How much is that dream home really going to cost you?

By Jenn Taft
1

You’ve found the dream house. Now let's look at what you’ll be paying for before it's yours. What are the extra costs?

Finally finding the house of your dreams is a wonderful feeling, but the costs involved with securing it can get out of hand. The cost of the house is only one part of what you are paying for, but without good financial planning that purchase will not occur.

There are a few things that come with every house purchase. So it’s time to decide – can you afford it?

Financial advisor costs

I know not everyone wants to use a financial advisor, but I found paying for the advice of someone who knows better kept us in line financially! Our advisor brokered our mortgage, finding us one we wouldn’t have found ourselves. She handled all the arrangements for it, leaving us some space in our brain to handle everything else.

Although not cheap, a good mortgage advisor is worth their weight in gold. Expect to pay around £250-300 for the privilege of their knowledge. You may find they check up on your finances annually for free once you are with them, a service that could prove invaluable.

Cost - around £300

Mortgage

The cost of the mortgage is one that you may not even notice, as usually it gets added onto the mortgage amount. That’s useful for you when you are trying to pay the other costs of moving and could do without another fee to pay.

The cost of your mortgage can be a few hundred pounds or could in fact be about 1% of the value of the house. Working with an advisor to find what will work best for you will help you afford this fee, but factor it in so that you are prepared if it needs to be paid up front.

Cost - Up to 1% of the value of the property

Ongoing costs

Always have some money ready in case your new home has maintenance needs. This could be some leaky pipes or it could be a full rewiring job, so make sure you have some money saved - up to £1000 would be a nice cushion to have ready just in case.

How will you know what work will need doing? You will be expected to get a home buyers survey, and this is usually a prerequisite of your mortgage. This can range from £250 to £600 and beyond, depending on how in depth you want it to be. Some lenders will include this in for free when you are setting up the mortgage, but be warned it is not in the lender’s interest to go in depth on detail, or in fact share their findings with you, they just want to see if the property is worth being involved with. If you want to know of any problems the house may have, get a more detailed report done privately.

Cost - usually around £400. For more information on this click here. 

Solicitors Fees

It is well worth the money to find a good solicitor beforehand to manage the valuations, surveys and deadlines involved with the move. This management of the process is not something you can do easily, and again will free you up to manage other things. Solicitors fees are anything between £450 and £800 plus VAT, or more, and you will also be expected to pay for local searches such as mining, water and drainage, and environmental on top of this fee.

Are the searches necessary? YES! I nearly bought a house with a serious contamination problem under the garden, which I wouldn’t have ever known about except the local environmental search pulled it up as a hazard. Thankfully it meant we could pull out of the purchase. That house is now affectionately known in our household as the ‘contaminated house’, and the searches stopped it doing us some serious health damage. These searches will cost roughly between £30 and £80 each, but differ slightly between local authorities.

Cost - Up to around £1000 +VAT, depending on the solicitor

Estate agent fees

If an estate agent is going to charge you to buy a house, walk away from them. You should only pay an estate agents fee if you are selling a house first, which is typically around 1% of the price of the house.

Cost - Nothing for first time buyers

Stamp duty

Stamp duty is a tax on the land a house is built on. The property only becomes yours once the tax office register it to you by providing a Certificate of Land Ownership. This can only happen once they have received the stamp duty. This tax is unavoidable, but will be dealt with by your solicitor. There are some discounts available on new build properties, usually by the builders themselves, as well as some regional discounts to help the housing market to flow.

Stamp duty is paid on properties over £125,000 and its amount goes up in bands.

£0 on anything up to £125,000

2% on anything from £125,001 to £250,000

5% on anything from £250,001 upwards

So when you work out the budget you have available for buying your home, make sure that you keep in mind the possible cost of stamp duty. Being caught out with this one could be expensive!

Cost - check the calculator if your house is over £125,000

Are you leasehold or freehold?

Is your house leasehold? If so find out how many years are left on the lease. Leasehold means that someone else owns the land your house is built on, and you are leasing it from them. That sounds like having a landlord, but the lease length is usually between 40 and 99 years, and can be as much 999 years! Most people prefer freehold as it means you own the house outright, with only around 1.5 million people having a leasehold property.

Mortgage companies sometimes don’t lend on leases less than 60 years. Extending the lease can cost between £8-20,000 so either get that knocked off the price, or have a contingency to pay for it once the house is yours.

It is also worth being aware that mortgage companies tend to only lend on leasehold flats due to the nature of the structure they are housed within, and buyers will struggle to get a mortgage for a freehold. Likewise, it is more common for houses to be freehold. It is worth checking the status of the house you wish to buy and seeing what a lender suggests. It would only take a simple chat to find out where you stand.

Cost - Nothing for freehold, possibly up to £20,000 for leasehold depending on the current lease length.

Insurance

You will need your home insurance set up before you complete the purchase of your new home. This is a precaution for the mortgage company as well as for you; it means the house is covered from the word go! Get some quotes on comparison sites and get the home insurance sorted as soon as you can.

Cost - get a quote and check! Usually between £30-60 a month.

 

Sound a lot?

It is well known that a house is one of the most expensive things you will buy in your lifetime and will eat more money than you expected! If done well though, and thoroughly, it should only feel expensive in the short term, and you will soon settle into a good routine with bills and outgoings.

Top Takeaway

- Get professional help! Solicitors and financial advisors know house stuff better than you do, so let them help you.

- Are you paying your mortgage fee up front or is it being added to your mortgage term?

- Check everything you can about the house – freehold/leasehold, searches etc – so you know what you are buying. Until you exchange you can still walk away if necessary.

- Make sure you have a contingency fund just in case anything should crop up during the purchase.

Comments (1)

Log in or register to add your comment
Not a giffgaff member? Register now

giffgaff gameplan

Copyright ©2018 giffgaff

Representative example for a loan of £4,000 for 24 months at an interest rate of 15.5% APR fixed. In this example the total amount payable (including interest and fees) would be £4633.57 and your monthly repayments would be £193.07.

giffgaff receives a fee for introducing personal loans to Retail Money Markets Ltd trading as Ratesetter.

giffgaff gameplan is a trading style of giffgaff Limited, we are a credit broker and not a lender and introduce loan applications to its selected provider of loans Retail Money Market Limited trading as Ratesetter. Terms and conditions apply. Finance subject to status. 18s and over. Credit is provided by Retail Money Market Limited trading as Ratesetter, 6th Floor, 55 Bishopsgate, London EC2N 3AS Ratesetter is authorised and regulated by the Financial Conduct Authority – Firm Reference Number 633741

giffgaff Limited is authorised and regulated by the Financial Conduct Authority, Firm Reference Number - 680957. Registered address – giffgaff Ltd, 260 Bath Road, Slough SL1 4DX. Company Number - 04196996.

Posts on this site reflect the opinion of the members posting only, and not necessarily giffgaff’s opinions or views. There’s a lot of information here that can help you, however, you must remember that we operate an open forum and sometimes messages that are posted are misleading, deceptive, or inaccurate. If you follow these tips, you do so at your own risk. Always do your research and check the terms.