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The True Costs of Buying a Home

on 15 September 2023

So, you’ve found your dream home and you’re ready to take the leap into homeownership. The excitement is palpable, but amidst the thrill, it’s crucial to remember there’s more to buying a home than just the sale price. Many first-time buyers are surprised by the hidden costs of buying a home. We’re shedding light on these often-overlooked expenses. From solicitors’ fees to valuation costs, let’s explore the true costs of buying a house or your first home and how Shared Ownership can help you get on the ladder.

The 7 Main Costs Involved in Buying a Home

1. Legal Fees to buy a home – Navigating the Legal Landscape

The Cost of Legal Fees: The cost of solicitor fees when buying a house typically range from £850 to £1,500 (possibly as high as £2,000 in 2024), including 20% VAT. This may increase based on the amount of work involved. Some solicitors charge a fixed conveyancing fee, others charge per hour, so it is important to be aware of how you will be charged at the beginning of the process.

What You Need to Know: A solicitor or licensed conveyancer is a vital partner during the home buying process. They handle the legal aspects of the transaction, ensuring a smooth transfer of ownership.

Their work includes largely these areas and in particular – b) Searches can incur additional costs usually around £200 – £300.

a) Conveyancing – the contract between yourself and the seller, organisation of your stamp duty payment, and the payment/transfer of funds for the purchase of your home.

b) Searches – your solicitor also conducts the relevant searches and liaises with your local authority to gain information on the area via various environmental searches to identify any risks of flooding, contamination or other aspects of the area that may impact your home purchase.

c) Land Registry Documentation – Your solicitor will also review all the details of the previous owner, the property boundaries, and register the deeds in your name once the sale has completed.

2. Mortgage Fees – Can be broken down into two areas:

a) Valuation Fee – Determining Property Value

The Costs: Valuation fees range from £150 to £800 and increase depending on the worth of the property. Some mortgage lenders don’t make a charge for this, but it is important to check this and factor in the costs of these potential mortgage fees when buying a house.What You Need to Know: When you apply for a mortgage, your lender will undertake a valuation of the property you want to buy, to determine the property’s worth. It’s a necessary step to secure your mortgage, ensuring that the property’s value aligns with the loan amount, so this cost should be considered in your overall fees when buying a house.

b) Mortgage Arrangement Fee

The Costs: Varies – £500 – £2000 typically. Occasionally a lender offers a no-arrangement fee deal.

What You Need To Know: This fee can be added to the amount you borrow, or paid fee independently of the amount borrowed. You will often be given the option when you choose a deal and apply for a mortgage on how you want to pay for it. Rates vary depending on the lender, the amount borrowed and the interest rates offered on the mortgage. Often where fixed mortgage interest rates are low and eye-catching, the arrangement fee can be steep, so it is important to look out for this and calculate this in your total cost of borrowing.

3. SurveyYour own Professional Inspection

The Costs: Approximately £400 to £1500 for a survey to be carried out by a RICS Professional (Royal Institution of Chartered Surveyors), and largely this isn’t a priority when buying a brand new home.

What you Need to Know: There are 3 levels of survey that you can request, and the level you should choose depends on your budget and often the age/condition of the house. The highest level will obviously go into much deeper detail on all aspects of the condition of the house, and this is especially advisable to ensure there are no horrors lurking such as subsidence, damaged or badly worn roof, or damp issues, many of which can be very costly to resolve if you buy the house unknowingly!

4. Electronic Transfer Fee – The Behind-the-Scenes Transaction

The Cost: Approximately £40 to £50.

What You Need to Know: The electronic transfer fee covers the movement of mortgage funds from your lender to your solicitor. While relatively minor in comparison to other costs, it’s a fee that is often overlooked.

5. The Deposit

The Cost: This depends on various things – the cost of the house, the % of total amount borrowed required as a deposit, and whether you are buying a part share of the house as a shared Ownership purchase. The deposit is often the biggest expense when considering all house-buying costs.

What You Need to Know: In most cases, mortgage lenders will not lend 100% of the value of a property and require you to pay a deposit towards the purchase of your home. This can be from as little as 5-10%, but in most cases the more you can put down the better. A bigger deposit means more lender choice and better mortgage deals, which can result in cheaper monthly repayments.

If you are buying a share of the home on a shared ownership scheme, then you will need a smaller amount for a deposit – as that 5 to 10% will apply to the cost share of the house you are buying. For example, if you are buying a 50% share of a home costing £250,000, and you need to pay a 5% deposit, then you will need to pay 5% of £125,000 which will be a £6250 deposit. This can increase if you choose to buy more of the property shares and staircase.

6. Stamp Duty

The Cost: *You will pay no Stamp Duty if the amount you pay for your main home is under £250,000. You will pay Stamp Duty on residential properties costing more than £250,000  unless you qualify for first-time buyer’s relief.

If you’re an eligible first-time buyer, you will pay no Stamp Duty on properties costing up to £425,000 and a discounted rate on property purchases up to £625,000.

If you are not eligible for first-time buyer’s relief and your home purchase price costs more than 250,000, you will pay a 5% stamp duty on the portion from £250,001 to £925,000.

* Stamp Duty rates as announced in the mini-budget on 23 September 2022 will remain until 31 March 2025

What you need to know:

You pay Stamp Duty Land Tax (SDLT) when you buy houses, flats and other land and buildings over a certain price in the UK. Stamp duty if relevant can be one of the bigger costs involved in buying a house.

You have 14 days to file a Stamp Duty Land Tax (SDLT) return and pay any SDLT due. If you don’t submit a return and pay the tax within 14 days, HMRC might charge you penalties and interest. Usually, your solicitor will deal with the Stamp Duty return and any payment due for you, although you can do it yourself. You must still submit a return (unless exempt) even if you won’t need to pay any Stamp Duty.

7. Moving Costs

The Cost: Depending on the volume of furniture and belongings you have to move, and the distance from your old to new home, this can vary from as little as a few hundred to a few thousand pounds.

The cheapest option would be to hire a van if you don’t have a large enough vehicle of your own to transport your things, and ask for family and friends to help. That way you only have the vehicle hire and petrol costs.

Top-end removal packages can include actual packing and unpacking but of course, you will pay a premium for this full service.

Finally, all of the above 7 outlined costs should allow you to calculate the total cost of buying a home. Being prepared and budgeting for all fees and charges when buying your home will hopefully make the process less stressful, and there will be no challenging surprises for your finances during the process.

At St Arthur Homes, we’re committed to guiding you every step of the way. Visit https://www.starthurhomes.com/what-is-shared-ownership/ to learn more about Shared Ownership and how it can lead you to the home of your dreams. Be sure to stay connected with us on Instagram @wearestarthur. There, you’ll discover our latest developments, meet our newest homeowners, and uncover valuable tips and tricks for your own buying journey.