Buying a Home: A Cost Breakdown
A lot of first-time buyers tend to think that the cost of buying a home begins and ends with the price of the house itself, but this is not the case. Beyond the price of the house, there are a number of other costs that you need to factor into your budget. These additional costs can add up, and if you aren’t prepared for them, you can find yourself in a bit of a pickle financially. This is why we have put together the following cost breakdown, so keep reading to learn more.
Unfortunately, 100% mortgages are completely unheard of nowadays, which means that you have to put down a deposit in order to secure a mortgage. The deposit that you need to offer will depend on the prices of the houses that you are looking at. You will need to offer at least 5%, but more often than not, 10% will put you in a better position. In truth, the better your deposit, the better the deal that you can expect on your mortgage,
Stamp duty is usually the biggest additional cost you can expect to face when buying a home. However, there are some discounts available to you. Those buying a home under a certain threshold are exempt, and this threshold is even higher for first time buyers. These discounts do vary depending on where you live in Britain, so be sure to check what schemes you are eligible for.
Buying a home is a legal process, and the process is called conveyancing. There are two forms of costs associated with conveyancing. Firstly, the legal fees are paid to the conveyancer or solicitor in exchange for doing all of the leg work. Then you have the disbursements, which include the various local searches necessary to purchasing your home. The price of these fees largely depends on the price of your home and whether it is leasehold or freehold.
There are several forms of survey. Some are mandatory, and some simply make good financial sense. They are used to assess the state of the building and the land around your home; they look for potential issues that you might encounter during your time within the home. While they do cost money, they can help you to avoid other larger costs down the line, so they are definitely worth doing. If you think that at any point you will want to build an extension or renovate your home, then speak to an ecology consultancy like Arbtech to find out whether or not you will run into any issues.
In all likelihood, your mortgage provider will want to conduct a valuation survey. They will want to know more about the value of the property before they agree to lend you the money you need for the mortgage. Now, not every provider will charge for conducting this valuation, so you may be able to save some money by finding a provider that offers this service free of charge.
After the valuation, there are other fees pertaining to securing a mortgage. There are mortgage arrangement fees, which can cost up to 1% of the mortgage’s worth. Some providers will want these fees paid for upfront, but this does mean that there is no additional interest associated with these fees. Other providers add it to your mortgage.
Lastly, you may also encounter mortgage broker fees if you use a mortgage broker. A mortgage broker connects wannabe homeowners with mortgage providers. You can avoid this additional cost by dealing directly with your mortgage providers instead of going through a mortgage broker.
Estate Agent Fees
While buying a home does come with some estate agent fees, for the most part, these are the responsibility of the seller. Most home buyers are somewhat dependant on estate agents for things like viewings, advice, and negotiations; however, you should not feel any pressure to use their services beyond that if they have an in-house mortgage broker or offer discounts for other services. So shop around to find the best deal.
That being said, there are such things as buying agents. They are a little bit like estate agents, but instead of facilitating the sale for the seller, they act solely within your interests as the buyer. They help you to find a property that is going to suit your needs. Then, once you’ve found the property, the buying agent helps you to negotiate to find the best terms and price. Obviously, all of this help comes at a cost. Some work on commission, and some charge a flat rate, so be sure to check.
Finally, there is also an emerging trend for buying properties from auctions. If you choose to go this route, then you can find a good deal. However, the majority of the houses that go to auction need a good deal of work doing to them. In addition to this, there are also admin fees to be aware of.
Now when all of that is over, there are several other costs associated with moving. Firstly, the cost of removal. If you don’t have too much and have the capabilities, you can do this for basically nothing, apart from paying for petrol and bribing your friends with food or booze. If you can’t move your things yourself, then you are going to have to look into hiring a van or using a removal service. This can be pricey, but it is also often a lot easier because you can find firms that put all of your furniture down and reassemble it at the other end too.
Depending on where you are moving from and to, you might not have enough furniture to fill up the house. This means buying new furniture and or white goods for your new property. This can be pricey, but it is often a good investment because the things that you buy will be with you for a long time. If you compromise on quality, then you are going to need to replace it and often, you’ll find that you’ve spent more than you would have originally.
Buying a home, especially for first-time buyers, is notoriously expensive, and the truth is that a lot of these costs are unavoidable. However, when you know what to expect, you can prepare yourself and your finances. You should also always remember to shop around for the best deal, although if it sounds too good to be true, it probably is.