When you decide to buy a home you often look at the sale price - but this is not your final number. Prepare to spend a lot more. The total cost of buying a house includes some major upfront costs and several smaller ones. A mortgage will not help you cover these fees.
Here’s the math:
Start with the deposit
The minimum deposit for a mortgage is 5% of the home cost. But in reality, few if any mortgage providers will cover 95% of the home price. So prepare to put a deposit down of around 15%. Saving for deposit totals, on average, £33,000 outside London and £115,000 in London. This will be your biggest upfront cost of buying a home.
+ Stamp duty
If your home is valued at or above £125,001 you will have to pay a government tax called stamp duty. First time buyers have different limits and exceptions: no stamp duty on the first £300,000 for properties valued at or below £500,000.
The total stamp duty tax varies depending on the cost of the property, and the rate goes higher along with the home price. You can use a stamp duty calculator to determine what you can expect. Mortgages do not cover this tax or any other additional home purchase costs.
+ Valuation fees
Before the mortgage lender gives you a loan, they will do an evaluation of the property. Some do not charge for this, while others will charge you between £150-£1,500. That price often depends on the value of the property in question.
+ Legal fees
Although there are some digital services that let you handle the legal side of a home purchase by yourself, it really is a good idea to go through a licensed conveyor or solicitor. They will handle a shocking amount of legal paperwork when buying and selling.
Solicitor fees for buying a house are often laid out upfront. They may be a fixed fee of around £850-£1,500, or a percentage of the home sale.
+ Electronic transfer fees
Sending money isn’t free. Especially when it’s a lot. Expect to pay around £50 in these fees.
+ Estate agent fees (for sellers)
If you are selling property, expect to pay the estate agent a percentage of the sale price, or a pre-agreed fixed fee. This house selling cost means you will have less than your sale-price in hand to put down as a deposit on a new home.
+ Removal costs
The cost of moving house physically is perhaps the most obvious. And unless you have some very good, strong friends with free time and a van, you can expect to pay several hundred pounds to a removals company.
+ Mortgage fees
There are many kinds of mortgages, and some of them have various fees associated with their arrangement. These can total between £100 and £2,000.
Saving up for your home
Now that you know a bit about the hidden costs of buying a house, be sure to change your “saving for a home” goal to reflect it. You can use Money Dashboard to set up and adjust your budget and track your savings towards your home-ownership goals.