Tepilo discuss the hidden costs of buying your first home (Updated February 2018)
Buying your first home is an exciting time, but hidden costs can sneak up on us and bring unwanted stress. We put together a cost checklist for first-time buyers to help you plan your budget and avoid nasty surprises. Read on to understand stamp duty, solicitor’s fees and more – including what they are and how much they might cost.
On top of your mortgage deposit, there are some additional upfront costs that you will need to save for. These costs include; stamp duty, valuation fees, surveyor’s fees, legal fees and electronic transfer fees. We have outlined what these costs are for and how much they might be…
What is Stamp Duty?
Stamp duty is a tax paid on homes that cost over a certain amount. In 2017, the stamp duty regulations changed, and first-time buyers are no longer charged stamp duty on the first £300,000 of their property (as long as the property price is £500,000 or less). When buying your second home, you pay 2% stamp duty on houses between £125,000 and £250,000, and 5% on homes between £250,000 and £500,000 – so this is a useful saving!
When you apply for a mortgage, the mortgage lender will value the property to decide how much they can lend you. The cost of this valuation ranges from £150 - £1,500.
When buying a house, you will usually hire a solicitor to help you with the legal process. Legal fees will range from £850 - £1,500. The solicitor may also carry out searches to see if there are any local plans or problems to be considered. These searches will come at an additional cost but they can bring any future issues or costs to your attention before you commit to buy.
Electronic Transfer Fees
This is the cost of the lenders transferring the mortgage money to the solicitor. This will usually cost between £40 and £50.
When taking out a mortgage you will be asked to pay a deposit (at least 5% off the purchase price). To help you save up for a deposit on your first home, the UK government have introduced a help to buy ISA scheme, which can be opened with most banks and building societies. When you save with a help to buy ISA, the government boosts your savings by 25%. This means that for every £200 you save, the government will give you £50.
As well as your deposit, you will be expected to pay a booking fee (usually between £99 and £250), an arrangement fee (up to £2000) and a mortgage valuation fee (usually around £150).
Once you have bought your first home there will be some new costs that you will take on. From doing your house up and fixing any damage, to the running of your home when you move in.
First of all, the house you buy may need some repairs – major repairs will have been highlighted in the survey carried out by your solicitor. The cost of repairs will vary widely depending on the issue and the contractor you hire to fix them. We would always advise looking into these costs before committing to buy.
In addition to repairs, you will also need to pay for home insurance to protect your new home from flood or fire damage, and life insurance in case you pass away before your mortgage is paid off. Again, this will vary widely depending on your property and personal situation.
Council Tax & Utility Bills
When you move into your first home you will need to start paying for council tax and utility bills. Council tax funds services such as rubbish collection, road maintenance and street lighting, and varies depending on the area you live in. There will also be regular bills to pay for gas, electric and water. It is a good idea to ask the sellers how much they pay for these before you move in.
Looking for housing for first time buyers? Use Tepilo’s Property Search tool to find the perfect first home.
Read more: The Best Cities for First Time Buyers