POSTED 05 April 2016 Guides and Top Tips

What Are The True Costs of Buying a House?

When buying a new home, there are many hidden costs which can surprise buyers. The gap between what buyers think the true cost of buying is to what the actual costs of buying a house are can be significant and make buyers rethink whether or not they are in a financial position to buy a house.

So, really how much does it cost to buy a house? House Network explains the extras that you should budget for:

The Deposit

Arguably the biggest payment, and one of the most expected costs when buying a house, is the deposit. People save up for years for a deposit on a house and usually, the deposit is on average between 15-25% of the property's value although you could go as low as 5 or 10% of the asking price of the house for first-time buyers.

It helps if buyers can put down a big deposit as this reduces the monthly costs of buying a house on your mortgage repayments significantly. If you already have a home, selling your current home may give you the deposit on your next home.

true costs 

Mortgage Payments

Remember to factor your monthly mortgage payments into the total cost of buying your home as it’s essential that you are able to make the payments.

Some mortgages also have a sign-up fee when you register which can be up to around £400 so shop around for the best deals before choosing a mortgage provider.

Solicitor’s Fees

One of the hidden costs involved when buying a house is the solicitor’s fees. To ensure a house sale goes through properly with all the correct legal documentation you’ll need a solicitor to deal with the paperwork on the purchase of your new home.

This could cost anything from around £600 to £1000. Solicitors fees can vary depending on the firm you choose to go with and the type of service you require. If you need a solicitor to help with the sale of a current home too then your costs will definitely be more.

Stamp Duty

One of the hidden costs of buying a house that has made a lot of headlines recently is the Stamp Duty Land Tax. Anyone buying a home over the value of £125,000 must pay Stamp Duty at the rate of 2%, and 5% on homes over £250,000.

If you’re buying a buy-to-let home rather than a residential property, recent changes to Stamp Duty rates mean this tax becomes an even greater hidden cost of buying a house.

Estate Agent’s Fees

Budgeting for estate agent’s fees is essential when you decide to put your property on the market. Estate agents are one of the main costs involved in buying a house as they charge between 1% and 3% of the property’s value plus 20% added VAT.

Often, if you’re looking for a really comprehensive service you may even need to pay more. When you use an online estate agent, like House Network, we charge a flat fee which includes no hidden costs.

Surveying

When you get a mortgage offer from your bank it’s highly likely that they will insist on a survey of your current home before agreeing to lend you the money to buy your new house. Surveying fees are a hidden cost of moving house that can be huge if anything of significant fault is discovered within the property. 

You can do the survey yourself but it is recommended that a professional comes in to uncover anything dangerous for the new buyer.

There are many hidden costs of buying a house and the true price of buying a home is not to be underestimated. If you’re thinking ‘how much do I need to buy a house?’ it doesn’t stop once you’ve covered all the initial costs.

Things like decorating, renovating and bills make being a homeowner more costly than you perhaps first thought. So make sure you’ve factored in all the hidden costs before you make a big decision on buying a new home.

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In Summary

The figures below are based on the current average UK house price of £226,000 as outlined by the UK Land Registry in April 2018. Average estate agent fees are usually between 1.2% - 3% (including VAT) based on research conducted by Which?.  

Title

Fee

Deposit (avg. in the UK)

£45,200 (or 10% of property value)

Mortgage Fee

£0 - £400

Mortgage

£720 - £900 per month (Payments usually start 4-6 weeks after you move in.)

Solicitors Fees

£600 - £1000

Stamp Duty

£0 (for first-time buyers)

£4,500.00 (2% for secondary property)

Estate Agents Fees (for home-movers)

£795 - £6780

Survey

£150 - £1500

Total Cost of buying a house

£24,865 - £60,280

 

As shown above, the total cost of buying a property is quite high, but by taking the necessary steps and researching carefully for the best mortgage deals, rates and savings you can keep these costs down as much as possible. Key steps to reducing the total cost of buying a property include:

  • Take a bit more time to save for a higher deposit
  • Negotiate the price of the property as best you can
  • Compare available rates from mortgage lenders to find the best rates/minimal fees
  • Be organised and have a responsive conveyancer
  • Sell with House Network to reduce the fee