You’ve found the home of your dreams and it’s within your budget, whether you’re a first-time buyer or a home mover it feels like a dream come true! But have you prepared for the additional costs of purchasing your new home?
ARE YOU MORTGAGE READY???
There are a number of hidden costs associated with buying a property that you may not know about until you start your mortgage application, so we’ve put together an overview of a number of costs you might need to be prepared for.
Stamp duty
Stamp duty is a government tax that can add thousands of pounds to the cost of purchasing a property. It is a tax on homes of which the thresholds and first-time buyer exemptions vary in England, Northern Ireland, Scotland and Wales which is why seeking professional tax advice is so important.
If you’re purchasing a second property or a buy-to-let investment then there will be an additional stamp duty surcharge to be paid on top of the normal amount so it is worth seeking professional tax advice before making a purchase.
Conveyancing
These are the fees for the legal processes when buying your new home. They include various local searches on your potential property to check, for example, if it’s a listed building or located in a conservation area.
The cost of conveyancing fees can very depending on a number of factors like the value of the property, whether it’s freehold or leasehold and the local searches that need to be completed.
Surveys and valuation fees
Your mortgage lender will carry out a valuation survey that will look solely at the property’s worth – it doesn’t cover structural issues and won’t highlight any problems with the property, and you may be liable to cover the costs as part of your mortgage product. Dependant on the property that you’re buying you may want also want to commission an independent report to highlight any structural issues and problems.
There are different types of reports which will examine the property in different ways so it worth seeking professional advice before you go ahead with one. Depending on the property’s value and what type of report you go for this could cost anywhere from a few hundred pounds to over one thousand pounds.
Mortgage arrangement and other fees
These fees are sometimes charged by mortgage companies and will vary depending on each lenders stance and which product is selected. Some lenders might insist that you pay the fees up front which means you won’t be paying interest on it – others might add it to your mortgage which could be better if you can’t afford another financial outlay at the time of purchasing your new home.
There are also potentially a number of other fees you may need to be prepared for such as administration fees and electronic transfer fees to name a few. All lenders will take a different approach with regards to costs which is why a mortgage adviser can be so invaluable.
Estate Agent Fees
It is important to factor in estate agent fees if you are selling your current home at the same as purchasing your new one. But, if you’re a first-time buyer, don’t worry, the seller will cover these costs!
Insurance
It is important you have the correct protection in place in case the worst should happen. Life insurance, critical illness cover and income protection can all provide a source of money for you or your family in your time of need which can help cover the cost of any debts like your mortgage. Whereas general insurance can be used to protect the economic value of your assets against accidents, damages or loss.
Removals or furniture
If you already have your own furniture then you might need to factor the costs of hiring a professional company to help you – unless you have little furniture and very energetic friends to hand!
If you don’t currently own any furniture then this of course is a definite cost you will need to factor in. Unless you’re prepared to sleep on the floor and drink warm milk you’re going to need a bed and a fridge as well all of the other furniture that you will want.
While this is only a brief overview of many of the additional costs you may be faced with when purchasing a home, it does highlight why it is worth seeking professional advice. Your mortgage adviser will be able to find a deal that’s right for you and your personal and financial circumstances.
If you missed ‘Are you mortgage-ready? Volume 1’ you can read it here.