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How much does it cost to buy your first home?

Written by Ipswich Building Society

16 Dec 2019

Tags

Mortgage Advice, Mortgages

4 min read

Getting a mortgage deposit together is probably the first thing you’ll think about when deciding to buy your first home. And while it’s certainly the biggest expense by far, there are also a number of other costs you may not have considered which could mean you need to put a little bit more aside before making your new purchase.

Here’s a rundown of most of the costs you’ll need to consider:

Mortgage deposit

If you want to buy a property you’ll need to put down a percentage down up front – this is known as the deposit. On average this is around 18% of the property value for many first time buyers but can be as little as 5%. As a general rule, a higher percentage of deposit will unlock better interest rates although some borrowers may choose to get on the property ladder sooner with a smaller deposit and start building up their equity.

Application fee

This is a fee charged by your lender when you apply for a mortgage product with them. This may not always be payable, depending on the product you choose. Some lenders will offer you the option of adding this fee to the mortgage loan rather than paying it upfront to avoid the initial cost, although this will mean you’ll end up paying more as interest is charged on the fee amount over the term of the mortgage. This fee is usually non-refundable, even if your mortgage application is declined.

Completion or arrangement fee

Similar to an application fee, this is charged by your lender when you have agreed your mortgage with them and the funds are released. Again, this may not always be payable depending on your chosen product and you can opt to add this fee to the mortgage loan.

Valuation fee

Sometimes this is charged when a lender assesses the value of the property to make sure it’s worth the amount they’re going to lend out. If a valuation fee is payable, this will be listed when you apply for your desired mortgage product.

Legal fees

Some legal fees may be payable to your conveyancer or solicitor, who will help you handle the purchase of your new home and take care of all of the legal stuff. Sometimes your lender may assist with legal costs – refer to the individual product details.

Stamp Duty

Stamp Duty Land Tax (or SDLT) is a tax paid on homes costing more than £125,000 in England and Northern Ireland. There are separate taxes similar to this operating in Wales and Scotland. First time buyers don’t pay Stamp Duty on homes worth up to £300,000, but for second and subsequent purchases Stamp Duty will be payable.

Electronic payment or CHAPS fee

This fee is charged for the transfer of the lender’s funds to your solicitor – it is generally about £25-£50 depending on your lender.

Other costs to bear in mind

The actual process of moving can incur some additional costs outside of the formal processes – for example, hiring a removal company or a van to transport some of your larger goods to your new home. You may also need to consider the cost of storage facilities for bigger moves.

If you’ve purchased a flat or leasehold property, you may also need to pay ground rent or a service charge – this could be up to £100 per year on average. You should also account for the cost of carrying out immediate repairs and/or renovations to the property once you’ve moved in.

Where to go next

If you’re thinking about buying your first home or unsure where to go next, give us a call on 0330 123 0773 and speak to one of our Mortgage Consultants for free, impartial advice.


Sources

https://www.which.co.uk/money/mortgages-and-property/mortgages/mortgages-and-deposits-the-basics/how-much-deposit-do-you-need-for-a-mortgage-acs1c3t6f9r0

https://www.moneyadviceservice.org.uk/en/articles/estimate-your-overall-buying-and-moving-costs

This article was published under our previous name of Ipswich Building Society. We changed our name in 2021 – find out more.

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