The costs involved in buying a property

Buying a property can be a complex process, and there are a number of costs that need to be considered in addition to the purchase of the property itself. The cost of the property is by far the largest expense, and unless you are buying the property outright, it will be covered by the sum of your deposit and the amount you borrow from the lender (your mortgage).

As a rule of thumb, the more money you put down as a deposit, the better deal you can get on the interest rate on your mortgage. Keep in mind, however, that putting all the money you can down as the deposit is not necessarily the most sensible thing to do, as there are other costs you will need to cover, and you may want to keep some aside in case of an emergency.

Fees

Mortgage product fees

On top of the interest you will pay on the mortgage you borrow, there might be a mortgage product fee to cover. Find out your estimated monthly mortgage repayment figure with our mortgage estimator calculator.

Mortgage broker or IFA fee

If you are using an independent financial adviser or a mortgage broker, there may be a fee for this service.

Legal fees

You will need a property solicitor or licensed conveyancer to perform the legal and administrative work required for buying a property. Some property solicitors offer a ‘no move, no fee’ guarantee, which means if your purchase falls through before exchange of contracts for any reason, you will not pay the legal fee.

Solicitors might offer fixed fees, charged by the hour, or take a percentage of the property value so it is important to know what the fees are likely to be from the beginning to avoid a large bill and a nasty shock at the end.

A good rule of thumb for seeking any professional service is to get three quotes before entering a contract but beware – conveyancing quotations can be difficult to understand so make sure the quotes you get are fixed and fully inclusive.

Lender’s valuation fee

When you have had your offer accepted on the property you want to buy, your lender will commission a surveyor to carry out a valuation to make sure the property is worth the money you are paying for it. This is sometimes covered in the mortgage package.

Stamp Duty Land Tax (SDLT)

Stamp Duty Land Tax (SDLT) is a tax paid by the buyer of a UK residential property when the purchase price exceeds £125,000. The stamp duty rate ranges from 5% to 12% of the purchase price, depending upon the value of the property bought, the purchase date and whether you are a multiple home owner. For more information on these updated rates and for help calculating the amount of SDLT you might owe on residential properties, use our stamp duty calculator. 

Survey and searches

Survey

The mortgage lender’s valuation is a cursory assessment of the property’s value that assures them you are getting value for your borrowed money. To truly understand the condition of your new property you should look to commission an independent survey from a registered Chartered Surveyor. 

The cost of this survey will depend on which of the following three types of survey you choose or more depending on the size, age and type of property: 

• A Condition Report is the most basic, and generally only suitable for modern properties in good condition 
• A RICS home survey level 2 is more detailed but non-intrusive so will identify surface level issues only. A Homebuyer’s report is the most detailed survey you need when buying a leasehold property. 
• A RICS home survey level 3 is the most comprehensive survey and therefore more costly, but advisable if you are buying a freehold house, especially if the property is very old, listed, unusual or in need of repair. The structure will be thoroughly assessed including in the attic or under the floorboards.

Searches

Your solicitor or conveyancer will arrange the searches, assess the results and report on their findings to both you and your mortgage lender. These searches include: 

• Local Authority plans
• Environmental risks
• Water and drainage
• Chancel repair liability
• Location-specific issues

Insurance and income protection

Home insurance

Home insurance falls into two categories; buildings and contents. You can buy them together from one insurer or separately from different providers. Home insurance provides important cover for your buildings, contents and personal possessions against loss or damage.

Buildings insurance

Buildings insurance is usually a requirement when taking out a mortgage and usually required to be in place on exchange of contracts. However, extra insurance covering items such as contents, personal possessions and family legal protection will help to meet all your home insurance needs.

If you are buying a leasehold property, the freeholder of the building will often be responsible for buildings insurance and will pass the premiums on to you through the service charge. You will need to check this in your lease before you buy. Specialist landlord’s building and contents insurance is available if you plan to rent your property.

Critical illness cover, life insurance and income protection

It is prudent to consider what will happen if you are no longer able to cover your mortgage repayments due to losing your job, suffering illness or injury or if you die during the policy term. Arranging critical illness cover, life insurance and income protection is sensible and can help safeguard your property and your family in the light of an unfortunate event. Kinleigh Financial Services arrange insurance exclusively through Legal & General.

Ongoing payments

First mortgage payment

Your first mortgage payment may be larger than the scheduled monthly payments as you may complete mid-way through a month. Interest on the mortgage is calculated from a few days before completion (when the lender releases the mortgage monies) with the first scheduled payment (plus the interest) being due the following month.

Utility bills and council tax

If you have moved into a bigger property, your energy bills and Council Tax may also be bigger, so these costs will need to be considered.

Other costs

Moving costs

Hiring a professional removal company can save a lot of anxiety and hard work. A removal firm is well-worth considering, but even if you decide to move your belongings yourself, it is likely that you will need to rent a lorry or van for the day. To keep the moving costs down it is advisable to sort through your belongings ahead of the move and sell, throw away or recycle anything you do not need, as every box and bag will add to the overall cost.

Decorating and refurbishing

Your existing furniture might be too big or too small for your new property. Likewise, the colour scheme of the previous owners might not be to your liking. The expense of buying new furniture and redecorating needs to be budgeted for.

Additional costs

You may choose to professionally clean your new property before moving in, and you may want to change the locks once you have moved in. If you are moving into a brand-new property you may also need to pay for connecting a telephone line.