What costs will I have to pay when buying a house? Part one


What costs will I have to pay when buying a house? Part one

Buying a house is a big commitment and likely to be the most expensive thing you ever purchase. Alongside saving for the deposit, there are a number of costs you’ll need to pay during the buying process.

In this article and Part 2 of this blog, we’ll guide you through some of these costs and give you an idea of how much money you’ll need to cover them.

If you’re a first time buyer, why not head to our complete guide to buying your first home

The deposit

This is the biggie, and it’s likely going to be the cost you’ll be saving towards for the longest time. That’s why you should aim to start saving towards your deposit as soon as possible, as it will give you an idea of how much you can afford to spend on a property.

Ideally, you should save a deposit of at least 10% of the property’s value if you’re not using one of the Help to Buy schemes, but by going through one of these schemes you could be able to purchase a property with as little as a 5% deposit. So, if you’re looking at homes valued at £150,000, a 10% deposit means you’ll need to have saved up a deposit of £15,000.

When it comes to just how much you should save for your deposit, generally it’s a good idea to try and save as much as possible. The more you have, the smaller the mortgage you’ll need to take out and the less interest you’ll have to pay over the course of your mortgage. Usually, the mortgage deals with the best interest rates are reserved for those with a deposit of 40% and above, which may take a while to save.

Mortgage arrangement fee

The arrangement fee for your mortgage can be another expensive outgoing, and typically costs between £1,000 and £1,500. Some mortgage providers may charge a specific percentage of the amount you borrow, which could end up being more expensive.

Some mortgage providers will allow you to add this cost to your mortgage and pay it off in instalments along with the rest of your loan, but it’s important to remember that you’ll be paying interest on this. So, where possible it’s best to pay this fee straight up if you can.

Not all mortgages come with an arrangement fee, but these may charge a higher rate of interest instead. Depending on your lender, you may have to pay other fees during the process. These can include administration fees, money transfer fees, product fees and sometimes fees to exit the mortgage early.

House surveys and a valuation

Your mortgage provider will carry out a valuation of the property, which is often “free” as it is included in the mortgage. However, not all lenders will include one, so you might have to pay for your own in some cases, which can cost around £250, depending on the value of the property.  

Keep in mind that the valuation is for the lender’s benefit and won’t tell you much about the condition of the property, so you’ll need to pay for a survey of your own if you want to find this out. To do so, head to the Royal Institution of Chartered Surveyors website here. You have three options to choose from.

The first is called a “home condition survey”, which is typically only recommended for new-build homes as it is very basic in its assessment. You can expect to pay around £250 for this.

For a more comprehensive study you could apply for a “homebuyer’s report”, which is one step up from the cheapest survey and can cost around £400. This will inform you if the property has certain faults like damp, and it should include a valuation that your mortgage lender may decide to use instead of conducting their own.

For period properties or non-standard builds, you may consider a “full structural survey” instead. This will give you a full breakdown of any issues that the property has or may have in the future, including structural supports and behind walls. This tends to cost upwards of £600, but can pinpoint faults that could cost you dearly in the future.

That’s all for part one. Check back with us tomorrow when we’ll give you a breakdown of stamp duty, Local Authority Searches, your solicitor fees and home insurance.