The Cost of Buying a Property

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.

• Searches £350

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.

• Stamp Duty

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.

• Will Writing- £200-300

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!

House Buying Terminology

Hello

In this post I'm going to explain some of the terminology you will encounter when buying a house. Some of the terms might be really obvious to some of you, but they weren't to me. I'm sure I'm not the only one!

"No Chain"- this one might be obvious but when we were looking for our house we only understood what it meant when an estate agent mentioned it. A property that has "No onward chain" is the best scenario to have as it means the seller is not dependent on another house purchase to move out. So they might be going into rented accommodation, they are selling a buy-to-let, or moving in with family for example. When there is a chain it can make the whole process very lengthy (8months plus in some cases) and unstable. Each person in the chain has to find somewhere else to buy, which can take a while. There is also the chance that one part of the chain falls through, delaying things further. Obviously you aren't going to buy a house purely on this basis, but if you had two houses you couldn't decide between and one was no chain then that would probably influence your decision. First time buyers are also not in a chain which makes them very desirable to sellers. If you are a first time buyer you can use this to your advantage. As you can move quickly the seller is more likely to accept your offer ;)

"Leasehold"- I have covered this in more detail in this post but will do a brief definition here. Leasehold means that you are in an agreement with the owner (freeholder) that you can occupy the property for a period of time (usually about 100 years maximum).

"Freehold"- Again I went into a lot of detail about what freehold means in this post. Freehold means you own the property and land it sits on 'absolutely'. So you are free to do with it what you want (subject to planning permission).

"Conveyancing"- We had no idea what this was before we started our purchase. Unfortunately those that work in the industry assume that you know what this means so don't explain it unless you ask. Conveyancing is concerned with all the legal documentation that is required to purchase a house. As I understand it you could do this yourself, but it is much easier and more sensible to employ someone who knows what they are doing (although it is not cheaper!). You can employ a conveyancer or a solicitor that specialises in conveyancing. It costs an awful lot of money for what seems like not a lot. But it is very important. They will liase with the sellers solicitor/conveyancer, obtain information on the cost of running the property, check planning permission, conduct 'searches' (explained more below), sort out boundary or rights of way issues. This is all done so that you can make an informed decision about whether to go through with the purchase.

"Searches"- This was another thing that we didn't understand, yet had to pay £250 for! As the name suggests they are searches of databases and records. But what are they searching for you may ask. They check to see if the property is built on a coal mining area, radon area (some dangerous gas), to see if you might have to pay for the upkeep of a church (this is called a Chancel check/search), bankruptcy search and a Land Registry search, amongst others.

"Exchange of Contracts"- this is the point at which you become legally responsible for the property and can no longer pull out of the purchase without serious ramifications (you will have to pay compensation to the seller and vice versa if they pull out at this stage). Buildings insurance needs to be arranged for this date.

"Completion"- yey you finally own the property and can pick up the keys!! This is the day you have spent months waiting for. It should take place one to two weeks after you have exchanged contracts.

"Stamp Duty"- Or Stamp Duty Land Tax (SDLT) to give it its full title. This is that horrible and hugely costly tax that the lovely people in government want you to hand over (as if you haven't spent enough money already). I will be doing another blog post which will explain this in more detail. But basically if you purchase a property costing £125,000 or more you will have to pay stamp duty.

I hope this is useful, TTFN!