First-time buyers, remember to factor in these costs

If you’re a first-time buyer, you’ve probably been focussing on getting a deposit together that will allow you to secure a mortgage. Yet, numerous other costs need to be factored into stepping onto the property ladder too.

It’s not surprising that the deposit is the main focus for most first-time buyers. It’s often one of the first hurdles you face when seeking to buy a home and it’s likely to be among the largest sums you’ve saved. Research suggests that the average deposit needed is on the rise too.

According to Halifax, at the beginning of 2020, the average first-time buyer purchase price was £231,455, with an average deposit of £46,187. When compared to the previous year, first-time buyers are saving 7% more to secure their first home. Raising a deposit can be challenging but it’s important that it’s not the only aspect you focus on. There are other costs associated with buying a home that should be considered as you save.

1. Mortgage arrangement fees

When first-time buyers think about taking out a mortgage, it’s often the process and taking steps to improve their chances of being approved that come to mind. But it’s something that can eat into your savings too.

Whilst checking the interest rate and deposit level needed is important, so too is understanding the associated fees. Make sure you know what arrangement fee and booking fee you’ll need to pay. Some lenders may offer deals where there are no fees to pay but you may find this means you miss out on the best deals.

Arrangement fees can range from £0 to over £2,000, whilst the most you should expect to pay for a booking fee is £200.

In addition, some lenders will charge you a valuation fee, this covers the cost of the lender checking how much the property you want to buy is worth. You can expect this to cost around £250. Again, some lenders will waive this fee.

If you choose to use a mortgage broker, there are likely to be associated fees for this service too, which will vary from broker to broker.

2. Legal fees

One of the biggest expenditures when purchasing a home is paying a solicitor, also known as conveyancing fees. This will cover all the legal work that is associated with buying a home, from checking leaseholds where necessary to dealing with the transfer in ownership. You’ll usually pay at several points during the buying process and pay a final bill on completion.

The cost of legal fees will depend on the solicitor you choose and how much your property costs. A first-time buyer should put aside around £1,500 to cover this.

3. Legal searches

In addition to paying your solicitor, legal searches will also be carried out on your behalf. These will look at a range of areas, such as environmental searches and water authority searches. These are done to ensure you are aware of any potential issues before you take ownership of a home. You will usually pay for the costs of searches via your solicitor. The cost varies depending on your local authority and which ones need to be carried out.

4. Building survey

You don’t have to have a building survey, but it’s often advisable to do so.

Whilst your lender will carry out a valuation, this is for their benefit. A building survey is for yours. It involves a surveyor checking the property and highlighting potential problems, such as damp or structural issues. It can provide peace of mind that the property you’re purchasing is in good condition or indicate where you may need to invest money in the future.

There are several different types of survey, make sure you understand what will be covered before booking one. Depending on the type of survey you choose, you can expect to pay between £400 and £800.

5. Land Registry fee

This is the fee you need to pay to register the property in your name. This is usually paid via your solicitor but goes directly to The Land Registry. How much it is will be will depend on how much your property is worth. It can cost up to £500.

6. Stamp duty

For most first-time buyers, Stamp Duty shouldn’t need to be paid. However, if you’re purchasing a home worth more than £300,000, this is something you will need to consider. The amount of Stamp Duty paid depends on the value of the property and calculated as a percentage. If you’re liable for Stamp Duty as a first-time buyer, you won’t have to pay anything on the first £300,000.

7. Moving home

Finally, moving home can be an expensive task on its own. From hiring a van to move furniture to the purchase of DIY products to put your stamp on the property, these expenses can add up. Make sure you leave some room in your budget to cover these costs that may have slipped your mind.

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