> BUYING & SELLING PROPERTY
TIPS AND ADVICE
Moving house is the most expensive thing that most of us ever do, and with all those costs flying around it’s important to try to keep up with the numbers. We take a deep dive into the true costs of buying your home.
Ordinarily, overpaying anything by £200 is a big deal – but when you’re buying and selling your home and spending thousands, a £200 overspend can seem like small beer. But doing it many times in your moving process and the numbers really do stack up.
The best way of dealing with your expenses for moving house is probably to set up a spreadsheet, and keep an eye on how the totals add up. Both projected costs and what you actually spend.
We uncover some of the costs that arise when you buy a house, and remind you that once you move the spending doesn’t stop …
One significant expense to consider is that you pay stamp duty when you buy your home. The cost varies according to the property’s value and the buyer’s status. There are also estate agents’ fees, which also vary according to price, as well as conveyancing that are similarly flexible. And there is insurance when you’re in the vulnerable position of actually moving your possessions, and they are between homes. And then the ongoing maintenance that every homeowner is liable for … but let’s begin at the beginning.
Part One – Before Completion
There’s a lot to take on board as you move toward buying your new home. When you decide to buy a house, you need to consider where you are buying, which property is right for you, and how much you can spend. How much tax will you be liable for? How can you make sure all the legal side is properly taken care of? No wonder it can take months – and even years – to move towards completing your purchase, and all the while your costs add up …
Your Mortgage
Work out your purchase budget, you’ll probably need to talk to mortgage companies / your bank / a mortgage broker / a mortgage lender to help you decide. Of course the bigger the deposit you have saved up, the less you will need to borrow.
Banks and mortgage companies may charge up to £2,500 to arrange a mortgage, or you may roll it all up into the cost of your mortgage. This arrangement fee can be paid upfront or added to the mortgage balance.
On top of your mortgage fees, you may also get charged a valuation fee by your lender, potentially around £300.
A mortgage broker may charge you for finding you a mortgage loan, unless they get paid commission by the lender. Make sure you are clear on how they are paid. Mortgage brokers can assist you through the mortgage application process, and it’s important to understand any potential fees associated with their services.
Larger deposits can lead to better mortgage deals with lower interest rates. It’s crucial to evaluate your financial circumstances when selecting the best mortgage deal.
Understanding the fees charged by mortgage lenders is essential, as these can impact your overall mortgage costs.
The mortgage valuation fee is a necessary cost associated with securing a mortgage, ensuring the property is worth at least the loan amount. If fees are added to the mortgage balance, the borrower will have to pay interest on these fees.
Mortgage Fees and Deposit
When you’re budgeting for buying your new home, you’ll factor in the deposit and mortgage fees involved. The deposit is a percentage of the property price paid by the buyer, typically ranging from 5% to 20% loan to value (LTV). A higher deposit can result in a better interest rate and lower fees. Mortgage fees, on the other hand, include arrangement fees, valuation fees, and booking fees, and these fees can add up quickly, so it’s crucial to budget for them too.
Arrangement fees, also known as product fees or completion fees, can be up to £2,000. Valuation fees, which assess the property’s value, typically range from £200 to £700. Booking fees are a non-refundable payment you make when you apply for a mortgage, usually cost around £100. Understanding these fees can help you make an informed decision when choosing a mortgage deal.
Stamp Duty Land Tax
You pay Stamp Duty Land Tax (SDLT) to the government when you complete your purchase. The amount you of stamp duty you pay varies according to the price of your property and your profile as a homebuyer.
As of September 2024, you pay no tax on the first £250,000 of your property price, and 5% on the next £250,000 to £925,000, then 10% on £925,001 to £1,500,000, and 12% above £1,500,000.
Are you a first time buyer? Then you pay nothing on the first £425,000 of your home. You can calculate exactly how much you will be liable for using the government’s Stamp Duty Land Tax calculator.
Are you buying your primary home? The amount of stamp duty you pay increases if you have more than one home. To find out more about the SDLT implications of buying property that is not your primary home, call the Stamp Duty Advice Line on 0300 200 3510.
Your Buildings Survey
Unlike SDLT, you can buy your new home without paying for a survey, though doing so can be a very risky move. You might think that you can rely on the seller’s Property Information form, but you’d be wrong.
Building surveys can stop you from buying a house or other property with structural issues, advise you of damp problems or issues of inappropriate building materials – problems that you might not notice and might even make a property difficult to insure, mortgage, or sell on.
For a standard cost of less than £1,500 a full structural survey removes a potential headache that our property misrepresentation team has experience of, and could also allow you to ask for a price reduction.
Conveyancing Costs
Conveyancing solicitor fees vary according to the price of your property and the amount of work involved in your transaction. This means that more expensive, leasehold properties with a more complex ownership profile cost the most to convey – and a smaller, cheaper, freehold house will cost the least.
Your conveyancing solicitor will also incur costs on your behalf that they will pay for you, and you will repay. These costs (or disbursements) include Land Registry fees, Search fees and SDLT fees. These are all accounted for in your initial quotation. You can order your conveyancing quote here: https://cunningtons.co.uk/request-a-quote/.
Part Two – After Completion
So that’s the purchase and admin done. Now you have ‘completed’ buying a house or flat, new costs start to appear …
Removal Costs
First of all, you’ve got your removal costs, hiring a van or a removal company to move all your worldly goods from one home to another.
Depending on the distance to travel and the amount of possessions you have accumulated, you’re looking at costs of up to £2000.
Insurance
Whether you are a freeholder or a leaseholder, it is important to arrange for your buildings’ insurance to kick in from the moment you exchange contracts on your purchase; you never know what’s going to happen to your new home, and you should be insured against the unexpected. Usually, the freeholder will have insurance in place if you are a leaseholder, but do check with your conveyancing solicitor to be sure.
The average cost of home insurance has risen steeply over recent years, meaning you are looking at an annual cost of around £300 for buildings and contents insurance (according to MoneySupermarket).
The costs of insuring your home will vary according to a number of factors:
• Type of cover: you can have buildings insurance, or opt for the more expensive buildings and contents.
• Location: the location of your property has an impact on the cost of insuring it, with issues like flood risk, subsidence risk, or even local crime rates having an impact;
• Home size: larger homes cost more to rebuild, so insuring them is more expensive;
• Type of property: the cost of insuring a flat, a detached house, or a semi-detached house differ, also affecting your insurance costs;
• Personal possessions: obviously the more you insure the contents for, the higher the premiums you will pay.
Cost of Maintenance
If you are moving into a leasehold property, you’ll start paying service charges and ground rent to the freeholder. These costs vary so widely that ascertaining their cost would have been part of the initial discovery process when you were choosing your property.
If you are a freeholder, you are still paying – even though it might be into a consortium with your neighbours, all property needs to be maintained. You can ask your vendor how much they typically pay for your property upkeep.
Utilities
Utilities like electricity, water and gas are obviously important, as is phone coverage and access to the internet. There’s a lot to consider when you move.
- Are you on the water mains? If not, you’ll have a septic tank, which will also need maintenance – though it will reduce the amount you pay to your local water company.
- Are you on the gas mains? Not all homes are, so you may have to get used to using a different sort of fuel.
- Does your current mobile have coverage in your new home area? If not, you’ll have to change it.
- How much electricity will your home need to function? Think about solar panels, electric heating, insulation; the mathematics involved can be daunting – but extremely important.
- And you might have to have to use a different internet provider – you can discuss all these issues with either your vendor or your new neighbours.
When you change your home, you are also changing a lot of other aspects of your life!
New Fixtures and Fittings
And then there’s the furniture and other bits and pieces.
You might have decided to keep on using a washing machine that was on its last legs, waiting till you were in your new home before buying a replacement. All expenses, and all to go onto your moving house spreadsheet.
And that’s not to mention carpets, doormats, curtains, paint, tiles, lampshades … the list is seemingly endless, and it’s easy to see how it all adds up.
Your sofa doesn’t fit into your new living room? And what about your outsized dining table?
This is when you may be looking at sales and secondhand alternatives to see you through.
Ongoing Mortgage Payments
Mortgage literally means ‘death pledge’, a pledge to keep paying until the loan is dead, or finished – and not until the death of the loan holder!
You commit to making regular payments to clear your loan, and that’s why there are such extensive credit checks when you apply to borrow enough money to buy your new home.
And although when you first take out your mortgage you will probably sign up for a fixed rate for a set number of years, one day you will have to renew your mortgage and there is no guarantee you will be offered the same rate when the time comes. You need to keep prepared for interest rate changes and act accordingly.
How Cunningtons can contribute to your home-buying success
As you can see, buying a new home involves a range of costs beyond just the purchase price, and continuing for very long time.
From mortgage setup and stamp duty to surveys, insurance, and other ongoing expenses, it’s crucial to have a clear understanding of your financial commitments.
To help you navigate this process with confidence, Cunningtons Solicitors have many years’ experience of dealing with conveyancing, as well as every other part of the property owning experience. Our local branches offer you the advantage of face-to-face meetings with your dedicated solicitor, ensuring personalised and inexpensive guidance throughout your property journey.
Don’t leave your biggest investment to chance – contact Cunningtons today and take the first step towards a smooth home-buying experience.
Contact us for your fixed-fee conveyancing quote, or visit one of our branches in Braintree, Brighton, Chelmsford, Croydon, Hornchurch, Solihull and Wickford to get your move underway.