money they have given to a borrower. If the property is worth less than was paid for it, the lender will lose money when it is time to sell.

    Some lenders offer a free valuation as part of the mortgage. However, if this is not available on the deal provided, buyers will need to cover the cost out of their own pockets. Valuations tend to start from around £125.

    What is a mortgage arrangement fee?

    Buyers can be charged a fee by a lender for the mortgage being arranged. Sometimes there may be no fee, but quite often there is one - and it can run into tens of thousands of pounds. It will depend on whether the mortgage fee is in the shape of a fixed fee or is expressed as a percentage of the property price.

    Borrowers can add the cost of a mortgage arrangement fee to the cost of their mortgage if they cannot afford to pay the sum upfront. However, it is worth keeping in mind that interest will be paid on this amount and so, for this reason, many people prefer to pay it when they buy the property.

    How much should I pay my solicitor?

    Buying a house comes with a stack of legal paperwork. It is why most people will pay for a solicitor to work through the necessary documents rather than try to attempt to do it themselves. Your solicitor - or conveyancer as they are known - will be well versed in handling all the responsibilities that come with buying a house, such as drawing up a contract, dealing with the Land Registry, arranging payment of any stamp duty and ensuring the payment of the property is made.

    It is worth asking for a quote upfront from your solicitor for the work involved as some will charge by the hour, while others will have a set fee based on the price of the property. But expect to pay anything up to around £1,500.

    A solicitor’s fee may include the searches required to check there are no planning issues, such as roads or developments, being planned near your new home that will affect the property. These may include, for example, any problems with rights of way or clauses linked to the use of the property.

    How much does it cost to register with the Land Registry?

    When you buy a house, it needs to be registered with the Land Registry. You will be charged a fee, which will depend on the value of the property - expect to pay between £40 and £910.

    What does a survey cost?

    There are three main types of survey available - a condition report, a homebuyer report and a buildings survey. Which one you choose will largely depend on the age of the property you are buying.

    A lender will tend to require a survey to ensure that the property is not going to raise any concerns that could affect the price of the building. For example, it may identify issues surrounding flooding or subsidence.

    An older building is likely to require a more detailed examination - and consequently, a more expensive one. It would be the same for an unusual property or one where extensive building work is planned. Under these circumstances, you would be looking to request a full building survey. This will cost from £600.

    For more modern properties or standard older properties that are in good condition, a homebuyer report is usually acceptable. Prices for this type of survey tend to start at £400.

    And for those looking to buy a new build property or one that is in a good state, a condition report is only likely to be required. This will cost around £250.

    How much is stamp duty?

    Stamp duty land tax is a tax charged if you buy a house, flat, land or building in England, Wales and Northern Ireland. If you’re buying a property for less than £125,000, then you do not have to pay the tax. And if you’re buying in Scotland, you’ll pay something different altogether - a land and buildings transaction tax. Properties up to £145,000 are not taxed in Scotland.

    For those who need to pay stamp duty, the amount you pay will depend on the price of your property. The rates were overhauled significantly by the Government in December 2014. Below are the new rates for residential properties.

    Property price

    Stamp duty rate

    £0 - £125,000

    0%

    £125,001 - £250,000

    2%

    £250,001 - £925,000

    5%

    £925,001 - £1,500,000

    10%

    £1,500,001 and over

    12%

    As stamp duty can be a significant amount of money to pay, it is important to factor it into your house buying budget.

    The overhaul of the stamp duty system means the rates are only paid on the amount that falls within each tax band. The previous ‘slab’ stamp duty system meant the rate was paid on the entire amount.

    It means a buyer would pay a total of £1,400 in stamp duty on a property bought for £195,000. This is because no tax is paid on the first £125,000 and 2% is paid on the remaining £70,000.

    How much does a removals company cost?

    Hiring a removal van can vary in cost from a few hundred pounds for hiring a small van to several thousand pounds for a more detailed service that includes packing up your items before you move. You’ll be charged on how many items you have and so there is an opportunity to save money by doing as much of the preparation work yourself.

    Ongoing costs

    Home insurance

    Home insurance covers both building insurance and contents insurance. Most buyers will be required by their lender to have buildings insurance as a condition of being given a mortgage.

    Building insurance provides cover for structural damage to the property, which may occur due to events such as flooding, fire or subsidence. One exception would be those buying a leasehold property, where buildings insurance tends to be covered in the service charge.

    Most homeowners also take out contents insurance, which covers damage to (or loss of) items within the property, such as furniture and personal belongings.

    You can compare home insurance deals here.

    Council tax

    Council tax is paid by anyone aged over 18 who owns or rents a home. The amount due depends on a property’s tax band, which is determined by the price of the property and its location.

    There are eight different council tax bands in England and Scotland, and nine in Wales, while Northern Ireland uses a different system altogether. Valuations are calculated by inspectors from the Valuation Office Agency (VOA), which is part of HM Revenue & Customs.

    Discounts on the tax due are available, such as for those who are disabled, single or on a low income. For example, a single person may be eligible for a council tax discount of as much as 25%. You may also not have to pay the tax if you’re an apprentice. To find out more about how much you need to pay and whether you are eligible for a discount, visit the Government website

    Council tax is used to pay for local services, including the police, fire brigade and rubbish collection.

    Some properties are exempt from council tax entirely. The tax does not have to be paid when:

    •          the property is only occupied by full-time students or people under 18
    •          the property is unoccupied following a death (exempt for six months)
    •          the property is unoccupied due to major renovations (exempt for 12 months)
    •          the property is repossessed
    •          the property is used as accommodation for those in the armed forces.

    Leasehold costs

    For those who have bought a leasehold property, there will be ground rent and a service charge to pay to the freeholder. The money is used to maintain the property and the communal areas. The costs will vary depending on the property, location and who the property is managed by.

    And there is a huge difference between properties, with ground being as little as £100 a year or running into hundreds of pounds, while management charges for the upkeep of the property can run into thousands of pounds a year.

    Utility bills

    When you’re budgeting for your new home, you’ll need to consider the ongoing costs of a property, which include gas, electricity and water bills. How much you’ll be charged for each of these will depend on how much you use. But you can get an indication of cost by asking the seller how much they spend every month.

    You may also need to budget for the cost of the internet, phone and TV licence. All of these bills can soon add up and so it is worthwhile including all of the utilities that you expect to use in your new home.

    Related information

    Some information contained herein may have changed since it was first published. PrimeLocation strongly advises you to seek current legal and/or financial advice from a qualified professional.

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