Hello
Today I've decided to write a post about the costs associated with buying a property. When we were looking at buying a house I found it very difficult to find consolidated figures on how much it was likely to cost. It is such a monumental amount of money that you really need to know well in advance roughly how much it will cost. I remember thinking 'Oh good I think I've got enough money for a deposit now' only to realise that we would need an extra £2-3,000 on top of that amount! Most disheartening when its taken years to get the deposit. To make matters worse we paid out half of this for the flat purchase, which fell through. This is a massive thing to take into consideration too. Whilst it was, in this instance, our choice (to a point) you do always have the risk that the seller may pull out of the purchase. So some of the things you have paid out for will need to be paid for again e.g searches, depending how far along the process you were. Make sure your conveyancer offer a "no purchase, no fee" arrangement, just in case.
So here are the costs you will incur. I will divide them into those you pay upfront or before completion, those that you pay on completion and extras. Where possible I will give a likely price range.
Before Completion
- Mortgage Broker Fees- £0-399+
When purchasing the flat we went to a corporate estate agents (and oh how we regret it). The 'lifetime broker fee' was £399 (grr!) which was supposed to mean that you could use this company for all future purchases and sales without having to pay fees ever again. Sounds great until they mess you about and you lose faith. We will NEVER use them again, so they did well out of us there. Anyway I digress, when we found the house we used an independent estate agents and they charged us nothing for setting up the mortgage. The service was excellent and we could be sure the service we were getting was based on the commission the person would receive. I would definitely recommend an independent estate agents as their fees are likely to be lower than corporates or as in our case non existent.
- Mortgage Booking Fee approx £300
This is a lovely charge the mortgage company adds for giving you a mortgage. Isn't that nice of them. This is sometimes added to the mortgage amount, rather than being an upfront cost.
- Valuation Fee- approx £150-200
This is the cost incurred by the mortgage company to send someone to the property to value it. They do this to insure the property is worth the price you are paying, incase they have to repossess it.
- Structural Survey- approx £150-£450
These vary in price based on how extensive the survey is. It is recommended that you have a full structural survey done. However this is the most expensive option, so you do have to weigh it up. The bank won't lend on a house that looks like it is about to fall down, so their survey is useful. But they don't tend to go in the property. If you are buying a very old house for example there are potentially a lot of structural problems that should be looked at. What you need to consider is that if you don't have a full survey and there is a problem with the house once you move in, you will have to pay for it. If it is discovered before you buy it, you can make it a condition of sale that the seller rectifies it before they leave.
These are the first things your conveyancer will do. I have explained more about them
here.
Upon Completion
- Conveyancing Fees £700+ (less search cost)
This is what you pay the solicitor for the legal aspects of the purchase. For example changing the deeds, searches, boundary and access issues.
This is the killer. Up until recently stamp duty wasn't applied on properties under £250,000. But our lovely government have reduced it right down to £125,000. So now anything other than a small flat qualifies for stamp duty.
- For houses £125,000-£250,00 stamp duty is 1%. So for a house worth £150,000 you will pay £1,500 in stamp duty
- For houses worth £250,000-£500,000 its 3%. So for a house worth £300,000 you will pay £9000.
- For houses worth £500,000-£1 million its 4%. So for a house worth £1 million you will pay £40,000. Ouch!
- For houses worth over £2 million its 7%. So for a house worth £2 million you will pay £100,000.
And apparently we have a budget deficit!
Extras to Consider
- House and Contents Insurance £300+
Contents insurance isn't essential, but in my opinion you would be extremely foolish not to get it. House insurance is usually a condition of the mortgage and you will have to provide evidence that you have got it to your conveyancer.
It is recommend that you write a will when you purchase a house as it greatly increases your estate should you die. It is important that you have a legal document to say where you would like the estate to go should you die. It isn't an essential requirement, but something you should do soon after you move in, if possible.
- Life Cover, Critical Illness Cover, Income Protection £30+ a month for all 3
These insurances have different names depending on the insurer. I found deciding on these very difficult as you have to think about your own mortality and the financial commitment you are making. If you are buying with someone else you have to think about how they will pay the mortgage without your income. Life Cover pays out a lump sum should you die before the mortgage term ends. You take out cover for the full mortgage amount. Critical illness pays a lump sum should you be diagnosed with a range of serious medical conditions. It can pay for private health care or pay the bills whilst you recover. Income protection pays a monthly amount for a maximum of two years should you be unable to work due to unemployment or illness. You don't have to have all three, it depends on your budget and circumstances. But it is something you should seriously consider.
I think that is everything! If I think of anything else I will update this post. In short our costs were about £2300 for a house worth £155,000 to give you a rough idea. But it will vary based on the companies you use, the price of the property and what type of survey you have.
TTFN!
