Before signing on the dotted line, there are so many different house-buying costs that you need to consider. Therefore, you must look at more than simply the asking price before buying a house in the UK, or you’ll soon realise you can’t afford to complete the purchase.
Purchasing a property is a stressful and complicated process, so to help you understand the cost involved in buying a house in the UK, we’ve put together this complete guide that includes the following:
· Hidden upfront costs when buying a house in the UK for first-time buyers
· Hidden upfront costs when buying a house in the UK when moving home or making a second home purchase
· Mortgage fees
· Ongoing fees
· Moving home costs
· Budget tracking
So, read on to find out the costs involved in buying a house to enable you to budget accordingly before purchasing your dream home.
Costs Involved in Buying a House in the UK
The purchase price is just one of the upfront costs associated with buying a house in the United Kingdom (it’s the biggest one, of course). When preparing your budget and determining what you can afford, you must factor in the following costs to avoid surprises.
So, when buying a house what costs are involved?
The highest upfront cost you face when purchasing a house is the deposit. For most buyers, the minimum deposit will be 5%, but it’s likely to be higher than this for many, particularly if you’re applying for a mortgage with a high loan-to-value ratio.
For instance, in the UK, the average deposit for first-time buyers is around 15%, highlighting that you need to save considerable money before getting on the property ladder. If the house is valued at £300,000, your deposit will need to be £45,000.
Another cost many people forget about when buying a property is stamp duty. Stamp duty is a tax levied on purchasing properties and works on a rising scale.
So, if you’re buying a house for less than £250,000, you don’t need to pay stamp duty. For properties between £250,001 and £925,000, the cost of stamp duty is 5% of the property’s value above the threshold.
Since most first-time buyers purchase properties for less than £250,000, stamp duty isn’t necessarily a house buying cost you’re likely to meet, but you need to be aware of it.
Estate agent fees
In the UK, most estate agent fees apply to those selling a home. However, it’s essential to recognise that estate agent fees exist, as they can increase a seller’s asking price.
Therefore, if you can negotiate with a seller directly without going through an agent, you can typically negotiate a lower purchase price, as the seller isn’t responsible for paying expensive estate agent fees to complete the process.
When purchasing a property, you must hire a solicitor or licensed conveyancer to carry out all legal work and documentation throughout the process of buying your home. Solicitor fees vary significantly and depend on several factors. Still, you can expect legal fees to cost between £800 and £1,500 when completing a house purchase, so make sure you make a provision for this unexpected house expense in your budget.
Some people take a chance and purchase a property without conducting a survey, but doing so is a bad move, particularly if you’re buying an older property.
A house survey considers things like the home’s structural soundness and whether it’s safe to move into or if work needs to be completed. The cost of a house survey is likely to be similar to the legal fees, but it depends on the size of the property and the scope of the survey to be undertaken.
Some mortgage providers might make a full survey as a condition of receiving a mortgage offer, so it's important to understand this cost when buying a house.
It might seem strange that you need to pay someone to value a house, but it’s important to ensure that you don’t pay above market value for the property you’re interested in.
You will need to hire the services of an RICS surveyor to complete a house valuation, and you can expect it to cost anywhere between £150 and £800. Again, the house valuation cost depends on the property’s size and various other factors.
Electronic transfer fee
You must factor in the electronic transfer fee when purchasing your home. This is a cost associated with transferring mortgage money to the solicitor, and it’s not likely to cost more than £100. Still, it’s important to include it in your budget, as unexpected costs can quickly add up and eat away at the money you’ve made available for the house purchase.
Land registry fee
Should you make changes to the title documents held at the Land Registry when completing the purchase of your home, you will need to pay a fee. You can make changes online via the Land Registry portal or by post, and the cost depends on which method you opt for and how much the property is worth.
Presently, it costs between £45 and £1,105 to make changes to the Land Registry, with properties between £100,001 and £200,000 coming with fees of £230 per change.
Mortgage advisor fees
Working with a mortgage advisor is important in house-buying, as they’re perfectly positioned to help you find the best deals for your income level.
Some mortgage brokers charge a fixed rate for their services, while others bill hourly. It’s difficult to predict the exact cost of mortgage advisor fees given that there are so many variables, but you can expect your fees to come in at around £500 if you’re a first-time buyer.
Once your mortgage advisor has helped you to find a suitable plan for your home, you need to consider the mortgage fees attached to your loan. While every mortgage is different, some of the fees that you need to prepare for include the following:
· Mortgage arrangement fees (£0 - £2,500)
· Mortgage booking fee (£100 - £300)
· Application and underwriting fees (£100 - £200)
· Processing and administration fees (<£100)
You should ask your chosen mortgage provider directly for information regarding their fees to make sure that you don’t get stung by hidden mortgage fees when you think the process is done and dusted.
Buying a thank-you present
Of course, you aren’t obliged to buy a thank-you present when buying a property, but it’s common to do so.
You can buy a thank-you present for people who were key to getting the deal over the line for you, be it family members, friends, or even professionals you have hired. Set aside £100 or so to purchase some thank-you gifts, and you will make your life much easier if you need help from the same people in the future.
Congratulations! You’ve just purchased a house and covered all of the costs associated with the process. But now that you’ve moved in, there are several unexpected home buying expenses that you need to budget for to maintain your property.
Every home is different, and the costs associated with ongoing fees will vary from family to family, but you should budget for the following:
· Insurance – you will need to apply for buildings and contents insurance to start on the day of you owning your new home.
· Maintenance and repairs – it’s always a good idea to create an account to cover maintenance fees and repairs to keep your house in good shape.
· Council tax – council tax bands are set depending on where in the country you live. Make sure you consider the monthly cost of your council tax obligations and factor them alongside your mortgage repayments.
· Energy bills – Energy bills are rising due to the cost-of-living crisis. You must make sure you can afford to pay your monthly bills while managing your mortgage repayments.
Conclusion: How to budget for Buying Your First Home
As you can see, so many costs are involved when buying a house, which is why creating a budget is important before purchasing a home.
You can refer to our budgeting basics blog post to help you create a comprehensive budget for your house purchase, and our household finance and budgeting templates guide will help you plan for ongoing costs after moving in.
Ultimately, you need to look beyond the purchase price when buying a house and consider the other upfront costs you must cover before signing on the dotted line.