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Home buying costs

Home buying costs

The cost of buying a home goes beyond the deposit and mortgage repayments – read our guide to help work out your overall home buying costs

Before you take out a mortgage, make sure you’ve factored in all of the costs and fees that come with buying property.

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First time buyer mortgages

Many of the fees vary depending on the lender and your circumstances, and you may not have to pay all of them, but it’s worth knowing, especially if you’re a first time buyer.

How much deposit do you need?

To be eligible for a mortgage you will need a cash deposit, and lenders typically require between 15-30% of the property’s value.

For example, if you’re looking to buy a home valued at £200,000, you’re likely to require an upfront deposit of between around £30,000 and £60,000.

The lender’s mortgage figures are also dependent on your personal circumstances such as credit history and annual income, not just your savings.

However, some lenders may ask for less than a 15% deposit for first-time buyers, and if you’re using the government’s Help to Buy scheme, you may only need 5% of the property’s value.

If you would like to learn more about the different loan-to-value (LTV) ratios available on the market these pages could help:

Mortgage repayments

How much you pay on your mortgage each month depends on how large your deposit is and how much you’ve borrowed, as well as your personal circumstances and the length of the term. It’s worth bearing this all in mind when deciding on the size of your mortgage.

Unless you have a deposit that covers more than 50% of the property’s value, you should expect to be paying your mortgage for many years.

Your monthly repayments will usually be lower as you increase the length of your term, but the overall total amount owed will still be higher.

For example, on a property valued at £200,000 with a deposit of £40,000, repayments over 10 years are likely to 70-90% higher than a 20-year term’s monthly repayments.

However, over 20 years you’re likely to be paying back a total of around 15-30% more than if you were repaying your mortgage over 10 years.

Stamp Duty

Stamp Duty Land Tax (SDLT) applies to all residential properties valued over £125,000. Anything above that value and you’ll be charged between 1-7% SDLT.

For example, on a property worth £200,000, you will need to pay the 1% Stamp Duty of £2,000.

Compare first-time buyer mortgages

Compare first time buyer mortgages from all the largest lenders

First time buyer mortgages

The next threshold is between £250,001 and £500,000, triggering 3% Stamp Duty. This means if you purchase a property worth £400,000 you would need to pay an additional £12,000.

You can read up more on Stamp Duty Land Tax rates to see which band your property is likely to fall into.

Upfront mortgage fees

Aside from the deposit, monthly repayments and land tax, home buying costs include an array of ‘smaller’ fees that vary according to personal circumstances and the provider.

You may be charged a mortgage set-up fee of around £100 to £250. This fee is usually put towards booking the mortgage and reserving a limited special rate deal.

Home buying costs - Person doing calculations - how much deposit do I need to buy a home?

The mortgage arrangement fee will likely be the largest of the additional mortgage costs, it typically costs up to  £2,000. Most mortgages will have a mortgage arrangement fee, but the cost of it will depend on the lender and interest rate charged.

As the cost of the mortgage arrangement fee can be quite substantial, lenders are likely to give you the option of adding it to the mortgage repayments but, naturally, you’ll have to pay interest on this, so it might be better to pay this upfront.

The mortgage account fee covers the cost of setting up, the maintenance and closing down of your account, and is charged at around £100 to £300.

The valuation fee will sometimes be offered by lenders for free, but this could cost you anything between £150 and £1,500, depending on the property’s value. This service ensures that the property value is worth the mortgage amount.

A higher lending charge may be implemented if you’re taking a mortgage that covers more than 80% of the property’s value, you may have to pay this, but it depends on the mortgage provider’s threshold.

In some cases, the higher lending charge will only be activated if you’re borrowing 90%. This is likely to be 1.5% of the property’s value, but providers will set their own rates, so it’s important to factor in this cost if your deposit can’t cover at least 10% of the property value.

 The telegraphic transfer fee will be charged by the lender for transferring the mortgage money to the seller’s solicitor, this is normally about £50.

Buildings insurance will be a regular premium you will have to pay, lenders will insist on you taking this out.

However, if you wish to shop around for a better home insurance deal for the building itself, then you’ll probably have to pay a switching fee to the lender of around £25.

Legal, estate agent and conveyancing costs

A solicitor will be required for a few of the services that help to facilitate the purchase of a home, including conveyancing searches and land registry.

Searches will cost around £250 to £350 and ensure that there are no planning or local issues affecting the property’s value.

Compare first-time buyer mortgages

Compare first time buyer mortgages from all the largest lenders

First time buyer mortgages

Legal land registry fees or the cost of conveyancing – the legal transfer of property from one person to another – can cost around £500 to £750, excluding VAT.

You’ll also need a surveyor to check that there are no structural defects with the property. A basic survey will cost around £250 and will be sufficient for new-build and conventional homes. Nonstandard homes – thatched houses, for example – may need a specialist survey costing over £600.

Finally, if you’re selling your current home to move into a new one, you’ll need to factor in the 1-3% estate agent’s fee, excluding VAT, for marketing and showing round potential buyers.

Ongoing and home moving costs

If you made it this far then you’ll be ready for the monthly mortgage repayments, but if you’re on a variable rate or a short-term fixed rate mortgage, it’s important to be prepared for any interest rate fluctuations.

Most people take out life insurance or payment protection insurance to protect themselves and their families in the event they’re unable to keep up with the monthly mortgage repayments.

You can compare life insurance quotes on uSwitch but some lenders will insist you take it with the mortgage.

For properties with communal areas, such as flats in apartment blocks, it’s likely that you’ll have to pay an annual service charge.

This price varies depending on the managing agents who are responsible for the upkeep of the overall building maintenance and services.

Making the move itself will have its costs, especially if you have a lot of things to take with you. You can pay for a removal firm to help you move home but there are other ways if you’re not willing to spend up to £500.

Some people use their car club membership to hire a van or you can borrow a friend’s van for the day using temporary car insurance.

Once you’ve moved, you’ll need to budget for the monthly council tax payments, which you can check online to work out how much it will cost you. How much you pay is based on your local authority and the valuation band your property falls into.

Lastly, you’ll need to consider bills for water, energy and utilities. You can compare gas and electricity on uSwitch to help find the cheapest energy supplier or tariff, and compare Internet providers via our broadband postcode checker.

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