What costs are involved in buying my first home?If you've never owned a freehold or leasehold property as your main home, either in the UK or abroad, then you're a first time buyer. You’ll usually need at least a 10% deposit before you can secure your first home although there are various schemes available which may reduce this figure. Since you are purchasing only and not selling, you won’t have to pay the estate agents fees. However, there are a number of other costs that you may not have budgeted for including professional fees, charges and taxes including Stamp Duty.
What mortgage costs will I pay?While it is possible to arrange your own mortgage, most first time buyers don’t want the hassle and prefer to use a mortgage broker. There are a number of fees associated with arranging a mortgage that you’ll need to budget for:
- Arrangement fee: this is the cost of the mortgage product itself and can be included in your monthly mortgage repayment to avoid a large upfront cost.
- Booking fee: this covers the cost of applying for the mortgage and is usually not recoverable. That means if you decide not to go for the mortgage, you’ll still pay the fee.
- Other fees: you’ll also need to factor in the cost of your mortgage advisor sending payment to your solicitor via CHAPS, the mortgage administration costs and the fee for your mortgage broker.
At the Mortgage Hut, we specialise in helping first time buyers get on the property ladder. We can help you get access to specialised products such as a new build first time buyer mortgage or if you’re self employed or have a poor credit rating. Using the services of a mortgage broker for your first mortgage can make the process as hassle-free as possible.
Do I need to pay for a survey?Even if you’re applying for a new build first time buyer mortgage, it can still make sense to have a survey done. That way you’re on top of any potential issues. If you’re buying a new build, you’ll only require a home buyer’s report on the general condition of the property. If you’re buying an older property then you’ll need a full structural survey that costs considerably more but delivers peace of mind.
Whether or not you opt for a survey, your lender will require a valuation to establish whether you’re paying a fair price for the property and what they’re prepared to lend. This is required whether you’re applying for a new build mortgage or a loan to buy an older property. The cost of the valuation report will vary depending on the cost of the property.
What are the legal costs associated with buying my first property?Conveyancing is the legal process which transfers ownership of a property from the vendor to the buyer. This process can be completed by a solicitor or a licensed conveyancer. While solicitors can offer specialised advice if the purchase is particularly complicated, you’ll pay for their expertise. A licensed conveyor is a more affordable option, particularly if you’ve applied for a new build mortgage and the purchase is straightforward.
You’ll also have to pay for additional fees including:
- Land registry fee: the Land Registry is a government department that charges a fee for re-registering a property with its new owner in England and Wales. This is a flat fee depending on the purchase price of your property.
- Searches: your conveyancer will undertake a number of searches on your behalf to make sure that there are no issues around the property. These could include drainage and water searches, issues in the local area including planned developments and road schemes, and a Land Registry search to ensure the seller is, in fact, the registered owner and can legally sell the property.
- Depending on the location of your property, you may also request specialised searches including a flood risk report and a mining search. You’ll be subject to a bankruptcy search (unless you’re a cash buyer), and an anti-money laundering identity check as required by the Proceeds of Crime Act 2002.
Do I have to pay any tax?Every house buyer is expected to pay Stamp Duty, although the rules are different depending on whether you’ve previously owned a property or not. The amount of Stamp Duty you’ll pay also depends on the value of your property - our handy calculator will help you to determine Stamp Duty costs as well as your mortgage repayments.
This is one of the major costs involved in house moving and can run into the thousands so it’s worth bearing in mind that first time buyers in England and Northern Ireland don’t have to pay Stamp Duty on properties worth up to £300,000. For properties worth between £300,000 and £500,000 you’ll only pay Stamp Duty on £200,000.
As of 2018, if you’re a first time buyer purchasing under a Shared Ownership scheme, you’ll benefit from Stamp Duty relief like any other first time buyer on properties worth up to £500,000. Beyond this threshold, all first time buyers will pay Stamp Duty at the standard rates.
Once I’ve completed, are there any other costs?You can always minimise your removal costs by doing it yourself and hiring a van. If that’s too time-consuming, shop around for the most competitive removal quotes and ask friends and family for recommendations. Costs will vary depending on how much you have to move and the distance you’ll be moving, but using the professionals makes sense if your move is going to be a complicated one.
Insurance is another cost that is often overlooked when you’re budgeting for your first home, but you won’t be able to get a mortgage without buildings insurance. You can usually find good deals when you bundle buildings and contents coverage together for an extra level of security. You might also want to take out moving insurance to cover any valuables in transit.
Other costs to take into consideration during moving day could be the cost of cleaning your home for the new owner and storage for items that may not fit into your new living space. If you have children and/or pets, you may need to cover the cost of childcare and/or kennels for the day. Finally, don’t forget to have your mail redirected - the Post Office charges a small fee but it’s worth it for peace of mind.
What about ongoing costs?It might seem strange to budget for ongoing costs, but this can have an impact on your budget for your first property. For example, you may be looking for a property to renovate, or prefer a period style property that will need a higher level of maintenance than a new build. It’s worth factoring this into your initial budget.
It’s also worth finding out the council tax for the average property in the area where you’re focusing your house hunt as this could make the difference between a property being affordable over the long term. You should also consider the ongoing costs associated with leasehold property where you may be paying additional ground rent, service charges and any maintenance fees which can quickly add up.
Finally, it’s always worth knowing the size of your potential mortgage repayments which is where our calculator comes in very handy. Working with the Mortgage Hut to find the best first time buyers mortgage could make all the difference to the property you can afford.
If you’re a first time buyer and you’re looking for a mortgage, we can help. At the Mortgage Hut, we have the expertise to find you the very best deal, even if you’re self employed or have a poor credit rating. If you have questions and want to speak to an expert for the right advice regarding your first time buyer mortgage options then why not call The Mortgage Hut today or make an enquiry.