AD| Buying a new home can be exciting! But it can also be stressful, especially when you come across hidden costs of buying a home that you weren’t previously aware of.
It’s no secret that it’s very difficult to get on the housing ladder these days. With the average UK home costing £270k (10% up on the year), that already means you need to have almost £30k in savings just for the 10% deposit. These can be eye-watering numbers, especially for those who are single.
When I lived alone in Leeds, I often found myself living paycheck to paycheck. I wasn’t on a terrible wage, but it also wasn’t great. It was pretty close to the average wage at the time. But after-tax, my rent cost a third of my wages, my bills another third which didn’t leave much for food, petrol, my car loan and fun.
I was regularly in my overdraft and the only way I was able to prevent myself from being in it all the time was by earning extra money blogging. One person shouldn’t have to work two jobs to be able to afford to rent a flat in Leeds It’s insane. Anyway – I could go about that for a long time but I won’t. Well, not in this post anyway.
The point is, I wasn’t able to save any money towards a deposit as I had no savings and no surplus money at the end of the month. The only reason I was able to eventually save for a deposit is when I moved in with my partner. He bought a small house, but I didn’t pay him rent – instead, I saved the money towards a bigger deposit on this house.
Unfortunately, there are more fees to pay than just the deposit. Things we might not even consider at the time. Hopefully, this blog post will help you to prepare better for buying your own home so you are able to have enough money to cover everything without having to get into debt.
Hidden costs of buying a home
Stamp Duty Land Tax
I hate stamp duty. My partner got stung on it with his first home as he ended up missing the incentive by the government which waivered stamp duty for first-time buyers by a month. Then we weren’t eligible with our current house as he wasn’t a first-time buyer. Painful!
Stamp Duty tax is the property transaction tax. The tax is due to be paid on any property which is purchased at more than £125,000 and must be paid within 14 days of the sale of the house, this is usually done by your solicitor on the day of completion. Historically it was introduced in 1694 to raise funds for the war.
Good news for first-time buyers! From 1 July 2021, you’ll get a discount (relief) that means you’ll pay less or no tax if both the following apply:
- you, and anyone else you’re buying with, are first-time buyers
- the purchase price is £500,000 or less
You can keep up to date on Stamp Duty here.
You can calculate an estimate for your Stamp Duty here. I just did a quick calculation on a £270k property and it return a £8900 stamp duty fee.
Mortgage Booking Fee.
This can cost you up to £2000, it varies from lender to lender.
Not all mortgage companies have this fee – but these tend to have a higher mortgage rate instead.
Though you can add your mortgage booking fee to your mortgage, sadly that means you end up paying interest on it.
Mortgage Account Fee
This is a bit of admin fee that can cost around £100 – £300. It’s the cost of setting up, maintaining and closing down your account.
This is about £50 and is the charge for transferring the mortgage money to the seller’s solicitor. Feel like I could do this myself for £0 in about 2 minutes but thanks for the extra bill!
You need a valuation on your new property to make sure its worth the mortgage amount. This is a requirement and you cannot get your mortgage without it. It can set you back anywhere between £150 to £1500 depending on the value of the house.
Higher Lending Charge
A lot of mortgages have this if you are taking out a mortgage that is over 80% of the value – so if your deposit is 20% or less, you are hit with this extra charge. It seems so unfair to get this charge, as not many people can afford a deposit of this amount as first-time buyers!
Conveyancing and Solicitor’s Fees
Conveyancing is the legal transfer of ownership of a property from the seller to the buyer. On average, this costs between £800 and £2000 but it can vary.
Lenders will require that you take out property insurance to cover your home in the event of it being damaged or destroyed. This can cost £100 – £250 a year. It’s a good idea to take out contents insurance too, to cover your possessions in event of a fire, a flood or theft.
Home Buyers Insurance
Home buyers insurance protects you financially if your sale falls through. This could end up costing you thousands without insurance to protect you from this cost! This is an optional cost but could end up saving you a lot of money if needed.
To actually move a house you may need to hire a van for a few days. You might decide (or need to) pay movers to help you. You can pay around £50-£500 for this. We rented a van for £70 but had a family to help us move the large items.
This may not be that much if you already own your own furnishing. We had a smaller house, so we did need some new things but nothing urgent! If you rent a finished property, it can get quite expensive.
Here are some things you may need:
- washing machine
- dining table
We got new sofas, some sideboards, a table, a guest bed and. a few other bits. We also paid for build in. wardrobes.
Decorating and Home Improvements
When you get a new home, you will want to put your own stamp on it. Whether that’s just painting and putting some wall art up, or knocking walls down and having a complete renovation. A lot of this can be done over time so doesn’t have to be an immediate cost if your new home is livable already.
When we moved into our old house, there were a lot of small things wrong with it. There were issues with the doors, the taps, the garage roof needed replacing and the bath had a leak so we initially had to pay for these things to be fixed.
Did you realise how much money you need to buy a house? Did any of these hidden of buying a home costs shock you?
Thank you for writing this post. In the future I eventually want to buy my own home and knowing about these fees is super helpful.
We were lucky with stamp duty because we just made it in the stamp duty holiday window! It was definitely at the back of my mind to keep some money back that could have gone into the deposit because I knew we’d have lots of extra costs!
We were VERY lucky when we moved. I think we were 6 days away from having to pay stamp duty, which is crazy. We were so nervous at the time, because I think it would have been around an extra £2K-ish in fees for what feels like absolutely nothing.
It’s post like this that I really appreciate because no one talks about the hidden fees but it stresses me out haha! It almost seems like, how is anyone supposed to afford all of that! Haha
It’s insane how much the costs are to buy a home! A workmate of mine has just bought her first home and I can’t believe how much money it has cost her! x
Lucy | http://www.lucymary.co.uk
I remember when I first started working in our home loans department and all the hidden costs and fees were explained – it’s CRAZY! This is such a helpful post; I’m sure a lot of first-time buyers would find it really beneficial x
mia // https://miasdiyprojects.com/
Solicitors fees and search fees were definitely the biggest cost I’d not properly thought about
Home buying can have so many hidden costs, my husband and I are currently saving and we’ve factored these costs into our savings!
It’s so hard to get on the housing ladder these days! My help to buy is growing but I’m still a way off saving for a house. Hoping that it’ll be easier now that I’ll be buying one with a partner.