With the average UK house price standing at £210,000 (as of February 2018), buying your own home is a serious undertaking.
Despite what is a large outlay, however, owning one's own property remains a key ambition for millions of Brits.
But the purchase price is only the beginning of the story. Unless you have several hundred thousand pounds saved up, you will need to find a deposit, then arrange a mortgage to obtain the remainder.
On top of this are numerous other costs and fees which need to be considered before you sign on the dotted line - not least of which is Stamp Duty
Raising enough cash for a deposit is the first challenge facing most would-be home buyers. Indeed, while deposits can be as low as 10%, this can easily equate to £20,000 on an average-priced home. And if you want to access the better mortgage rates, you will need to find at least 25%.
Having identified a suitable home and with the seller having accepted the offer, your mortgage provider will want to undertake a valuation of the property. This is to ensure it is worth at least the amount being borrowed.
The larger the property, the more this valuation will cost. In most cases, you as the buyer will be required to pay this.
The lender's valuation is not as in-depth as a full survey, which should be carried out to ensure there are no serious structural problems with the property, or any legal issues. The most affordable - and most rudimentary - survey is called a Home Condition Report (HCR). This costs around £250 and is best suited to newer homes and conventional properties.
The Homebuyer's Report, on the other hand, is a more in-depth report, which includes a valuation that may be used by your mortgage provider, potentially eliminating the need for a separate lender's valuation. This costs around £400.
However, if your would-be home is particularly old, or is listed, it may be worth investing in a full structural survey. You can expect to pay between £600 and £1,000 for this.
It's important to learn of any planning issues relating to the property. For example, a new road or supermarket may be planned nearby, which in time could impact the property value. Underground drain provision should also be determined. These kind of facts can be ascertained by carrying out local authority searches, which will cost around £300.
The interest charged on your mortgage is not the only fee charged by your lender. Among the various fees that can pop up, the most costly is the arrangement fee. Although this may be included with some mortgages, most lenders still charge it. In recent years the arrangement fee has been on the rise, ostensibly to make up for lower, more competitive mortgage rates. It's important to be aware of all such fees in order to understand if a mortgage really offers good value.
Some arrangement fees are charged as a percentage of the loan, but most are set as a fixed fee. You can expect to pay between £1,000 and £1,500 for this.
- Fee for transferring loan amount to seller's solicitor
- Administration fee
- Products fee
- Exit fee, charged if you want to pay off the mortgage earlier than the agreed date.
Another unavoidable fee is that charged by your solicitor. They will manage the legal aspects of the transaction, including Stamp Duty and transferring the mortgage sum to the seller. A licensed conveyancer can also carry out these duties. Expect to pay between £500 and £750.
Of all the costs associated with buying a home, stamp duty can be the most costly - assuming your property is worth more than £125,001, the sum at which the tax kicks in. Above this amount, a 2% tax is payable on properties priced up to £250,000, rising to 5% on homes worth between £250,001 and £925,000. If your property is worth between £925,001 and £1.5m, you will face a 10% fee.
For those buying a home worth £2,000,000 or more, the fee rises to a substantial 12%.
So, for example, the gov.uk states that Stamp Duty Land Tax (SDLT) works in portions as shown below.
Property or lease premium or transfer value
Up to £125,000
The next £125,000 (the portion from £125,001 to £250,000)
The next £675,000 (the portion from £250,001 to £925,000)
The next £575,000 (the portion from £925,001 to £1.5 million)
The remaining amount (the portion above £1.5 million)
If you're buying an additional residential property (such as a buy-to-let) or a second home worth £40,000 or more, an extra 3% will be payable. This tax was introduced in April 2016.
Mortgage lenders will require you to have buildings insurance in place. In addition to this you can add contents insurance, but this is not mandatory.
Depending how far you are moving and how many items you have, home removal costs will vary. You may decide to carry out the removals yourself, but it may be less stressful to pay a professional removal firm to do it for you.