When you buy a property, the purchase price is only the beginning. The additional fees can soon mount up. In fact, the Home Owners’ Alliance estimates that all the extra expenses can add more than 10% to the cost.
So what extra fees and expenses might you face when buying a new home?
Property surveys
Mortgage lenders will carry out a basic valuation survey to confirm how much the property is worth. The price of this can start from around £150, varying according to its value. Some lenders offer it for free.
Three other types of survey are available: a RICS Home Survey Level 1, Level 2 (previously a Homebuyer Survey) and Level 3, which is a full structural survey.
Which one you choose will depend on the age and state of repair of the building. The basic Level 1 survey is only suitable for standard properties. The other two highlight potential problems and what is needed to put them right, but the structural survey goes into greater detail and may give an estimate of the cost of repairs.
The cost of these surveys can vary depending on your location and the value of the property but the most basic survey can set you back £500 or more, while a Level 3 survey is at least £700.
Mortgage arrangement fee
As well as a valuation survey fee, you will need to pay a mortgage arrangement fee, which is often more than £1,000. Lower fees tend to mean you pay a higher interest rate. It’s best to pay this fee in advance rather than at the end of the mortgage, to avoid paying interest on it throughout the term of your loan.
Conveyancing and solicitors’ fees
Solicitors charge a fixed fee or a percentage of the value of the property. This could come to £1,500, with the costs of searches on top.
These are the searches most commonly used by homebuyers:
Local Authority
Local authority searches (costing up to £250) include the Local Land Charges Register. Your solicitor will also find out about any issues such as new roads that are being planned near the property.
Land registry
This search, costing £4-£8, will confirm who holds the legal title to the land and whether there are any charges on the property, such as a mortgage.
Drainage and Water
The water company will confirm whether the property is connected to the mains water supply, drainage, surface water drainage and whether there are any public drains on the land. This costs up to £100.
Environmental
An environmental search (up to £60) uses historical information to show flooding, subsidence, contamination and other risks in the area.
Chancel Repair
A Chancel Repair search (up to £90) lets you know if you would be liable to contribute to the repair of the local parish church.
Stamp Duty
Stamp Duty affects the purchasers of residential properties sold for over £125,000 (or £300,000 for first-time buyers). Rates are:
- £125,001 to £250,000: 2%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Over £1.5 million: 12%
Electronic transfer fee
When you buy a property and move the money from your bank account to your solicitor’s, they will transfer it electronically to your seller’s solicitor. The fee for this is usually around £40.
Removals
Using a removals firm can seem like a large expense if you don’t have a lot of possessions and many people hire a van instead. The cost of van hire varies according to where you live and the day you move.
Removals firms generally charge from £400 but may charge more for weekend work.
Home insurance
Buildings insurance is important. In fact, it will be a requirement if you’ve taken out a mortgage. Contents insurance also protects your belongings in the event of fire, flood or other disaster.
Leasehold properties
If you buy a leasehold property, you own the building but not the land it sits on. You’ll need to pay a ‘ground rent’ each year, which is usually a nominal amount. Buying a flat within a block also attracts maintenance and service charges, which can increase annually.
It’s a good idea to factor in these extra costs before you start house hunting. You’ll be more confident your budget will stretch far enough and you’ll avoid any nasty surprises later on.
