- 23 February 2021
- Posted by: mikey0809
- Category: Mortgage
There are a number of expenses to factor in when buying a home – from the deposit and stamp duty to solicitor’s fees and removal costs. To plan your budget Miles Robinson of Trussle guides you through each one of the issues.
Before you take that first step on the property ladder that is a huge financial commitment when buying a home there are a lot of factors to consider.
Making sure you are prepared is key and aside from the price of your dream home, you should factor in other costs which are required to be pay too.
Your deposit will be the biggest payment you’ll have to account for when buying your first property.
You’ll have to pay a deposit and take out a mortgage to pay the remainder in monthly repayments, if you do not have the full price of the home you wish to buy.
A larger deposit can also mean your mortgage repayments are lower, depending on your repayment term. It’s worth saving up as much as possible towards your deposit to give you a better chance at securing a good deal.
The size of your deposit is relative to the total cost of the home you wish to buy and an average deposit can differ widely by region.
Previously, a deposit of at least 5% of the property’s value was needed, however, the coronavirus pandemic has led to many lenders withdrawing 95% loan-to-value (LTV) deals which means some lenders will now only accept deposits of at least 10%.
In the current market, the average house price in England is £252,000, according to Halifax. To put down a 10% deposit and access 90% LTV mortgages for a house at this price, you’ll need to save at least £25,200. To put down a 5% deposit for a 95% LTV mortgage, you’ll need at least £12,600.
We’d recommend using an online affordability calculator to calculate what you can afford based on your deposit size, income and outgoings.
The current stamp duty holiday enables first-time and next-time buyers to purchase homes without facing any stamp duty tax on properties under £500,000. This could save an average of up to £15,000 per transaction.
However, the deadline for the stamp duty holiday is 31 March 2021, and with high levels of demand and delays within the industry on completions, buyers hoping to take advantage of the tax relief should act quickly.
We’d advise buyers to calculate their potential stamp duty tax using a stamp duty calculator, so they can be prepared for additional costs should they not complete in time. This will help to avoid any unexpected costs further down the line.
From 1 April 2021, next-time buyers will be required to pay stamp duty on any residential properties at the value of £125,000 or higher.
However, it’s worth noting that first-time buyers will continue to benefit from the stamp duty tax relief for properties up to £300,000 and will pay 5% on the remaining cost up to £500,000.
Solicitor and Conveyancing Fees
Conveyancing involves the legal transfer of ownership from the seller to the buyer and includes all the legal and administrative work that’s part of the process. When purchasing a house, you’ll need to hire a solicitor or licensed conveyancer to carry out the legal work involved.
Fees vary depending on the solicitor (or conveyancer) you use, your location and the property you’re buying. There isn’t an average figure for legal fees, however, it’s sensible to prepare for costs from £850 to £1,500+.
You will also be required to pay disbursements for a number of required legal searches, such as electronic ID verification, bankruptcy searches, local authority searches and Land Registry charges. See estimates below:
- Local searches to check if there are any local plans or problems. This will cost you around £250 to £300.
- Bankruptcy search – £2 to £4 per person taking out the mortgage
- Land Registry fees from £135 and office copies (if required), approx. £4 to £8
- Electronic ID verification – £2 to £18 per person taking out the mortgage
- Local authority searches – £100 to £200
- Water and drainage search – £30 to £40
- Environmental search – £30 to £35
- Telegraphic transfer fee – £25 to £45
- Mortgage handling fee – £60 to £80
- HMLR final search – £3 to £7
- Land Registry Charge – £20 – £910
You’ll need to discuss how the payments will work with your solicitor. However, it’s often the case that you’ll need to pay the fee for carrying out your local searches upfront and then pay the remaining costs throughout the process, on exchange of contracts or completion.
Mortgage brokers operate independently and often have access to thousands of deals on the market.
Before confirming a broker to help you secure the best mortgage deal for your circumstances, ensure you discuss fees and any potential charges.
Some brokers will charge a fee which can be a percentage of the loan amount, or a fixed fee. Whilst others, like Trussle, do not charge a fee at all.
Given the range of different options available to you, it’s important to do your research before choosing a broker.
When choosing a lender either independently or with your broker, you should consider and take into account all potential fees and charges you may be required to pay. These can vary from lender to lender and depend on your situation. Mortgage fees often include:
- Arrangement fee – sometimes called a ‘product fee’ usually about £1,000 but this varies.
- Missed payment fee – a fee some lenders might charge if your account is in arrears. The penalty depends on each lender’s rules.
- Early repayment charge – this might not always apply. Check what the rules are with each mortgage provider, especially if you want to make early repayments. Often the charges range from 1% to 5% of the value of the early repayment.
- Exit or closure fee – a fee to your lender when you repay your mortgage, even if you’re not repaying it early. You might not have to pay this if you’ve paid the full mortgage account fee. This usually includes set up, maintenance and closing the account. It often costs between £75 and £300.
Once you have had an offer accepted on a property, it’s recommended that you hire a qualified surveyor to carry out a survey on the property’s condition.
The surveyor will visit the property, carry out an inspection and prepare a report on the property’s condition, outlining any problems they have found.
When selecting a surveyor, ensure they are a member of one of the below:
- RICS: Royal Institution of Chartered Surveyors
- RPSA: Residential Property Surveyors Association
Finally, once you have exchanged and have a completion date agreed, you may need to consider removal services to help with your move.
Costs will depend on the services you require, for example, packing and unpacking, loading and unloading, the assembly of furniture etc. The current average of removal services for a three-bedroom house within 50 miles is £806.
Buying your first home is an exciting milestone, however, it’s important you enter the buying process with a good understanding of the steps and most importantly, the costs involved. If you’re thinking about buying your first home, consider reviewing your finances to see where you might be able to cut back on your outgoings and spending.
We’d always recommend that you seek professional advice from a broker to discuss the options available to you based on your personal and financial circumstances.