The Costs of Buying a House: How much is it really?

The Costs of Buying a House: How much is it really?

Buying a house is usually the most money you’ll spend on a single thing in your lifetime.

But many buyers underestimate exactly how much they need to spend to move, focusing on the major costs like their mortgage and neglecting to include the smaller amounts that all add up.

Your budget is one of the most important things to keep on top of when moving, so we’ve outlined all the costs of buying a house right here…

What is the average cost of buying a house?

Taking your mortgage out of the equation, the average cost of moving house in the UK in 2020 was around £9,000, according to comparemymove.com.

That cost includes all the up-front fees, including stamp duty.

What fees do you pay up front when buying a house?

As well as the purchase price of the property you’re purchasing, there are a host of up-front costs you’ll need to consider when buying a house:

1. Stamp duty

Stamp duty is often one of the biggest costs you’ll face when buying a home.

Essentially, stamp duty is the tax you pay when you buy a property, and the amount is staggered as the purchase price rises.

If you’re a first-time buyer, you’ll pay the following rates of stamp duty:

Portion of purchase price

Stamp duty rate

£0 - £300,000

0%

£300,001 - £500,000

5%

If you’re a first-time buyer purchasing a home for more than £500,000, or you’ve previously owned a property, you’ll pay the following stamp duty rates:

Portion of purchase price

Stamp duty rate

£0 - £125,000

0%

£125,001 - £250,000

2%

£250,001 - £925,000

5%

£925,001 - £1.5m

10%

£1.5m +

12%

If you already own a property and you’re buying a second home or an investment property, you’ll also pay a 3% surcharge on each tier of stamp duty, making the rates:

Portion of purchase price

Stamp duty rate

£0 - £125,000

3%

£125,001 - £250,000

5%

£250,001 - £925,000

8%

£925,001 - £1.5m

13%

£1.5m +

15%


2. The property deposit

Your deposit is the amount of money you put towards the purchase price of your property and is likely to be one of the larger amounts of money in your budget to buy a home.

Most mortgage lenders will require a deposit of at least 10% of the property’s purchase price, although it’s sometimes possible to buy with a 5% deposit.

If you’re buying a property for £250,000, for example, a 10% deposit would be £25,000, while a 5% deposit would be £12,500.

Schemes like Help to Buy and Shared Ownership mean it’s possible to buy with a 5% deposit, while there are also mortgages available for buyers with small deposits under the government’s 95% mortgage guarantee scheme.

The more you can save as a deposit, though, the more attractive your mortgage rate, the cheaper your monthly payments and the larger your ‘stake’ in your home.

The closer you can get to a 20% deposit (£50,000 on that £250,000 property mentioned above), the better your mortgage rate will be as you’ll have access to far more mortgages than someone with only a 5 or 10% deposit.

3. Mortgage valuation fee

Your mortgage lender will carry out a valuation on the property you’re buying once you’ve had your offer accepted by the seller.

This is to ensure the property is worth at least the amount of money you’re borrowing as a mortgage to pay for it.

Some mortgages come with a free valuation, but most lenders charge a fee for this process which can be anywhere between £200 and £1,500 depending on the value of the property you’re buying.

4. Mortgage arrangement fees

As well as a valuation fee, your mortgage lender will usually charge you an arrangement fee for your mortgage, too.

Again, this fee can vary but the average is usually around £1,000.

This fee can be added to your mortgage in most cases, but remember you’ll pay interest on it if you choose to do this.

5. Survey fee

When you’re buying a home, its important you’re certain there are no major problems with the property.

So, having the property checked by a surveyor before you buy it is a great way to provide peace of mind, or flag up any potential issues before you commit.

Fees for surveys depend on the type of survey you have.

A basic home report survey costs around £250, while a full structural survey can cost upwards of £600.

6. The legal costs of buying a house

When you buy a home, you’ll need a solicitor or conveyancer to do the legal work for you.

Legal fees can cost anywhere between £600 and £2,000 depending on the firm you use and the complexity of your purchase.

As well as the cost of your solicitor or conveyancer, there will sometimes be additional fees to pay for searches undertaken by your local authority.

You should budget around £200 for these if they’re not included in your legal firm’s costs.

The ‘hidden’ costs of buying a house

As well as all the up-front costs of buying a home, there are several ‘hidden costs’ you may have to budget for, as well as ongoing costs of running and maintaining your new property:

1. Mail re-direction

While not an essential cost, re-directing your mail from your old property to your new one can help ensure you don’t miss any vital post after you’ve moved.

While you might think you’ve told everyone you need to about your new address, it’s very easy to forget one or two and mail re-direction can help.

You can re-direct your mail to another UK address for three months for £33.99.

Re-direction for six months, nine months, or a year is also available for an increased cost, while there are extra fees to re-direct the mail of more than one person in your household.

2. Storage costs

If you would rather move out of your current property before moving into your new home, you may need to store your belongings at a secure storage facility.

Many people choose to do this rather than leave their current home and move into a new one on the same day, which can be very stressful.

Storage costs depend on the number of things you wish to store and the time you wish to store them for, so make sure you shop around for a good deal.

3. Child or pet care costs

Moving can be stressful, so doing it with children or animals in tow is rarely a good idea.

Many buyers choose to budget a small amount of money for childcare or kennels, meaning they can move and then collect pets or children once the heavy lifting is all complete.

4. House removal costs

Unless you’re planning to move your belongings yourself, you’ll need to hire a removals company.

The cost of removals can vary depending on how many belongings you have and the distance between your current house and your new home.

Make sure you speak to removals companies well in advance of your completion date as they do become very busy and ensure you shop around, too, as there are often deals to be found.

5. Insurance

As buying a property is such a significant investment, you’ll need to protect yourself with a range of insurance policies, including:

  • Buildings and contents insurance
  • Life insurance

6. The cost of owning a home

Once you’ve moved in, you’ll need to start budgeting for all the costs that come with owning your own home, including:

  • Water, gas, and electricity bills
  • Broadband and TV expenses
  • Council tax
  • Ground rent and service charge if a leasehold property
  • Parking permits if you live in a city and have no off-street parking
  • Ongoing maintenance and building work

Further reading…

Questions to ask when viewing a property

Buy or rent? The pros and cons revealed

What to do if you have problems after buying