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Money, tax and benefits
Planning for buying a home
Buying a property will probably be your biggest single investment. So it's important to work out the total cost - not just the mortgage - and how much you can really afford. You also need to plan for increases in your future outgoings, like a rise in interest rates.
'One-off' buying costs
Deposit
If you're a first time buyer, most lenders insist on a deposit of five or ten per cent of the purchase price. Some will lend 100 per cent of the price, but they'll usually lend less and will charge a higher interest rate or 'higher lending charge'.
Surveyor's fees
You'll usually need to pay for the lender's basic valuation survey - the cost varies by lender and property value but is usually a few hundred pounds. To check the property's condition you'll need a more detailed survey for which you'll need to compare quotes.
Stamp Duty
If the purchase price is over £125,000 you pay Stamp Duty Land Tax of between one and four per cent of the property value. However, if the property's in a designated 'disadvantaged' area, you may not have to pay any Stamp Duty Land Tax at all. With some new builds the developer will pay your Stamp Duty Land Tax for you.
Solicitor's or conveyancer's fees
These cover searches and legal paperwork. Costs vary by area and/or the property value (or loan amount if it's remortgage) and include:
- legal fees
- land registry fees (use the calculator below)
- local authority searches
- drainage and environmental searches
- administration costs
Your solicitor will confirm the cost of the above fees.
Land Registry fees calculator
You can also use the Land Registry fees online calculator below:
- to check fees for a mortgage, scroll down and choose the option 'Transfer of whole for value' then enter the property purchase price
- for a remortgage scroll down and select 'Charge - registration (of registered land)' then enter the loan amount
Lender's arrangement fees
These vary by lender, but may include:
- booking fee (limited offer mortgages only)
- arrangement or completion fee (can often be added to the loan)
Lender's insurance premium
If you have a high percentage loan you may need to pay a one-off fee called a 'higher lending charge'. This protects the lender if you can't repay your mortgage. It's worked out as a percentage of what you borrow above the lender's higher lending charge limit, which is usually 80 or 90 per cent of the property value. The premium can be high; ask your lender or mortgage adviser. You can usually add it to the mortgage if it doesn't take you above the lender's maximum loan for the property value, but this will increase your interest charges.
Removals/moving in expenses
These vary according to:
- where you live
- the size of your property
- how much furniture you've got
- how far you're moving
- how much packing you'll do yourself
It's best to get several quotes, and always check that your remover's properly insured.
Ongoing monthly costs
Mortgage repayments
You'll need to budget for your monthly mortgage repayments - and take into account what effect a future change of interest rates would have on these.
If you have an 'interest only' mortgage, you'll usually also need to budget for monthly payments into an investment to pay off the loan at the end of the term.
Life insurance / mortgage protection cover
You might need to take out a life assurance policy such as 'term insurance' or a 'mortgage protection policy'. The monthly payments can be relatively low and the insurance pays off what you owe if you die before you've finished repaying the loan. Ask your mortgage adviser for more details.(If you have a mortgage endowment policy, this includes life cover).
You can also take out insurance that pays your monthly repayments if you're ill or out of work - but this can be expensive.
Buildings and contents insurance
Once you exchange contracts for your property you're responsible for insuring it. Your lender can insist that you have buildings insurance - but they can't make you buy their own. But in some cases, lenders insist that you take out their insurance on completion.
Council Tax, utility and other regular bills
Don't forget that when you move, your monthly bills might go up.
Will you have enough to meet your new monthly outgoings?
You can use the Financial Services Authority (FSA) budget calculator to work out whether you'll have enough to meet your monthly payments. They also offer useful further tips on buying a home.
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