The extra costs of buying a home
When you’re saving for a house, the focus is often on reaching your target deposit. But there’s a few extra costs to think about as you move through the home-buying process.
That’s why it’s vital to build a buffer into the funds you save - to make sure you’re not caught short after paying your deposit.
Below are just some of the extra costs you might incur when buying a home.
Head to our saving for a house guide to see how Wesleyan can help you save for them.
Stamp duty
Formally known as Stamp Duty Land Tax, stamp duty is a tax on property purchases. It can add a hefty chunk to the cost of buying a home.
You should expect to pay 5% on any amount over £250,000. For example, if you buy a £295,000 house, you'd pay 5% of £45,000. That means you'd pay £2,250.
Stamp duty rates increase to 10% on amounts over £925,000 and rise again on amounts over £1.5 million. This is for residential properties.
Do first-time buyers pay stamp duty?
Current laws mean most first-time buyers don’t pay stamp duty right now. If you're buying in England or Northern Ireland, you won't pay stamp duty tax on primary residential properties worth up to £425,000.
For properties costing up to £625,000, you won't be required to pay stamp duty on the first £425,000. You will however pay 5% stamp duty tax on the remaining amount, up to £200,000.
For example, if you buy a property for £525,000, you wouldn't pay tax on the first £425,000. However, you would need to pay 5% on the remaining £100,000, so your total stamp duty bill would be £5,000.
The threshold amounts are due to change in April 2025.
Mortgage product fee
On some mortgages, you get the option to pay an up-front product fee in return for access to a better rate. Typically, this fee is in the region of £1,000.
Depending on how much you’re borrowing and the length of your term, the product fee may or may not be worth paying. Do your maths to make sure you’re getting value for money.
Valuation fee
As they are lending against the value of the house, the mortgage lender needs to verify the property’s worth before proceeding.
They’ll usually send a surveyor round to value the house, and you’ll often have to cover their costs in doing so. Basic valuations can sometimes be bundled into other mortgage costs, but in other cases they can cost £400 to £600.
Buildings survey
To do your due diligence on a property, it’s wise to take out a house survey.
This can range from a basic survey to a full structural survey, so costs can vary quite dramatically. But it could be money well spent if it stops you buying a house riddled with defects.
You’re looking at around £1,000 to £1,500 depending on the value, age and size of the house.
Solicitors’ fees
Also known as conveyancing fees, solicitors’ fees will typically set you back at least £1,000. This is for taking care of the legal searches and paperwork associated with your property purchase.
Sometimes searches are billed in addition to the solicitor’s costs. When the time comes, make sure you ask whether the price includes the searches.
Buildings insurance
Your lender will need to see buildings insurance in place to protect their asset. But you don’t need to take out your buildings insurance from the same provider.
While it’s not mandatory, contents insurance is usually a good idea too. This protects all your possessions against loss, theft or damage.
In both cases, the costs will vary depending on the level of cover you need, and the value of your property. You can find out more about home insurance here.
Mortgage protection
Mortgage protection insurance is designed to pay off any outstanding mortgage on your home if you die.
It’s not compulsory, but if you’re buying your home as a couple, it’s worth thinking about how your partner would pay the mortgage if you were no longer around.
Costs for mortgage protection will vary, but you’ll usually be able to pay your premiums monthly or yearly.
The cost of moving
Finally, make sure you factor in the cost of the move itself. Removal services are rarely cheap – and you’ll be amazed at just how many boxes you need.
According to reallymoving.com, the average moving cost of a 1 to 2 bedroom house is between £300 and £433. For a 3-bedroom house, it’s £595.
Get some quotes well in advance of your moving date. Booking early may save you money – or at least give you time to set the funds aside.