Buying a property is an exciting adventure, but it’s also a complex financial commitment that involves more than just the purchase price. Whether you’re a first-time buyer or an experienced investor, it’s essential to know about all the costs involved so that you can budget accurately and avoid any nasty surprises.
Let’s take a closer look into these costs to help you make better informed decisions on your property buying journey.
Your deposit is generally the most substantial upfront cost when buying property. It can be any amount, but must be a minimum of 5% of the property value of which you are purchasing. The higher the deposit, the lower the interest rate you may get on your mortgage, so it pays to save as much as you can.
Stamp Duty Land Tax (SDLT) applies to property purchases over a certain value. The rate varies based on the property price and whether you’re a first-time buyer. At times, the government have announced stamp duty holidays (this happened during the height of Covid-19 in 2020), so it’s good to stay updated. Click here for a handy stamp duty calculator.
Mortgage lenders usually require a valuation to determine if the property offers sufficient security for the loan. This can cost between £100 and £1,500 (at the time of writing this article Sept. 2023), depending on the property value and the comprehensiveness of the valuation.
A solicitor or conveyancer will handle the legal paperwork, searches, and other legal aspects of buying a property. These fees can vary greatly depending on the house you are buying.
While not mandatory, it’s wise to have a survey carried out to check for any hidden issues with the property. The average fee for a basic ‘Home Buyers Report’ is £400+ and a full structural survey starts from £600+.
Your monthly mortgage repayment is likely to be your most significant ongoing expense. The exact amount will depend on the size of your loan, interest rate, and the term of the mortgage. Using a mortgage calculator will provide a good estimate, whilst speaking with an independent mortgage advisor will provide you access to the best rates and products available to you across the mortgage market.
All homeowners are required to pay council tax, which varies by location and the valuation band of your property. Rates can range from £1,000 to £3,500+ per year. You can check a property’s council tax band here.
Gas, electricity, water, and other utilities are also ongoing costs. While these vary widely, if you are a first-time buyer, budgeting around £350 per month is a good starting point.
Maintenance and Repairs
Homeownership comes with the responsibility of maintenance. Costs can vary significantly but budget to spend at least £1,000 per year on minor repairs, maintenance. For significant issues like a new roof or boiler costs can easily tot up to thousands of pounds.
Service Charges and Ground Rent
If you buy a leasehold property, you’ll need to pay service charges for the maintenance of common areas and ground rent to the freeholder. These can range from a few hundred to several thousand pounds per year. These costs should be made transparent to you during the sale of the property stage.
Buildings and contents insurance is crucial for protecting your investment. Expect to pay between £120 and £300+ per year, depending on the coverage and location.
Life Insurance and Payment Protection
While optional, insurances offer you financial protection in case of death, critical illness, or loss of income. Rates vary based on your health, age, and the level of coverage, but they can provide priceless peace of mind. A professional expert will be able to explain the range of protection products available, and which would benefit you and your circumstances best.
Buying a property in the UK is a significant financial commitment with various costs beyond the purchase price. Being aware of both the upfront and ongoing expenses can help you budget effectively and navigate the home-buying process with confidence.
Remember, while some of these costs may seem daunting, many are one-off payments, and others can be viewed as an investment into your future and financial security.
Consulting with professionals throughout your journey will help you to get the most current and tailored advice.