Whilst buying a new home is exciting, it’s important to factor in the extra costs that come with it. These can include solicitor’s fees, surveys and Stamp Duty, if you are in England and Northern Ireland, Land and Buildings Transaction Tax if you are in Scotland, or the Land Transaction Tax if you are in Wales, plus mortgage arrangement fees and more.
Budgeting for these in advance will make the process far easier and less stressful. As a rule of thumb, these costs typically amount to around 3% to 5% of the purchase price. Depending on the price of property, this could be as much as 12%.
If you’re serving and using Forces Help to Buy, remember that while the scheme can help with a deposit and some associated costs, you’ll still need to plan carefully for all upfront expenses.
Once your offer has been accepted, the buying process begins. This can take a few months and involves plenty of paperwork and additional expenses. After choosing a mortgage, your broker or bank will finalise your application. Some lenders charge a mortgage arrangement fee. This can be paid upfront or added to your loan balance.
You’ll also need to appoint a solicitor or conveyancer. They will give you an estimate of their fees, as well as search and land registry costs, which legally prove your property ownership. Some of these are paid when they begin the work and the remainder is settled on completion.
Your lender will arrange a valuation of the property to confirm it is worth the loan amount.
You may also choose to commission your own survey to check for structural or maintenance issues. Costs vary depending on the level of detail, but investing in a thorough survey can save you money in the long run.
If problems arise, your solicitor can raise these with the seller before contracts are exchanged. You may be able to negotiate a reduction in the purchase price.
When you exchange contracts, you’ll be asked to pay your deposit. This is normally 5% to 20% of the purchase price.
You must also ensure you have buildings insurance in place.
Your solicitor will receive the mortgage funds from the bank or building society. On completion day, they will transfer the remaining funds on your behalf to pay the Stamp Duty or equivalent for Wales and Scotland. They will also register the property in your name with the Land Registry.
These extra costs can add up quickly, but by planning for them from the outset, you’ll have a clear picture of what you can realistically afford and avoid any nasty surprises along the way.