Costs of Buying a House

You need to budget for the initial costs of buying your home, so here are few things to consider

Robert Drury


Many buyers underestimate the total costs of buying a house. To help understand the main expenses you will face, here is a guide.

Deposit

For many, especially first-time buyers, this is the most significant of the costs of buying a house. In the past, some lenders would consider lending the entire purchase price with a 100% mortgage. Others would offer up to 95% of the value of a home and then a further 30% of the value as an unsecured loan (believe it or not!). This level of lending proved risky for lenders when house prices fell during the credit crunch. As a result of significant changes to mortgage lending introduced in April 2014, these products no longer exist.

It is still possible to obtain a 95% mortgage from some lenders including large High Street lenders and smaller Building Societies, but their criteria and underwriting (assessment of you and your circumstances) is strict. Borrowing a large proportion of the value of your house presents the lenders with a higher risk of losing money if you default. To reflect this added risk, the interest rates on these schemes can be higher than with lower loan-to-value mortgages. The higher the total deposit, then generally the lower the interest rates available.

Home buyers ideally need a deposit of at least 10% of the price in order to attract lower interest rates. Larger deposits may be needed for new build flats and apartments.

Stamp Duty

Stamp Duty Land Tax is a tax payable on any residential property costing more than £125,000. It is paid to HM Revenue & Customs by your Solicitor upon completion of the purchase. It is charged at different rates depending on the portion of the purchase price that falls into each rate band:

  • Up to £125,000 = nil
  • £125,000 – £250,000 = 2% (i.e. up to £2,500)
  • £250,000 – £925,000 = 5% (i.e. up to £33,750)
  • £925,000 – £1.5 million = 10% (i.e. up to £57,500)
  • Over £1.5 million = 12% (uncapped)

The total charge is found by adding the sums within each band up to the purchase price. So for example a purchase at £325,000 would incur a stamp duty charge of £2,500 + £3,750 = £6,250.

For First-Time Buyers the starting point for stamp duty tax was revised upwards to £300,000 in the 2017 Autumn budget. Therefore, nothing is payable up to this point after which the rates above kick in. For first time buyers purchasing London properties, the starting threshold was raised to £500,000. To qualify, all buyers must never have owned a property before. These concessions can markedly reduce the costs of buying a house for first time buyers.

Legal Fees

A Solicitor will need to act for you in the purchase. They will make all of the necessary legal requirements to transfer ownership of the property to you. Depending on the property value you should budget for fees of £600 – £1500. On top of this you will have to pay ‘disbursements’ which are paid to other organisations for local, environmental and water searches. Depending on your local council the range of these costs is £250 – £300. A registration fee is also payable to the Land Registry who record your new ownership of the property. This fee varies according to the purchase price.

Survey / Valuation Fees

All mortgaged property needs to be valued by an independent valuer. A basic report is needed by the lender, but a more detailed survey known as a Homebuyers Report is often recommended for the buyer. This is especially true where the property is older or has unusual features. Fees are usually on a sliding scale based on the valuation, starting at around £200 for a basic report on property valued at up to £100,000, to approximately £375 for a £300,000 property. Some lenders offer a basic report free of charge, but you may not receive a copy of the report.

Homebuyer Report fees are around double the basic report costs but a much more detailed survey is produced, giving information and reassurance. They can often be arranged through the lender, which sometimes results in a cost saving. This is because the basic mortgage valuation can be created from the Homebuyer Report details.

A full structural survey will cost you more although this is designed for properties with specific areas of concern regarding its construction or structure. These types of report are rarely needed for straightforward home purchases.

Product Fees

Product fees are often charged by the lender for specific deals, such as fixed and tracker rates. These vary between £300 to £1,500 or more. Often the fee can be added to the loan and repaid over the life of the mortgage. However, the fee must be factored in to the overall costs of the loan to compare whether the deal is attractive or not in relation to others with smaller or no fees.

Higher Lending Charge

This is a largely historical charge which lenders used to pass on to borrowers. Where a lender grants a mortgage above a certain amount, often 75% of the valuation of the property, they are required to arrange for their own protection some ‘additional security’. This was usually an insurance policy which would make good any losses they suffered in the event of a repossession and sale, where the sale price does not cover the mortgage debt. Historically, this could add a significant amount to the costs of buying a house, especially for those with smaller deposits.

Practically all lenders currently meet the cost of this insurance policy but in the past they did not. You will rarely see them nowadays.

Mortgage Adviser Fees

The process of searching and applying for the most suitable mortgage is now longer, more involved and more difficult than it used to be. Consequently, many mortgage advisers now make a charge for their professional services. Mortgage brokers may also receive commission from the lender.

Typical fees can be £250 – £750 where commission is received from the lender as well, or £1,000 – £1,500 where it isn’t.

 

The total costs of buying a house will therefore vary depending on the value of the house you buy but you need to understand all of them, and when they are payable, before committing yourself.

Andy Wilson Financial Services are proud members of the Equity Release Council
We are Preferred Traders for Equity Release by Age UK (Lincoln)
Mortgage Adviser at VouchedFor Top Rated Award

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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Andy Wilson Financial Services Ltd (“we” “us” “our”) is committed to protecting and respecting your privacy. We are the data controller and will process your personal data in accordance with the Data Protection Act 1998 as amended or replaced by the General Data Protection Regulation 2016 and any national laws which relate to the processing of personal data (“data protection legislation”).

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We will collect details such as name, address, email address, contact number, date of birth, national insurance number and financial information in order to provide services to customers. We may also receive details of credit checks undertaken where you have supplied these to us.

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We will use customer personal data for our legitimate interests including:

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We will not transfer any customer personal data outside the European Economic Area (“EEA”).

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We will collect details such as contact names, address, email address and telephone number in order to contact you about goods and/or services we have ordered from you, to comply with our contractual obligations and to place further orders. We may share your personal data with our employees to manage our relationship with you and we will keep your personal data for as long as we require your goods and/or services subject to a maximum of six years from the date of our last contact with you. We will not transfer your personal data outside the EEA.

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We may use customer personal data to provide you with details about our services, products,  business updates and events which we think may be of interest.

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You have the right to opt-out of receiving the information detailed in section 5.1 at any time. To opt-out of receiving such information you can:

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Where you have subscribed to receive marketing correspondence from us we will keep your personal data for six years from when you subscribed to receiving marketing information from us or until you unsubscribe from receiving such correspondence from us (whichever is earlier).

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In accordance with data protection legislation we are required to notify you of the legal basis upon which we process your personal data. We process your personal data for the following reasons:

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We will also process your personal data including personal sensitive data  where we have obtained your explicit consent.

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In addition to the third parties mentioned previously in this policy, we may disclose your personal data to third parties for the following legitimate business purposes:

  • (7.1.1) – staff members in order to facilitate the provision of services to you;
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  • (7.1.3) – to a prospective buyer of some or all of our business or assets, in which case personal data including Your Data will also be one of the transferred assets.

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We may disclose your personal data to the police, regulatory bodies, legal advisors or similar third parties where we are under a legal duty to disclose or share your personal data in order to comply with any legal obligation, or in order to enforce or apply our agreements; or to protect our rights, property, or safety of our customers, or others. This includes exchanging information with other companies and organisations for the purposes of fraud protection and credit risk reduction.

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We will not sell or distribute your personal data to other organisations without your approval.

8 – Cross-Border Data Transfers

We do not transfer personal data outside the EEA.  Where this is required in the future, we will ensure that safeguards are in place so that such transfers comply with data protection legislation.

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Information you provide to us is shared on our secure servers. We have implemented appropriate physical, technical and organisational measures designed to secure your information against accidental loss and unauthorised access, use, alteration or disclosure. In addition, we limit access to personal data to those employees, agents, contractors and other third parties that have a legitimate business need for such access.

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Where we have given you (or where you have chosen) a password which enables you to access certain parts of our Site, you are responsible for keeping this password confidential. We ask you not to share a password with anyone.

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Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your information transmitted to our Site; any transmission is at your own risk.

10 – Access to, updating, deleting and restricting of your data

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It is important that the personal data we hold about you is accurate and current.  Please keep us informed if the personal data we hold about you changes. 

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Data protection legislation gives you certain rights in relation to your personal data. You have the right to object to the processing of your personal data in certain circumstances and to withdraw your consent to the processing of your personal data where this has been provided.

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You can also ask us to undertake the following:

  • (10.3.1) – update or amend your personal data if you feel this is inaccurate;
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  • (10.3.3) – send you copies of your personal data in a commonly used format and transfer your information to another entity where you have supplied this to us, and we process this electronically with your consent or where necessary for the performance of a contract;
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  • (10.3.5) – provide you with access to information held about you and for this to be provided in an intelligible form.

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We may request specific information from you to help us confirm your identity. Data protection legislation may allow or require us to refuse to provide you with access to some or all the personal data that we hold about you or to comply with any requests made in accordance with your rights referred to above. If we cannot provide you with access to your personal data, or process any other request we receive, we will inform you of the reasons why, subject to any legal or regulatory restrictions.

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Please send any requests relating to the above to our Privacy Officer, Andy Wilson, at 2 Claudius Road, North Hykeham, Lincoln, LN6 9PH or andy@andywilsonfs.co.uk specifying your name and the action you would like us to undertake. Note that in relation to requests to access personal data, we reserve the right to charge a reasonable fee to comply with your request.

11 – Right to Withdraw Consent

Where you have provided your consent to the collection, processing and transfer of your personal data, you may withdraw that consent at any time. This will not affect the lawfulness of data processing based on consent before it is withdrawn. To withdraw your consent please contact us at andy@andywilsonfs.co.uk or by writing to Andy Wilson, 2 Claudius Road, North Hykeham, Lincoln, LN6 9PH

12 – Changes to our Privacy Policy

We reserve the right to update this privacy policy at any time, and any changes we make to our privacy policy will be posted on this page. We will notify you if there are any changes to this policy that materially affect how we collect, store or process your personal data. If we would like to use your previously collected personal data for different purposes than those we notified you about at the time of collection, we will provide you with notice and, where required by law, seek your consent, before using your personal data for a new or unrelated purpose. We may process your personal data without your knowledge or consent where required by applicable law or regulation.

13 – Contact Us

We have appointed a Privacy Officer to oversee compliance with this privacy policy. If you have any questions, comments or requests regarding this policy or how we use your personal data please contact our Privacy Officer at andy@andywilsonfs.co.uk or tel: 01522-590015. This is in addition to your right to contact the Information Commissioners Office if you are unsatisfied with our response to any issues you raise at https://ico.org.uk/global/contact-us/

 

Last updated: 1 April 2018.

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