Buying Your First Home: The Hidden Costs You Might Not Be Prepared For

21 August, 2024

You have taken the major decision to purchase your first house. But sadly, purchasing a house is far more than just choosing a location you enjoy and signing the dotted line. There can be a whole host of unexpected costs. Knowing what to budget for outside of the mortgage can help you prevent any unwelcome shocks at what ought to be one of the most exciting periods in life. The team at GetAnOffer have put their heads together to make a list of some of the things that might come as an unwelcome surprise! If you’re just about to embark on your first property purchase, we hope it helps.

Mortgage Arrangement Fees

Many lenders impose a cost to set up a mortgage, sometimes known as a mortgage arrangement fee or product fee. While some lenders may overlook this fee, others might charge anything between £500 and £2,000. Should your mortgage exclude this cost, you must pay it beforehand. Although some lenders let it be included in the mortgage balance, this will result in interest paid over the loan period. Shop around; different lenders have varied policies about these costs.

Valuation Fees

Usually, your lender will need the property's value to guarantee it is worth the amount you are borrowing (and more) before accepting your mortgage. This assessment serves mostly for the lender's advantage; it is not the same as a comprehensive survey looking at the state of the property. The valuer of the property and the mortgage provider will determine the range of a basic valuation from roughly £150 to £1,500. Again, shop around – some are even free of charge.

Survey Costs

Speaking of surveys, you will probably want one done personally to prevent any unpleasant shocks following your move in. While more thorough choices like a Homebuyer Report or Building inspection might go up to £1,000 or more, depending on the property, a basic inspection like a condition report might cost about £250. This is a crucial expense to take into account since structural issues found after buying could cost thousands in repairs. Consider upgrading a mortgage valuation to a survey which may save money.

Stamp Duty Land Tax (SDLT)

Stamp Duty Land Tax will be due whether your purchase of a house in England or Northern Ireland exceeds £250,000. The property price determines this tax; first-time purchasers find some relief on properties priced up to £425,000. Since Stamp Duty is among the biggest out-of-pocket costs other than your deposit, be sure you budget for this – although most first timers buy below the threshold.

Legal Fees and Disbursements

The legal elements of your property acquisition are handled by conveyancing solicitors, whose costs vary based on the intricacy of the deal. Apart from the solicitor's expense, usually between £850 and £1,500 plus VAT, you must also pay for disbursements. These extra expenses, which help guarantee no legal problems with your property, include local authority searches and Land Registry fees. Although you cannot completely escape this expense, with proper investigation, you can identify a solicitor providing reasonable value for money but make sure their service is up to scratch too.

Buildings Insurance

Your lender will want evidence that you have obtained building insurance before releasing your mortgage money. This protects your property against damage, floods, or fire. Usually costing between £200 and £300 annually, buildings insurance will vary based on the location, kind of property, and age. You need this in place not only for your lender but also for your peace of mind although often flats include it within maintenance costs.

Removal and Storage Costs

Once the big day comes, you will have to pack everything from your present home to your new one. Depending on how far you are moving and how much you are moving, hiring a removal firm might cost anywhere from £300 to over £1,500. If you intend to pack yourself, make sure you budget for packing supplies. Sometimes, depending on the distance between leaving your present house and going into your new one, you could have to consider storage expenses.

Furniture and Appliances

From upgrading appliances like the washing machine or fridge to purchasing a new sofa and bed, this might be anything. With costs, the sky’s the limit! We suggest not rushing to buy too much quickly as your requirements may change after you’ve settled in for a while.

Council Tax and Utility Bills

Usually overlooked in the thrill of purchasing a house is council tax. The value of your property and its location will determine the amount you pay, but generally, you will have to budget for a monthly outlay of £100 or so. Not to overlook water, electricity, and gas costs either.

Ongoing Maintenance and Repairs

Ultimately, property carries a degree of responsibility that renting just does not demand. Now it's up to you to keep the property, fix problems, and ensure everything stays in good running condition. Maintenance expenses can sneak up on you, whether they are related to repairing a leaking roof, boiler replacement, or garden upkeep. As a rule of thumb, you should budget at least 1% of the value of your house for repairs and upkeep each year. This fund will cushion any unanticipated problems that develop. Flats are often more expensive to maintain thanks to agent’s fees, flat roofs, a lift or communal gardens.

There are many costs to consider, but most often, people are pleased that they took the plunge to buy and escape the so-called ‘rental trap’, where costs can be even more unknowable.