First Time Buyers: Your Financial Guide to buying your first home 12th March 2015

Are you thinking of buying your first home? Then it’s important to know how much it will cost you. Here’s a rundown of all the costs to expect.

Buying your first home can be an expensive time, and many people find themselves saving for years. If you are thinking of starting home viewings, take a look at our list of costs below to see if you can really afford to move out:

Deposit

The largest single payment will be the deposit on the home. The value of this will depend on your particular mortgage agreement, but this is usually between 5% and 15% of the total value of the property. For example, the average price of a home in the UK is now just under £190,000, so the deposit will need to be between £9,500 and £28,500. But the more you save the better your mortgage options will be.

Some mortgage lenders may also charge you a set-up or booking fee. This can be anywhere from £100 to £250 and may be refunded if the mortgage application falls through. This fee is to reserve the funds and fix the deal.

Some mortgages will also incur an arrangement fee of up to £2,000. This can be paid upfront or added onto the total mortgage amount; however you will have to pay interest on this if you decide to delay payment.

Mortgage Account Fee

A mortgage account fee is a single set-up charge from your lender, which will also cover maintenance and account closing costs. Many people choose to pay these when they take out the loan to avoid having to pay an administration fee when the mortgage is repaid. This can be anywhere from £100 to £300.

Legal Costs

Whatever type of property you are buying you will need to enlist the services of a solicitor to handle the legal process of signing over the home. This can cost up to £750 plus VAT.

Stamp Duty

As you may know, stamp duty charges have recently changed in the UK. Stamp duty is paid on the land and property transaction and is now charged on the amount between certain thresholds. These barriers are:

Under £125,000 – 0% charge
£125,000 to £250,000 – 2% charge
£250,000 to £925,000 – 5% charge
£925,000 to £1.5million – 10% charge
Above £1.5million – 12% charge

Valuation Fee and Survey

This cost can range drastically, from an affordable £150 to a more eye-watering £1,500, but it is an essential part of the buying journey. This charge is by the mortgage lender to value the property you are buying, and may be charged as part of a survey report.

How much you pay will depends on how in-depth an investigation you’d like to have done. For an older property it is advisable to have a full check to ensure there aren’t any costly issues.

There are three main types of survey:

• Home condition survey – a basic survey ideal for new-build homes. It is also the cheapest option at around £250.
• Homebuyer’s report – A more in depth survey that looks at both the inside and outside of the property, as well as a valuation. Expect to pay at least £400 for this.
• Building or structural survey – The most detailed check, which is advised for older or unusual properties. This will ensure there are no major problems that will need budgeting into your overall purchase cost. This survey will cost you more than £600.

Moving Costs

This is the cost of moving your possessions from your rented property or you parents’ home to your new house. Most home removal companies will also help pack your items too.

Telegraphic Transfer Fee

This is a fee paid by the mortgage lender to transfer the money to your solicitor. This will be around £50.

As well as these essential costs there are a number of other possible charges you may incur. These include:

Higher Lending Charge

If you are only putting down a 5% deposit, and are therefore borrowing the vast majority of the value of the property, the lender may decide to take out cover and charge you the insurance fee. This insurance will protect the lender should you struggle to make repayments.

How much this charge is depends on the size of the loan, but this is usually around 1.5% of the total value. But don’t worry, these charges are now less common than they used to be, so you are unlikely to have to worry about this.

Searches

Are you concerned about local issues or planning projects in the area that may affect the future value of your property? For example, if a field at the bottom of your garden may get built on.

Then you can enlist the services of a solicitor who will submit a search to the local council to check for any future developments. You may also be advised to have a drains search at the same time.

This will cost you around £250.

Registration of Title

If you live in Scotland you will need to pay a title registration fee, the cost of which will vary with each property.

Furnishings

If you’ve never lived in your own home before ensure you have enough savings to furnish your new house. Depending on the level of finish, expect to spend at least £5,000 in doing so to a comfortable standard.

So how much do you need to save in order to fund your first home? Well, for essential costs we’d estimate a minimum of £6,500 plus your deposit. But this could increase drastically, especially if you will need to buy furniture.

So will you be looking for your first home soon? Best of luck in your hunt.

About the authors
Dave Sayce and Marc Benger co-founded Compare My Move after running a removal company themselves for over five years. They established Compare My Move to make searching for home removal companies easy. They compare costs from your local providers to find you the best deal possible. Fill in their quick form and compare quotes today!