Fri 17 Nov 2017
Buying a house for the first time? Before you take your first step onto the property ladder, there are many costs to consider before you start searching for your first home.
Preparation is the key for any first time buyer, so before you start your property search you will need to consider all of the costs that are involved, including deposits, solicitor fees and Stamp Duty, to ensure you can afford to move.
Costs involved when buying a property
- Stamp Duty
- Solicitor fees
- Mortgage valuation
- Mortgage arrangement fees
- Broker fees
DepositsFor those taking out a mortgage, usually the minimum deposit you will be required to pay is between 5-10% of the total cost of the property. For example, a house at £200,000 with a 5% deposit will require £10,000 in cash. It is important to remember the more deposit you have, the less interest you will pay on the mortgage repayments. Usually the interest on repayments for 5% deposits is much higher in comparison to 10% deposits.
Stamp DutyStamp Duty Land Tax (SDLT) is a tax you will need to pay when buying a property or land over a certain price in England, Wales and Northern Ireland. The amount you pay is a percentage of the price of the property.
You pay Stamp Duty on increasing portions of the property price above £125,000. Unless you are a first time buyer, then Stamp Duty is waivered for a purchase of up to £300,000.
|Property or lease premium or transfer value||SDLT rate|
|Up to £125,000 (excluding purchases below £40,000)|
|The next £125,000 (the portion from £125,001 to £250,000)||2%|
|The next £675,000 (the portion from £250,001 to £925,000)||5%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||10%|
|The remaining amount (the portion above £1.5 million)||12%|
If you buy a house for £275,000, the SDLT you owe is calculated as follows:
- 0% on the first £125,000 = £0
- 2% on the next £125,000 = £2,500
- 5% on the final £25,000 = £1,250
- Total SDLT payable = £3,750
Work out how much you will have to pay using the Gov.uk website's Stamp Duty calculator.
When purchasing a property you will need to instruct a solicitor or licenced conveyancer to carry out all the legal work. They will have to conduct a number of searches before your property purchase can go through. Solicitor fees when buying a house can vary, but on average you can expect to pay between £850 to £1500. Your solicitor will usually request an upfront payment for local searches before acting on your behalf, these usually cost between £250 to £300.
SurveysHaving a survey carried out on a property you are buying is not compulsory, however it is recommended. A survey will highlight issues/defects that the property has. Some defects could potentially be expensive to rectify, therefore knowing about them before you commit to buying a house is a good idea and will help you decide whether to go ahead with the sale, renegotiate the price or pull out altogether. The cost of a survey can vary, depending on the size of the property and the type of survey you would like.
Your mortgage lender will want to carry out a basic survey on the property to establish its current value and condition to warrant lending funds against it. Many lenders will do this for free, however some will charge you a fee (on average £200 to £300), therefore this is another cost for you to consider.
Mortgage arrangement feesArrangement fees vary between lenders. In some cases there will be no arrangement fee, it is entirely dependent on the terms of the loan.
Broker feesUsing an independent mortgage advisor/broker can be useful when it comes to finding a mortgage. By searching the whole market they can help find you a deal to suit your needs, and they will give guidance during the application process. Some mortgage advisors charge a broker fee for this service starting from around £500.
Once you have considered these costs you will have a better idea of how much your budget is and be able to focus your search on properties that are within your price range. To start the ball rolling John German Estate Agents can put you in touch with Apt Financial Management for FREE independent mortgage advice. You will be offered advice on how much you can borrow and the likelihood of acceptability. Apt will search the whole of the market to find you the most suitable mortgage, and to keep your moving costs down, there be no broker fee to pay.
To find out more or to arrange an appointment click on the links below:
"I was selling through another agent with no success so changed to John German and couldn't of been happier with the service. Thank you for getting me on my way."