What else to budget for
Taking that step towards buying a new home can be exciting. However, the buying process can be costly and if you aren’t entirely sure what to budget for, you run the risk of spending more than you had planned. Here are some of the expenses you might need to consider. Remember, this is not a comprehensive list and you should plan realistically for all the costs you may incur.
Buying the property
Stamp Duty Land Tax (SDLT), Land & Buildings Transaction Tax (LBTT) or Land Transaction Tax (LTT)
In England and Northern Ireland, stamp duty is a tax payable on the purchase of property and the percentage you pay rises in bands, in accordance with the purchase price. In Scotland, the Land & Buildings Transaction Tax (LBTT) applies and in Wales, the Land Transaction Tax (LTT) applies instead. As with stamp duty, LBTT and LTT rates are linked to the property purchase price and there are various rate thresholds. For all three types of tax, you have 30 days from the completion date to make the payment. For more information, search the Government websites for SDLT, LBTT and LTT.
For information specific to your purchase, you should talk to your solicitor or licensed conveyancer.
Certain fees may apply when you arrange a mortgage, sometimes called product, arrangement or booking fees. Some mortgage deals will require you to pay the fee up front, while others allow you to add the fee to your mortgage. Fees vary from lender to lender and product to product.
Mortgage broker fees
Brokers can advise you on mortgages and work on your behalf to take you through the process of applying. Some brokers will require a fee for their advice, while others will be paid a fee by the mortgage lender. Your broker will advise you of their charging structure.
Mortgage indemnity fees
Your lender will sometimes take out an insurance policy to cover themselves in the event you can’t pay back the mortgage. They may ask for a payment to help cover the cost of that policy. This can sometimes apply when you have a higher ‘loan-to-value’ ratio, meaning that the amount you are borrowing is high in relation to the value of the property.
Estate agent fees
It is normally the seller who is required to pay estate agent fees. However, in England it’s important to be aware of ‘Sale by Tenders’ (a sealed bid auction), as this means you may be required to pay the estate agent around 2-2.5% + VAT in ‘introduction’ fees. Some estate agents have also introduced a ‘Buyer’s Premium’ which reduces fees for the seller, but requires the buyer to pay a fee which can be in the thousands.
Valuation and surveyor’s fees
Your lender may ask for a fee to cover a mortgage valuation on the home, and the amount can vary depending on the value of the property you are purchasing. This valuation is to ensure that the lender is happy to secure your mortgage on the property, and that the value is in line with your mortgage amount.
If you opt to have a structural survey of your new home – a detailed inspection of its condition – you will need to pay the surveyor a fee. Fees vary depending on the type of survey you opt for. A thorough survey can help you avoid unexpected expenses in the future and if something about the property is found to be below standard, it can prove useful in negotiating a lower price.
Legal or conveyancing fees
Conveyancing is the legal process by which you purchase a property. It can involve several different search fees and the registering of property with the Land Registry in England, Wales and Northern Ireland or the Registers of Scotland (RoS) in Scotland. Depending on your mortgage deal, your lender may contribute to some legal fees.
The Government’s Money Advice Service website states that removal costs usually range from £300-£600. However, the cost of a removal depends on the amount of belongings and furniture you have and the distance you need to move. It’s a good idea to get personal recommendations and more than one quote.
Unless the previous owner is leaving them behind, you might need to budget for essential white goods like a fridge, cooker and perhaps a washing machine.
Once you’ve moved in…
Water, gas and electric bills
It’s wise to budget for energy bills in your monthly budget. Why not ask the current owner how much they pay, to give you an idea of what to expect.
TV and broadband
Are you planning to install broadband or a cable or satellite service? Don’t forget to budget for these in your outgoings.
Buildings and contents insurance
Your annual buildings insurance essentially covers the bricks and mortar of the property, including all of its fitted fixtures. Although you are not legally required by law to have buildings cover – if you own your home outright for example – your lender is more than likely to insist your home is covered if there is a mortgage on it.
The cost of your contents cover is based on a number of things. It includes the replacement cost of the items you choose to insure. However, details like your home security, the property’s location and your previous claims history can affect your premium.
Another inevitable aspect of owning a home that you will need to account for is council tax in England, Wales and Scotland and rates in Northern Ireland. The amount you pay depends on the value and location of your property, along with the ‘council tax band’. The estate agent or owner should be able to tell you which council tax band the property falls into. In Northern Ireland, there are district and regional rates. You can check all the details with the local authority.
If your property is leasehold, you may have to pay the freeholder an annual ground rent. The cost of this will vary depending on the property. Leaseholders have to obtain permission for any major works they wish to carry out to the property. The freeholder may be responsible for maintaining the common parts of the building.
If you’re purchasing a flat, there can often be a monthly or annual charge for the maintenance of the property. This can be combined with the ground rent (if applicable), or payable separately. It is likely to cover things like the upkeep of communal areas, such as hallways and gardens.
In some cities, the local authority may issue parking permits for residents. These will often attract an annual fee.
The material contained in this article is intended for information purposes only and not as advice.
You should obtain professional legal or other advice if you are unsure about the effect on you of any matter in this article.
Published: 26 January 2018
Your home may be repossessed if you do not keep up repayments on your mortgage