Buying a new home can be an exciting and life-changing decision, but it can also be quite challenging. The process involves various fees, from legal fees to stamp duty and ongoing payments. As a first-time buyer or homeowner, you must prepare financially for these fees to ensure a smooth and stress-free purchase.
Upfront Costs
Mortgage Fees:
Choosing a mortgage lender comes with different fees. First, you may have to pay a product fee, which is usually a percentage of the amount borrowed. Additionally, you may also pay a mortgage broker or IFA fee. Mortgage brokers connect borrowers with mortgage lenders and charge a fee for their services. IFAs are independent financial advisers that can help you choose, organize and manage your finances. It’s essential to understand what each fee covers and decide if these fees are worth paying to avoid any future financial burdens.
Legal Fees:
When buying a home, you’ll require a solicitor or conveyancer for legal services. The legal fees cover the cost of property conveyancing, such as transferring ownership, arranging and reviewing contracts, and performing property searches. These fees vary depending on the solicitor’s experience and location, so be sure to get several quotes before making your decision.
Lender’s Valuation Fee:
Once you have decided on a property and a mortgage lender, the lender will request a valuation of the property to determine its value and condition. A lender’s valuation fee can range from a few hundred pounds to over a thousand pounds, so ensure you understand the lender’s valuation process to avoid overpaying.
Stamp Duty Land Tax (SDLT):
Stamp Duty Land Tax (SDLT) is the tax often required to be paid when buying a property above £125,000 in England, Northern Ireland, and Wales. The payment amount depends on the purchase price and ranges from zero to over twelve thousand pounds. As a first-time buyer or homeowner, ensure you understand the SDLT rates and thresholds to prepare for the additional payment, you can use a stamp duty calculator to work out a rough estimate.
Survey & Searches
Before buying a property, it’s essential to have a surveyor assess the property’s condition and identify potential hazards. A survey fee will vary depending on the surveyor’s location, experience, and your requirements. Additionally, conveyancing solicitors also conduct several searches that cover identifying land ownership, local authority planning, environmental reports, and drainage reports. Ensure you understand the fees for each service and insist on them so you’re fully prepared for any hazards.
Insurance
Home Insurance:
Home insurance covers your property against risks like fire, flooding, and theft. The cost of home insurance will vary depending upon the type of coverage, your location, and the property’s value. It’s important to have home insurance to protect one of the most significant assets you might ever possess.
Building Insurance:
Building insurance covers the property’s structure and would typically be required by your mortgage lender. The cost of building insurance will vary, depending on the property’s value, and is a good measure to have to ensure that any repairs that may come to need are covered.
Critical Illness Cover, Life Insurance and Income Protection:
Critical illness, life insurance, and income protection are optional covers that can protect you financially if adverse life events occur. Critical illness covers payments when you become seriously ill, whereas life insurance covers payments when you die. Income protection covers payments when you’re unable to work due to injury or illness. Each of these fees has to be added to your costs before your complete buying.
Ongoing Costs
First Mortgage Payment:
Your first mortgage payment will typically be higher in comparison with other monthly payments. Depending on the lender, this payment will take into account the first few months of interest payments for the mortgage.
Utility Bills and Council Tax:
Utility bills cover ongoing payments for electricity, gas and water usage, etc. Council tax is a mandatory payment made to your local council for local services. With utility bills and council tax, it is important to budget and understand the costs involved, as they can become quite the expense.
Maintenance and Repairs:
Owning a home comes with the responsibility of maintenance and repairs. This could include routine maintenance tasks such as painting and landscaping, as well as unexpected repairs like plumbing issues or roof leaks. These costs can fluctuate greatly depending on the age, size, and condition of the property. It’s prudent to set aside a contingency fund for these potential costs to ensure that your new home remains in good condition. Remember, regular maintenance can often prevent costlier repairs down the line.
Moving Costs
When moving, you may engage the services of a professional moving company to move your items. These fees vary depending on distance, items being moved, and moving periods. Similarly, if moving requires renting a van, factor this into your budget.
Decorating and Refurbishing
Decorating, refurbishing, or renovating your new property is optional but can be quite useful in giving your home a personalized touch. You can start small with a fresh lick of paint, or go all out with brand new kitchen appliances, covering a vast range of costs depending on what you choose to do.
Additional Costs
When purchasing a property, it’s important to consider additional costs like mortgage protection insurance and estate agent fees. Miscellaneous expenses can also accumulate, so keeping track of expenses is crucial. Other things to keep in mind include professional cleaning before moving in and changing locks for added security. Budgeting for telephone and broadband connections is necessary for brand-new properties. Stay organized and plan your expenses accordingly for future moves.
Buying a new home comes with many additional fees that can make the process costly. As a homeowner or first-time buyer, it’s essential to prepare for these fees by budgeting and researching fees, and keeping your expenses under control. At Ashton White, we will take the worry out of all these costs by recommending reputable services and keeping you informed throughout the entire process. Get in touch with our Billericay Estate Agents to buy or sell your home.
