Costs Checklist For First -Time Buyers
A report published this year revealed that a quarter of first-time buyers had little or no idea about the purchasing fees that are incurred when buying a property. The report also revealed that one in ten first time buyers thought the cost of buying a home would be no more than £1000.
So we have put together a checklist of costs that you can expect to pay as a first-time buyer that should help you budget when buying your first home.
Legal costs and conveyancing costs are a large cost and will include a range of costs that are involved in the conveyancing process. Costs include the solicitor’s charge for work carried out, land registry costs and search costs. There are a number of searches that are carried out. The main and mandatory ones for your lender are the Local and Land Charges Search and the Enquiries of the Local Authority. The land Charges Search checks on matters such as planning permissions granted, compulsory purchase orders and tree preservation audits. The Local Authority Enquiries will check on matters such as contaminated land and road maintenance for the property. Other searches which are not mandatory but you can have carried out include an environmental search and flooding search.
It is advisable to get a number of quotes from various solicitors and ask for the bill to be itemised so that you can see and clarify the costs and what you will need to budget for.
Stamp Duty Tax
Stamp Duty Tax is a mandatory Government tax that is payable on property over the value of £125,000. There are various bands of Stamp Duty Tax as follows:
Price Band of Property Percentage Stamp Duty Tax Payable
£125,001 to £250,000 1%
£250,001 to £500,000 3%
£500,001 to £1 million 4%
£1 million to £2 million 5%
Be clear about the amount of Stamp Duty Tax that you will need to pay when you buy your property.
Valuation and Survey Fees
Buyers also need to pay the valuation and survey fees that are part of the mortgage application process. The valuation will confirm the price of the property you are buying to the lender in order that they are satisfied to lend the amount of mortgage applied for. If the valuation is not satisfactory, lenders will not lend the mortgage finance on it.
There are three main different types of surveys that incorporate the valuation required by the mortgage lender. You can choose from a straight forward valuation survey, a homebuyer survey which is suitable for properties less than 75 years old and a more detailed building or structural survey for older and more unusual properties. Decide which type of survey you wish to instruct and get quotes from various surveyors.
Mortgage Arrangement Fee
Banks and building societies charge fees to arrange mortgage lending for borrowers. Some fees are hefty fees up to £1000 and over and you can check these out when shopping around for mortgages. Mortgage fees will vary according to the type of mortgage you take out and the lender. Always check what the associated mortgage arrangement fee is and budget for this. Most lenders will allow you to add the fee onto the mortgage loan, however this increases it.
Sonya writes for What House?, a property portal that specialises in new homes available in the UK.