Buying a house is one of the most important financial decisions one has to make in a lifetime. It involves a lot of logistics which require thorough mental and financial preparedness. Its easy to become fixated on the purchase price of the house and forget, or may not be aware of the other costs involved. These other extra costs are subjective to different factors some of them being the place, county the house is located in, the seller or the condition of the house.
So what are these extra costs you might encounter when buying a house?
Stamp Duty Land Tax (SDLT) is a tax on properties bought in England and Northern Ireland. You’ll need to pay it when you buy a residential property that costs more than £125,000.
|Property or lease premium or transfer value||SDLT rate|
|Up to £125,000||Zero|
|The next £125,000 (the portion from £125,001 to £250,000)||2%|
|The next £675,000 (the portion from £250,001 to £925,000)||5%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||10%|
|The remaining amount (the portion above £1.5 million)||12%|
Purchasing a house involves a legal processes and the legal paperwork of a house sale is largely done by conveyance solicitors. These typically involve instructing a solicitor / conveyancer,
local authority search, pre-exchange of contracts, deed of transfer, mortgages, stamp duty and land registry.
There are different types of insurance payments associated with any house. There is the life insurance, homeowners insurance and your mortgage lender may insist on certain levels of insurance to cover the cost of the property / outstanding mortgage.
Homeowner’s insurance covers losses and damages to an individual’s house and to the assets in the home. For first time homeowners, the chances are you haven’t bought any homeowners insurance. But if you already have one and need to transition, you have to cancel the old policy first. The cost of doing so varies between policies depending on factors like age of the house, square footage, additional structures and many more.
You might also want to consider mortgage life insurance which majorly protects your family and loved ones in case of death such that the burden is not placed on them. All these plus many other insurance payments that would be necessary for consideration are should be considered while planning to buy a house.
A deposit is basically the amount of money you put towards the purchase of the house. Most mortgages offer more favourable rates when a minimum of 10% of the purchase prices is deposited, however with Help to Buy you can purchase a house with as little as a 5% deposit* and with the new Family Springboard Mortgage the borrower pays a 0% deposit but requires a helper to deposit 10% of the purchase price into a savings account.
Inspection and Survey Fees
These are the most ignored fees when buying a house and sometimes they come to haunt us later on. Inspection of a house helps uncover any underlying issues with the house, in case there any. The surveyor gives a clear picture of the condition of the property such as if there is any damp, cracks or any critical repair that needs to be done.
The inspector will also estimate the life expectancy of different structures and system in the house such as the electrical system, air condition system, roofing or plumbing systems. We recommend using a surveyor who is accredited by the Royal Institute of Chartered Surveyors (RICS).
Estate Agent Fees
If you are selling a property you will also have to take into account, estate agent fees. Check the small print when using an Online Only estate agent that market themselves with “no fees” and other fees can sometimes cost you more then a local estate agent with fixed fees.
Priestley’s operate on a ‘no sale no fee’ basis, so you’ll only pay when the property’s sold.
Unless you have some friends who own trucks and are willing to help you move in your belongings, doing it yourself can be an uphill task. Again it is better done by professionals who can handle everything with the necessary care. Whether it’s renting a van and doing the job yourself or hiring professional movers, it all involves costs which if not planned for might surprise you. The costs here depend on how far your belongings are being moved to and how much you have to move. Being prepared for this would probably save you a shocker.
These include electricity, gas, water, telephone or any other installed network connections and council tax. Saving some cash for the necessary first monthly bills is always a wise move.
These are perhaps the most overlooked costs in the process of purchasing a house. They involve the fee charged by the mortgage lender and third-parties involved in the process. They pay for services provided to documents, securing and completing the financial transactions on a home sale. Discuss these with your mortgage broker in your initial meeting.
Bottom line is to ensure you are fully prepared for all the costs that will come along.