Hidden costs: Volume 1. Buying a house
Life is full of unexpected hidden costs, making essential purchases difficult to budget for including buying a house, weddings and owning your first car. Over the next few months we’ll be releasing articles and graphics to help you budget and take some of life’s curve-balls head on.
First up – Hidden Costs associated with buying a house
This is the tax you pay on buying a house or land, the cost of which can add up to thousands of pounds depending on the value of your property. The current threshold for paying stamp duty is £125,000 for residential properties and £150,000 for non-residential land and properties.
Percentage costs then apply beyond the thresholds, based on portions of the property value, as per the following table:
|Property value (residential)||Tax rate (SDLT rate)|
|Up to £125,000||Zero|
|The next £125,000 (£125,001 to £250,000)||2%|
|The next £675,000 (£250,001 to £925,000)||5%|
|The next £575,000 (£925,011 to £1.5 million)||10%|
|The remaining amount (above £1.5 million)||12%|
- For example, if you buy a house for £290,000, the SDLT you will pay is calculated as follows:
- 0% on the first £125,000 = £0
- 2% on the next £125,000 = £2,500
- 5% on the final £40,000 = £1,600
- Total SDLT = £4,100
This largely refers to the legal fees involved in buying a house, including various search fees and documentation with the Land Registry. As with stamp duty, the amount you pay depends on the value of the home you are buying, as well as the type of searches you have done. Typically, conveyancing costs are within the £300-600 bracket.
Surveys and valuations
Many lenders will refer to the survey as the home buyer’s report so remember not to get the two confused. Basic surveys cost £200-300 whilst some lenders will provide this service free of charge. A full structural survey can be anything up to around £800. This is recommended if you wish for a more thorough appraisal and peace of mind – particularly if you are buying an older property which may have obvious signs of wear and tear.
As with surveys, valuations can be provided free of charge by some lenders. Others will charge but the cost shouldn’t be above £200. This involves a short visit to the property by a surveyor to ensure that you aren’t being miss-sold.
Arrangement fees are often charged by lenders and are either billed as a one off cost or incorporated into your monthly payments. This can range from a few hundred pounds to 1% of your total mortgage. Other hidden costs can include a broker fee if you used a mortgage broker –these are professionals who scout the market in search of the best deals for your mortgage. Their fees shouldn’t be more than a few hundred pounds.
Buildings and contents cover is a requirement when owning or renting a property and is usually a condition within your mortgage agreement. However, be sure to look around before committing to buying insurance with your lender – they often make big commissions on selling third-party cover and you can often find the same cover for cheaper elsewhere.
Think about what you need to take with you and calculate the potential cost of moving it to your new property. Professional removals firms can cost anything from a couple of hundred pounds right up to the thousands, obviously depending on the size of items you have and number of them.
If you’re buying a new home then the costs of repairs will be minimal, if nothing. However most will require redecoration and touching up, particularly if you are moving a lot of furniture in and out of the house. After all, everyone wants to make their new house feel like home. The only thing to bear in is that all of this costs. Paint, materials and labour can all rack up and soon reach well into the £100s.
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