The true cost of buying a property is not something everyone is immediately aware of, especially first-time buyers. Beyond the purchase price you’re considering, there are a range of additional costs which can add as much as 10% onto the overall price of buying the home. It’s an expensive business but the chance to own your very own home is more than worth it for many people.

The purchase price is only the beginning when it comes to buying a property and it is important to consider all the other costs when budgeting for probably the biggest expense of your lifetime. Here we’re looking more closely at the typical costs of buying a property, including stamp duty, mortgage fees and other costs including surveys and valuation.

STAMP DUTY

Stamp Duty Land Tax is usually paid when you buy a home or land in England or Northern Ireland over a certain price. Currently; as part of the Governments temporary financial stimulus package, there is no Stamp Duty (nil rate band) on properties up to £500,000, and this applies to both first-time buyers and those who have previously owned a home.

From 1st July to 30th September 2021 the nill rate band on residential properties reduces to £250,000, though for first time buyers this is set at £300,000. Stamp duty is expected to return to its historical standard of £125,000 from 1st October 2021.

The tax applies to all freehold and leasehold properties and there are many on-line calculators to help you work out exactly how much the rate you pay might be.

PROPERTY DEPOSIT

This won’t come as much of a surprise to most potential buyers, and it does come off the overall property purchase fee. Your property deposit is the amount you put down to secure the property when buying your home. Usually, you will need between 5% and 20% of the overall purchase price as your deposit, for example, for a £250,000 home you would be looking at a deposit of between £12,500 and £50,000.

VALUATION FEES

Your mortgage lender will assess the value of the property you’re hoping to purchase, and this will form the basis of the amount they’re prepared to lend you. The cost of the valuation fee is usually between £150 and £1,500 dependent on the property’s value. Not all lenders charge this fee, and it may depend on the mortgage product you choose, so it is always worth factoring this in when comparing lenders.

SURVEY FEES

Property surveys are optional but given the large costs of buying a property they are often a wise investment. For older properties they can help to ensure any problems are found before you make a purchase, and you may alter your offer based on the survey results.

For new-build properties an independent professional snagging company will help ensure that all the building work is up to a high standard and complies with your property’s warranty rights.

For existing properties surveys range in price dependent on the depth you want to go into and the surveyor you choose. A basic home buyers report can cost from £300 while a full structural survey or home condition survey can often be £600 - £900.

New-build snagging surveys costs are often similar, and based on the size of the property and whether a re-inspection visit (known as a de-snag) is desired to check on the quality of any repair work carried out after the initial inspection.

While surveys can seem like yet another cost to meet in the buying process they do minimise the risk of running into bigger problems in the long run.

LEGAL FEES

Most house purchases require a solicitor or licensed conveyor to manage and complete all the legal paperwork and requirements when buying and selling residential property. Legal fees usually work out around £850 to £1,500, but this will differ from company to company. Your chosen legal partner should also carry out local searches; to see if there are any local plans or problems you need to know about. These searches may be included in their overall package or charged separately at a cost of around £200-£300.

REMOVAL COSTS

When you’re first thinking about moving and buying a new home, moving your current belongings probably isn’t at the front of your mind, but this costs too. Removals can cost anything from £200-£1,000 dependent on the level of service you’re planning to use and the size/ number of vehicle(s) required. There’s always the cost-effective alternative of hiring a van and doing it yourself though this does require some careful planning especially if you taking large and heavy items with you.

ELECTRONIC TRANSFER FEES

This is only a small cost but one you should be ready for. Buying and selling property involves the movement of huge sums of money in a short time period. You solicitor will be responsible for making sure your deposit and other funds move via same day transfer (usually CHAPs) and this comes at a cost of around £30. You may also find your solicitor wants to carry out a property fraud fee to ensure there is no risk of fraudulent activity and this can be around £10 too.

ESTATE AGENT FEES

Estate agent fees are only applicable if you are selling a property and therefore not relevant for first-time buyers. These fees will be negotiated when you put your property on the market and are often around 2-3% of the property’s sale price plus VAT. Historically highstreet agencies favoured ‘no sale no fee’ arrangements with higher final % fees, and online estate agencies offered lower fees with some upfront costs, regardless of whether your property is sold. This is not always the case especially as hybrid providers offering a mix of the two have arrived in recent years. A more detailed breakdown of estate agency fees and commission can be found here.

BUILDINGS INSURANCE

Mortgage lenders require you to have buildings insurance in place before you exchange. Building cover usually comes in at around £80 - £100 a year though this will differ if you have a particularly unusual property such as a listed building.

The costs involving in buying a home can be overwhelming but if you have a good understanding at the outset there should be no nasty surprises. For new-build home owners PayPal’s Pay In 3 finance option can help spread the costs of completing a professional snagging survey over 3 months.

The Typical Costs of Buying a Home