Thinking of buying a home? There are all kinds of advantages to getting on the property ladder including more freedom to renovate, access to the property market and the possibility that your home may rise in value making you a profit. However, there’s a downside to buying – it’s expensive. In fact, it’s a lot more expensive than most people realise, as many first-time buyers find out the hard way.
Saving up for a deposit is undoubtedly the biggest cost, but there are other hidden expenses to consider too. The buying process requires help from lots of different people, all of whom want your money. And once you finally own the property, the mortgage payments aren’t the only cost to consider. Here are some of hidden costs to take into consideration when buying so that you can budget effectively.
You don’t have to spend money on surveyors, but it can be valuable for saving costs later down the line. Surveyors check your property for any signs of damage that could one day result in costly repairs. The price of hiring a survey can vary massively, ranging from £100 to £1500 depending on how thorough you want the survey to be and the experience of the surveyor. Chartered surveyors are likely to be more reliable at spotting damage and giving advice but are likely to charge more. In many cases you can negotiate survey costs. It can also be worth asking about professional indemnity insurance – this is essentially a warranty that means you can claim money back if a surveyor fails to spot damage that later requires costly repairs.
Solicitors are needed to handle the paperwork involved in the change of ownership. Unless you’re a solicitor yourself, you probably shouldn’t attempt to handle this paperwork yourself. You can hire a standard attorney solicitor to handle this – the power of attorney solicitors will often include legal work related to property. Alternatively, you may want to hire a specialised property solicitor known as a conveyancer. You may be able to negotiate costs, although some solicitors may have fixed fees. This is likely to cost a couple hundred pounds.
You may need to hire a removals agency to help move your possessions. A removals agency can get your items moved swiftly and carefully, although they are likely to charge several hundred pounds for their services (this depends on how many possessions you’re moving and over what distance you’re moving them). In some cases, it could be cheaper to hire a van and move the possessions yourself.
Hidden mortgage fees
There may be all kinds of costs involved when choosing a mortgage lender on top of putting down a deposit. When shopping for a mortgage, you may want to hire a mortgage broker. These professionals can help you shop for the best deal – they may even have close relationships with lenders that allow them access to special deals you can’t get on the high street. Some offer advice for free, whilst those with exclusive deals may charge anything from a hundred pounds to 1% of the mortgage for their services. You don’t need to hire a mortgage broker and can shop around for deals independently.
Once you’ve chosen a suitable mortgage lender you may then be expected to pay a mortgage arrangement fee. This can be anything from £100 to 1% of the mortgage and covers setup fees as well as valuation costs. Some mortgage lenders may also charge an indemnity fee, which is insurance if you fail to pay back your mortgage, although this is becoming increasingly rare these days.
Stamp duty is a tax you pay when you buy a home. Fortunately, as of 2017, first-time-buyers don’t have to pay stamp duty on any property less than £300,000 (second-time buyers sadly have to pay it for any properties over £125,000). Stamp duty is very expensive. Along with the deposit, it may well be the most expensive costs of buying a home, sometimes as much as 7% of the property’s value making it an expense of several thousands. You have 30 days after purchasing a property to pay stamp duty.
Once you’ve finally moved into your home, you may well want to do some redecorating and perhaps even some remodelling. When buying a property, it’s important to take these costs into account – if an ugly bathroom is the compromise, can you realistically afford to then renovate it, or will you have to save up for many more months before you can do this.
A surveyor can help you to budget remodelling costs whilst looking around your property. Conversions and extensions are likely to be the most expensive costs, although they could add significant value to your home. Green improvements such as adding solar panels or insulating the home can also be costly, but could save you money in bills in the long run.
Things are likely to go wrong in your home that need repairing. In a rented property, a landlord can cover these costs, but in a purchased property you are in charge of this maintenance. A surveyor can warn you about many of the most immediate repairs, but is unlikely to be able to predict wear and tear in many years to come. It’s worth having some savings to cover potential damage such as leaks, faulty white goods and cracks in wall. Alternatively, you could take out an emergency loan to cover these costs (although be aware that you will be paying interest).
Property insurance could be worth taking out to cover you against weather damage or damage from theft and vandalism. Property insurance rates will vary depending on the extent of the coverage that you want. Preventative measures such as burglar alarms and flood guards may be able to lower your insurance rates.