Hidden Costs of Buying a Home: What to watch Out For

When buying a home in the UK, several hidden or additional costs can come as a surprise beyond just the property price. Here’s a breakdown of some of the most common hidden costs:

1. Stamp Duty Land Tax (SDLT)

• For England and Northern Ireland: SDLT applies to properties over £250,000 (for first-time buyers, the threshold is £425,000). The amount you pay increases with the property price.
• In Scotland: This is called Land and Buildings Transaction Tax (LBTT).
• In Wales: It’s known as the Land Transaction Tax (LTT).
• The rate is progressive, so you’ll pay a different percentage on portions of the property’s price above certain thresholds, ranging from 0% to 12%.

2. Legal Fees (Solicitor/Conveyancing Fees)

• You will need to hire a solicitor or licensed conveyancer to handle the legal aspects of the purchase, such as searches, contracts, and liaising with the seller’s solicitor.
• Costs can range from £800 to £1,500 depending on the property price and complexity.

3. Surveyor Fees

• A survey is highly recommended to assess the condition of the property. The cost depends on the type of survey:
  • Condition Report: Around £250
  • Homebuyer Report: £400–£700
  • Full Structural Survey: £600–£1,500

4. Mortgage Fees

• Arrangement/Booking Fees: Many mortgage products have arrangement fees, typically between £0 and £2,000.
• Valuation Fees: Your mortgage lender will require a valuation of the property. This can cost between £150 and £1,500 depending on the property value.
• Mortgage Broker Fees: If you use a mortgage broker, some charge a fee (typically £300–£500), while others are free (such as Houz Mortgages!)

5. Removal Costs

• Hiring a removal company can cost between £300 and £1,500 depending on the amount of belongings and the distance of the move.

6. Insurance Costs

• Buildings Insurance: Lenders require buildings insurance to cover the structure of the property from the date contracts are exchanged. This can range from £200 to £400 annually.
• Contents Insurance: Covering your possessions typically costs £50 to £150 annually.
• Life Insurance and Critical Illness Cover: These may be required by lenders to ensure the mortgage is paid off if something happens to you.

7. Search Fees

• Your solicitor will arrange searches (local authority, environmental, water and drainage) to check for any issues that may affect the property. These can cost between £250 and £500.

8. Deposit

• While this isn’t exactly “hidden,” the mortgage deposit (usually 5–20% of the property price) can be larger than expected, especially if lenders ask for a higher percentage based on your financial situation or property type.

9. Leasehold Charges (if applicable)

• If you buy a leasehold property, you’ll likely face:
  • Ground Rent: Typically £50 to £200 per year, though some can be higher.
  • Service Charges: Covering maintenance of shared areas, can vary but average £1,000 to £2,000 annually.
  • Lease Extension Fees: If the lease is short (under 80 years), extending it can cost thousands.

10. Moving-In Costs

• Repairs and Renovations: Even if you’ve had a survey done, there may still be minor (or major) fixes or updates required. Budget for anything from a few hundred pounds to thousands, depending on the property’s condition.
• Furniture and Appliances: If the previous owner takes all fixtures and fittings, you may need to purchase new items.

11. Utility Connection and Council Tax

• Utility Setup Fees: Some providers may charge connection fees for utilities (electricity, gas, internet).
• Council Tax: This varies depending on the property’s value and local authority. Make sure you’re aware of the banding for your new property.

12. Unexpected Maintenance or Repairs

• Particularly with older properties, unexpected repairs (like fixing a boiler or dealing with structural issues) can arise after moving in.

Planning for these additional expenses will help you manage your budget effectively and avoid financial surprises during the home-buying process. For more information on which costs could be applicable to you and how to manage them, reach out to Houz Mortgages today and we’ll guide you through, step-by-step.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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