Buying a property is one of the largest investments anyone will make during their life. It's important to plan the financial side of moving home, to make sure it will go smoothly and be affordable in the long-term.
The costs of a home do not just include the mortgage, and you should plan ahead for future increases in your outgoings, such as a rise in interest rates.
One-off Outgoings
Deposit - Many lenders will insist that first-time buyers put down a deposit of five or ten percent of the total purchasing cost. This deposit will decrease the amount of money borrowed, and lower monthly costs and total interest paid on the mortgage. Some lenders may offer a 100% mortgage, but keep a close eye on the costs.
Surveyor's Fees - A lender will insist on a basic valuation survey to be completed, at a cost of around £250. This is only for the lender's benefit however, and you should also have a detailed Homebuyer's Survey or full structural survey carried out.
Stamp Duty - If the purchase price of the property is over £120,000 you will need to pay Stamp Duty Land Tax. This usually costs between one and four percent. Some property developers will pay your Stamp Duty for you, and some 'disadvantaged' areas are excempt.
Solicitor's and Conveyancer's Fees - These cover the paperwork behind buying a house, and the costs will vary depending on the property value and location.
- Legal fees start from around £500 + VAT
- Land registry fees are between £40 and £700
- Local authority searches up to £250
- Drainage and local environment searches between £30 and £40 each
- Administration costs of about £50
Lender's Arrangement Fees - These will include a booking fee of about £150 (limited offer mortgages only) and an arrangement or completion fee, normally between £100 and £400.
Lender's Insurance Premium - A high percentage loan above the normal lending charge limit (usually 80 or 90 percent) will incur a lender's insurance premium. This protects the lender if you are unable to make payments in the future, and you can usually add the cost of it to your mortgage.
Moving Expenses - These will vary widely depending on distance, location, furniture, and much more. Ideally you should get three or four quotes from removal companies.
Ongoing Monthly Costs
Mortgage Repayments - A repayment mortgage will consist of 'capital and interest' payments, while an interest-only mortgage will consist of 'interest' payments only. If you have an interest-only mortgage, you should budget for monthly investments (like a pension, ISA or endowment policy) to pay off the mortgage at the end of the term.
Protection and Cover - Unless you have an endowment policy linked to your mortgage, you might need to take out a life assurance policy such as ‘term insurance’ or a 'mortgage protection policy'. The monthly payments can be relatively low and the insurance pays off what you owe if you die before you’ve finished repaying the loan. Ask your mortgage adviser for more details.
Buildings and Contents Insurance - Once you exchange contracts for your property you’re responsible for insuring it. Your lender can insist that you have buildings insurance - but they can’t make you buy their own. But in some cases, lenders insist that you take out their insurance on completion.
Council Tax & Bills - Don’t forget that when you move, your monthly bills might go up.
