If you’re thinking of buying a house in the United Kingdom, it’s important to be aware of the various costs and fees that will be involved. There are both upfront costs and ongoing costs, which can add up to a significant amount of money. In this article, we’ll take a look at each of these costs and fees, so that you have a better understanding of what to expect.
#1 Upfront costs
Upfront costs include stamp duty, deposit, legal fees, valuation fees, surveyor’s fee, electronic transfer fee, and estate agent’s fee.
Stamp duty
Stamp Duty is a tax that is payable on the purchase of a property in the United Kingdom. It is a one-time tax that is paid by the buyer at the time of purchase. The amount of Stamp Duty payable depends on the value of the property and whether the buyer is a first-time buyer. First-time buyers in the United Kingdom pay no stamp duty on properties worth up to £425,000. This is a significant saving for many people who are looking to get on the property ladder, and it is hoped that it will help to boost the housing market. In addition, the value of the property on which first-time buyers can claim relief is £625,000.
If you’re buying a second home, you’ll have to pay an extra 3% in stamp duty on properties costing more than £40,000. This surcharge applies regardless of whether the property is your main residence or not.
Deposit
A deposit is a sum of money paid by a buyer to a seller as an indication of their purchase intention. In the context of buying a house in the UK, the deposit is usually between 5% to 10% of the property’s purchase price. The deposit is paid on exchange of contracts, at which point the buyer becomes legally bound to purchase the property. The deposit is usually held by the seller’s solicitor or conveyancer until completion, at which time it is paid to the seller. The deposit can be paid in cash or by bank transfer. If the deposit is paid by cheque, it will need to clear before exchange of contracts can take place.
The deposit is an important part of the purchase process as it shows that the buyer is serious about buying the property and is able to raise the necessary funds. It also provides some protection for the seller.
Legal fees
You’ll need to instruct a solicitor or conveyancer to carry out all the legal work involved in buying a property. They will carry out searches, prepare contracts, and transfer money on your behalf. The legal fees can vary depending on a number of factors, including the price of the property, the location and whether there are any complicated issues with the sale. However, as a guide, you can expect to pay around £500-£1,000 in legal fees when buying a house in the UK.
Surveyor’s fee
It is important to have a property surveyed before you buy it, as this will identify any potential problems that could affect the value of the property. There are different types of surveys available, and the cost will vary depending on the type of survey you choose. For example, a HomeBuyer Report will cost around £350, while a Full Structural Survey will cost around £700.
Electronic transfer fee
When you buy a property in the UK, the money is usually transferred electronically from your bank to the seller’s bank. This electronic transfer is known as a CHAPS (Clearing House Automated Payment System) payment. The fee for this service is typically £30-£40.
Estate agent’s fee
This is only paid by the seller for the estate agent’s services. The fee is usually 1% to 4% of the final sale price.
#2 Mortgage fees
There are a number of fees associated with taking out a mortgage in the United Kingdom. These include the booking fee, application fee, valuation fee, arrangement fee, and sometimes even a higher lending charge.
Arrangement fee
It is charged by the lender for arranging your mortgage. A mortgage arrangement fee is a fee charged by a lender when an offer of a mortgage is made. The fee covers the cost of the lender’s administration and processing of the application. It is typically charged as a percentage of the loan amount, and can range from 0.3% to 1% of the loan amount. (Typically around £500-£2000.)
Booking fee
A mortgage booking fee is a charge that some mortgage lenders in the United Kingdom levy on prospective borrowers. The booking fee, which is also sometimes included in the “mortgage arrangement fee”, is usually paid when the borrower applies for a mortgage and is typically used to cover the costs of processing the application. In some cases, the fee typically around £100-£200 may be refundable if the borrower’s application is unsuccessful.
Application fee
This is a one-off fee charged by the lender for processing your mortgage application. The fee can vary depending on the lender, but is typically around £100-£250.
Valuation fee
This is a fee charged by the lender for carrying out a valuation of the property you are looking to buy. The fee can vary depending on the lender, but is typically around £250-£350.
Higher lending charge
It is levied by some lenders if you borrow a certain percentage of the property value.
Broker fee
If you use a mortgage broker to help you find a favorable mortgage deal, they will charge a fee for their services. The fee can vary depending on the broker, but is typically around £500.
Mortgage life insurance
This is an optional insurance policy that pays out a lump sum in the event of your passing away. The money can be used to pay off your mortgage so that your family is not left with debt.
#3 Ongoing costs
Remember once you buy your own home you’re responsible for looking after it.
Maintenance and repairs
You will be responsible for any maintenance and repairs that need to be carried out on the property. This can include anything from fixing a leaky tap to redecorating the entire house.
Buildings insurance
This is a mandatory insurance policy if you have a mortgage. The policy covers the cost of repairing or rebuilding your home if it is damaged by fire, flood, storm, subsidence or other insured events.
Contents insurance
This is an optional insurance policy that covers the cost of replacing your belongings if they are lost, stolen or damaged.
Council tax
This is a local government tax that you must pay if you own a property in the United Kingdom. The amount you pay depends on the value of your property and the area you live in. Affordable areas in the UK usually come with lower council tax costs.
#4 Leaseholders’ costs
If you are buying a leasehold property, there will be some additional costs that you need to be aware of.
Ground rent
This is a charge that you may need to pay to the landlord for the use of the land your property is built on. In England and Wales, ground rent charges have been banned on new residential long leases since 30 June 2022.
Service charges
These are charges that you must pay to the landlord for the upkeep and maintenance of the communal areas of the property, such as gardens, lifts, and entrances.
#5 Costs of moving home
Removal costs
You will need to pay for a professional removal company to transport your belongings from your old home to your new one. Usually varies between £300-£1000.
Storage costs
You may need to pay for storage if you cannot move all of your belongings into your new home straight away.
Cleaning costs
If you are moving out from a rental property, you may need to pay for a professional cleaning company to clean your old home before you move out.
Change of address costs
There will be a few one-off costs associated with changing your address, such as redirecting your mail. Mail redirection is a service offered by Royal Mail that will forward your mail to your new address for a period of time.
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