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The hidden costs of homebuying
When you’re looking for a new home, there are more costs to consider than just your mortgage. First time homebuyers having secured their deposit soon come across hidden costs and charges that they may have been unaware of. Here we take a look at some of these, helping you prepare for the full cost of a property purchase.
One additional cost that cannot be avoided is stamp duty. On properties and land over and above a value of £60,000 you have to pay this tax. For properties between £60,000 and £250,000 the tax is set at 1% of the purchase price of your property. From £250,000 to £500,000 you pay 3%, and above £500,000 you pay 4%. The only exception is with properties within regeneration areas with a value of £150,000 or less. These properties are exempt from stamp duty.
Depending on your lender, you may also be charged a valuation fee. This is usually no more than £150 and is a charge to cover the costs of your lender’s surveyor visiting your property to see that its structure is sound and that it is being sold at a reasonable price.
When seriously looking into buying a proposed property, you’ll also need a survey. Many homebuyers opt for a cheaper basic survey or homebuyer’s report, which costs a few hundred pounds. Some lenders will even include a basic survey free of charge.
Alternatively you can opt for a more comprehensive full structural survey. This will cost more, around £800, but more than this for larger properties. This type of survey is more extensive and is designed to pick up on any problems that may not be uncovered by a basic survey.
One cost that varies from lender to lender is a lender’s fee. This is supposed to cover your lender’s administration costs. However, not all lenders will charge for this and many choose to waive either the lender’s fee or valuation fee. It’s worth checking to see if this charge will still apply to you if your house purchase falls through too.
So as well as savings for your deposit, it’s essential to start putting money aside to cover these costs. Many of them, unfortunately, are an unavoidable part of the homebuying process. An important first step is setting up a dedicated savings account. Set up a standing order to automatically transfer a portion of your monthly income into this account.
When searching for a suitable savings account, take a look online to see which banks are offering the best rates. The higher the interest rate, the quicker your funds will grow. Another way to help speed up the savings process is to invest in an ISA. You can invest up to £5100 per year in a cash ISA and up to a total of £10,200 in a stocks and shares ISA tax-free.
The better rates on savings accounts tend to be available with restricted access accounts, where you have to give a period of notice before being able to access your funds. Be aware though that these accounts usually charge you a penalty for withdrawing your money early. Check out the websites of major banks like Santander for more on savings, as these banks often offer their best savings accounts rates to web customers who agree to manage their accounts online.
