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Costs for buying a home

Home buying costs go beyond the initial deposit and monthly mortgage repayments – read our guide to help work out how much buying a home will cost you overall.

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Costs for buying a homeCosts for buying a home

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

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The fees involved can vary widely depending on the mortgage you choose and your personal circumstances. Here are the most common costs associated with buying a home.

  • Deposit: Establishing how big a deposit you need is the first step to getting a mortgage

  • Mortgage repayments: Your mortgage repayments will depend on the size of your mortgage and its term

  • Stamp duty: This is usually charged on all properties worth over £125,000 if you’re already a homeowner, and over £300,000 if you’re a first time buyer

  • Upfront mortgage fees: Before a mortgage is arranged you need to calculate your mortgage fees

  • Legal, estate agent and conveyancing costs: There are additional costs involved in taking out a mortgage, including legal, estate agent, and conveyance costs

  • Ongoing and home moving costs: Moving your belongings into your new home also involves other costs

What deposit do I need for a mortgage?

To be eligible for a mortgage, you will need a cash deposit. Most lenders 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 need an upfront deposit of between £30,000 and £60,000.

In most cases, a larger deposit will give you access to cheaper mortgage rates. However, whether or not you can get a mortgage will also depend on your credit history and annual income, not just the size of deposit you can offer.

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

Increasing the term, say from 20 to 25 years, will usually result in lower monthly repayments. But borrowing longer term will also mean paying more interest overall.

For example, on a property valued at £200,000 with a deposit of £40,000, repayments over 10 years are likely to be between 70% and 90% higher than the repayments on a 20-year mortgage.

However, by spreading the cost over 20 years rather than 10, you’re likely to end up paying back a total of around 15% to 30% more.

How much is the stamp duty cost?

Stamp Duty Land Tax (SDLT) usually applies to all residential properties valued over £125,000 if you’re already a homeowner. First time buyers have stamp duty relief on properties costing £300,000 and under. Above these amounts, the rate you pay depends on the property value, and ranges from 2% to 12%. 

So under usual circumstances, if you’re a previous homeowner, you would have to pay £5,000 Stamp Duty on a £250,000 property. 

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However, at the time of writing (2020), homebuyers can take advantage of a Stamp Duty holiday put in place by the government to shore up the housing market in the wake of the Covid-19 pandemic. Under the terms of this initiative, there is no Stamp Duty to pay on any properties worth less than £500,000 until 1 July 2021.

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

Upfront fees for house buying mortgage

Home buying costs include an array of upfront mortgage fees.

The mortgage arrangement fee will likely be the largest of these additional costs, and can set you back up to £2,000. However, mortgage arrangement fees vary widely, which is why it’s important to take this cost into account as well as the interest rate when comparing mortgage deals.

If you don’t have the cash to pay your mortgage arrangement fee upfront, you may be able to add it to your mortgage amount. However, you will pay interest on the charge if you do this, so it’s best to pay it upfront if you can. 

You may also be charged a mortgage set-up fee of between £100 and £250. This fee is for booking the mortgage and reserving a limited special rate deal.

Some lenders charge a mortgage account fee of between £100 and £300 that covers the cost of setting up, maintaining, and closing down your account.

The mortgage valuation fee can be anything from £150 and £1,500, depending on the property you want to buy. However, some lenders waive this fee to attract new customers. 

A higher lending charge of around 1.5% of a property’s value may be imposed if you’re unable to find a deposit of at least 20% – although some lenders only charge this if you’re borrowing 90%.

Most lenders charge a telegraphic transfer fee for transferring the mortgage money to the seller’s solicitor. This is normally about £50.

You’ll usually need to pay a solicitor or conveyancer to manage certain aspects of your purchase. Their fees are usually between £850 to £1,500, plus the cost of local searches at £250 to £350 to ensure there are no planning or local issues affecting the property’s value.

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Compare a huge range of first time buyer mortgages on our comparison tables

Land registry fees for transferring the property into your name can cost a further £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. Non-standard homes – such as thatched houses – may need a specialist survey costing £600 or more.

If you’re selling your current home to move into a new one, most estate agents will charge you between 1% and 3% of the purchase price for their services.

Home moving and ongoing costs

Paying a removals company to help you move into your new home will usually cost at least £500. Cheaper options include hiring a van or borrowing a friend’s for the day using temporary car insurance and doing it yourself.

Other costs to bear in mind once you’ve moved in include:

Home insurance – most mortgage lenders will insist you have buildings insurance, while contents insurance is a good idea to protect your belongings.

Life insurance – many people take out life insurance to pay off their mortgage should they pass away during the term.

Services charges – if you live in a flat, you will probably face maintenance and services charges. These can run into thousands of pounds a year.

Council tax – you can check online how much you have to pay.

Mortgage repayment fluctuations – if you choose a variable rate mortgage, it’s important to be prepared in case higher interest rates push up your monthly repayments. 

Utility bills – comparing gas and electricity on Uswitch can help you find the cheapest energy supplier or tariff. You can also compare Internet providers with our broadband postcode checker.

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