The hidden costs of purchasing your first home

With the New Year offering mortgage deals that are more affordable than ever and new government help available to first-time buyers, 2022 couldn’t be a better time to buy a property.

With house prices continually rising, getting on the property ladder sooner rather than later is the key to bagging yourself a property you love at exactly the right price. The cost of purchasing your first home however goes beyond saving a healthy deposit.

There is a long list of costs to foot the bill for when purchasing your first home. Here we take a look at them all so you can budget realistically and become one step closer to property ownership.

Stamp duty

Last year’s stamp duty break was a huge relief for thousands of property buyers, and for good reason.

With stamp duty between 2 and 12% of the property’s value as of October 2021, many buyers realised huge savings as a result of the relief. Stamp duty is calculated based on the tax bracket that the property you are looking to purchase falls into. 

Homes purchased for less than £125,000 in England and Northern Ireland are exempt from stamp duty but above this, you’ll have to settle a bill for stamp duty according to the most recent rates. 

If you purchase a home for £249,000, you pay no stamp duty on up to £125,000 of your purchase and 2% on the next £124,000. This will equate to a stamp duty bill of £2,480.

Conveyancing

During the property buying process, you’ll need representation from a solicitor or conveyancer to make the transaction legally binding, and this comes at a cost.

Your chosen solicitor or conveyancer will be charged with completing varying checks and searches as well as transferring ownership. Fees for checks, searches, bank transfers, processing stamp duty payments, Help to Buy supplements, gifted deposits, and copies of title deeds often come at additional cost. 

The Homeowner’s Alliance details how much you can expect to pay for basic conveyancing fees:

“The legal portion of the conveyancing fees bill covers the work done by the conveyancing solicitor themselves. Conveyancing fees do vary but are typically between £850-£1500, plus the cost of disbursements.  Legal fees for leasehold properties are more.”

Surveys

Property surveys essentially evaluate the condition of the building you are looking to buy to provide peace of mind for you and your lender.

There are several professional surveys to choose from, including the basic condition report (which costs £300 or more), Homebuyers Report (£350 or more), home condition surveys (£400 or more), and RICS Building Surveys (£500 or more).

Buyers of new-build properties may also need to request a snagging report at a cost of between £300 and £600. If the property you wish to purchase is older, has notable issues, or has an unusual construction, your lender may stipulate that more specialist reports and surveys be completed before confirming your mortgage.

Mortgage fees

Along with the surveys mentioned above, your lender may wish to complete a valuation survey. This survey determines whether the property you intend to buy is worth the price you are looking to pay.

Mortgage valuation costs are usually covered by the lender, with free mortgage valuations offered as incentives across many mortgage products. Alternatively, the lender may request that you cover the cost.

Mortgage arrangement fees may also be due on your selected product, ranging from £300 to up to 1% of the mortgage value.

Brokers and estate agents

If you’re using a mortgage broker and/or an estate agent, you will have to budget for their fees. With mortgage brokers, these fees usually depend on the value of the mortgage you choose. Estate agents charge set or percentage-based fees.

Other costs to budget for

Unfortunately, the costs of purchasing your first home don’t end there. You’ll need to take out life insurance and home insurance (starting from the date you exchange).

Don’t forget to budget for the cost of removals. This cost varies depending on whether you’re self-driving a removals van, hiring a professional removals company, or paying extra for help with packing.

Tick one to-do off your list by contacting us for mortgage advice today.

Image: Tero Vesalainen / Shutterstock.com