There’s no denying that buying a property is more difficult than it used to be, particularly for first-time buyers. Interest rates are at a 14-year high, mortgages are less affordable, and soaring energy and living bills are squeezing budgets like never before. According to Halifax, the average price of a home for first-time buyers is now around 7.6 times the average UK salary. Despite these hurdles, this group now accounts for 52% of all loans on homes – the highest in the last decade. For those looking to step foot on the UK’s property ladder, there are many different costs involved with home ownership that they may be unaware of. As aspiring buyers are set to take advantage of falling prices and get their foot on the ladder, Simon Bath, CEO and founder of iPlace Global, advises that it is important to look beyond the asking price before buying a house in the UK, to ensure that you can afford to complete the purchase.
To help prospective homeowners understand all the costs that come with buying a home, the experts at iPlace Global have compiled the ultimate guide to buying a home – complete with all the expenses that will need to be considered before signing on the dotted line.
The highest upfront cost homebuyers face when purchasing a house is the deposit. Halifax estimated that the average deposit paid in 2022 accounted for 21% of the purchase price – soaring to almost £62,470. This means the average first-time buyer would need to raise approximately £62,500 for a deposit in order to buy a home, an 8% rise compared to 2021.
Stamp duty is a tax levied on purchasing properties and works on a rising scale. In a bid to stimulate activity within the housing market, the government has increased the threshold at which homebuyers pay stamp duty – from £125,000 to £250,000, and up to £425,000 for first-time buyers. This means that if you’re buying a house for less than £250,000, you aren’t required to pay stamp duty. For properties worth between £250,001 and £925,000, the cost of stamp duty is 5% of the property’s value above the threshold.
When purchasing a property, you are required to hire a solicitor or licensed conveyancer to carry out the legal and documentation process that come with buying a home. Solicitor fees vary from purchase to purchase and depend on several factors.
First-time buyers can expect legal fees to range from £800 and £1,500. However, Bath recommends that aspiring homeowners educate themselves on the conveyancing process, as without being aware of the various steps that come with this, you could be faced with long delays and could even be charged additional costs down the line. Ensure that you make provisions for this when budgeting around your purchase.
It’s important for aspiring homebuyers to consider the moving costs that come with home ownership. This includes removal and mail redirection fees and can range anywhere between £264 and £1,680 depending on the volume of the belongings. Home-movers should also expect to pay around £1 per mile that you are travelling.
If you are buying with a mortgage, you will need to have a house valuation. This is a condition of your mortgage provider and ensures that you don’t pay above market value for the property you’re interested in. You will not need a valuation if one is provided as part of your home survey. Some providers will offer a free valuation as part of your package, while others will require you to pay a fee. Providers that require you to pay will base their fees off the value of the property.
Typically, you will need to hire the services of an RICS surveyor to complete a house valuation, and you can expect it to cost anywhere between £150 and £800.
Electronic transfer fees:
This is the cost associated with transferring mortgage capital to the solicitor, and one that first-time buyers often aren’t aware of.
While it’s unlikely to cost more than £100, Bath explains that it’s important to include these costs in your budget, as unexpected costs can quickly add up and eat away into the capital that is reserved for the actual property itself.
Mortgage advisor fees:
Working with a mortgage advisor is an important step in the home buying process, as they’re perfectly positioned to help you find the best deals for your income level.
Some mortgage brokers charge a fixed rate for their services, while others bill hourly. While it is difficult to predict the exact cost of hiring a mortgage advisor – given that there are so many variables to consider – Bath estimates that you can typically expect your fees to come in at around £500 if you’re a first-time buyer.
Once your mortgage advisor has helped you to find a suitable product, it is imperative to consider the mortgage fees attached to your loan. While every case is different, some of the fees that you need to prepare for include the following:
· Mortgage arrangement fees (£0 – £2,500)
· Mortgage booking fee (£100 – £300)
· Application and underwriting fees (£100 – £200)
· Processing and administration fees (<£100)
Bath advises that you should ask your chosen mortgage provider directly for information regarding their fees, to ensure that you don’t get stung by any hidden costs.
Land registry fees:
Should you make any changes to the title documents held at the Land Registry when completing the purchase of your home, you will need to pay a fee. Currently, it costs between £45 and £1,105 to make changes. For properties worth
Estate agent fees:
In the UK, most estate agent fees apply to those selling a home. It’s important to recognise that these costs exist, as they can increase the seller’s asking price. If you negotiate with
House survey fees:
A house survey assesses things like the property’s structural soundness and whether it’s safe to move into or if work needs to be completed. The cost of a house survey is likely to be similar to the legal fees, and is often measured in relation to the size of the property and the scope of the survey to be undertaken.
Bath states that some people choose to take the chance and purchase a property without conducting a survey, but doing so can be a risky move, particularly when looking at an older property. Some mortgage providers might make a full survey a condition of receiving a mortgage offer, so it’s important to understand this cost when buying a house.
Simon Bath, CEO and Founder of iPlace Global, comments on the home-buying process for first-timers:
“With house prices on the downfall, we will likely see the property market come to life again as aspiring homeowners look to take advantage of the current climate. However, with the cost-of-living crisis and high energy bills, those looking to move must be patient when it comes to preparing for their transaction to avoid paying unnecessarily high costs in what is already a difficult and long-winded process.”
“So many people have paid over the odds on property in the last year not just on the property itself, but on the move as well. Services overcharge in response to increased demand and a lack of available resources. With a majority of Brits feeling the strain of the current economic climate, is crucial for potential homebuyers to save money whenever they have the opportunity.
“My advice for prospective buyers is to take the time to familiarise yourself with the key elements of the property market and every single cost that is involved in the buying process. Homebuyers must now – more than ever – take their time to compare services and providers to get the best deals possible when finding the home of their dreams.”