As well as saving up for the deposit on your first home, there are a number of other fees, charges and costs associated with moving that you will need to consider.
Before we delve into that, one piece of good news is that, after the government’s latest Budget in 2017, first-time buyers will no longer have to pay any Stamp Duty Land Tax (SDLT) on the first £300,000 of any property worth up to £500,000.
Nevertheless, there are other charges you may not be aware of so ensure that you do your homework.
The obvious one. With generally high house prices, most lenders require a minimum of 10% of the property value as a deposit – though there are a few that will accept 5%.
For example, if the property that you’re looking at is worth £150,000, then you will need to save a minimum of £15,000 to unlock the best interest rates. Whilst there will be lenders that will accept £7,500 (5%), the rates would be less favourable than those who look for 10%.
Put simply, the bigger the deposit, the better you look and the better the interest rates the lender will offer you will be.
Once you have had an offer accepted on a property, your lender will need to carry out a valuation to ensure that it’s worth the amount that they’re lending to you.
Some lenders incorporate this into the mortgage repayment so you won’t have to pay anything up front, but if they don’t, then you will need to pay between £200 and £500 for this. The actual cost will usually be determined by the type and of cost of the property that you’re buying.
Whilst a lender’s valuation tells you about the value of the property, it won’t tell you anything about the condition of the property or any underlying issues it may have.
To do this, you will have to commission your own survey from an independent surveyor which your solicitor will often recommend for you or you can choose your own at the Royal Institution of Chartered Surveyors.
The cheapest and most basic survey is known as the Home Condition Survey which is usually recommended for new-build homes and costs around £250.
A more in-depth survey, known as a Homebuyer’s Report, which also includes a valuation that your mortgage lender could use, is also available for around £400.
The most detailed survey, known as a Structural Survey, is ideal for older or listed buildings is available for anything upwards of £600.
Local Authority Searches
To ensure that there are no planning issues with your property – i.e. a major road or property development being built nearby – that could affect your purchase, a search will have to be carried out for around £300.
As expected, lenders charge for lending you money.
On top of the interest that you’re charged on your mortgage, there will also be fees that you need to pay.
There are arrangement fees that are usually charged as a percentage of the loan and can be around the £1,500 mark as a result, but you should get the option to add this to the mortgage so you don’t have to pay it back in one lump sum.
You also need to consider administration and product fees, and depending on the type of mortgage or property, you may have to pay an additional £50 or so to have the mortgage money transferred to the seller’s solicitors.
Nowadays, many lenders waive a lot of these fees but you still need to double check what’s in your mortgage offer.
In order to handle all of the legal aspects of your purchase, you will need to hire a solicitor or licensed conveyancer.
They will handle everything from the payment of Stamp Duty to the transfer of the funds.
Your mortgage broker will be able to recommend one but you can choose your own if you wish, and it will usually cost between £500-£750 – depending on the size of the mortgage.
Most, if not all lenders, require you to have home insurance at the very minimum, with some offering it as part of the mortgage.
They only require you to have insurance that covers the structure of the property, not the contents, so you will need additional cover if that’s what you require.
The cost, as it so often does, depends on the size and location of the property but will usually be around £200-£600.
For advice on the costs involved in getting a mortgage if you’re a first-time buyer, speak to one of our expert advisers who will be able to help you with the next steps.