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74% underestimate full homebuying costs

From solicitors' bills to removal fees, 74% of homeowners underestimate the full cost of buying a home, finds new research. We look at the real cost.

Sold sign outside house

After years of stagnation, the property market is moving again, with house prices up 5.5% in 2013, according to the latest figures from the Office for National Statistics.

And the Council of Mortgage Lenders says that loan approvals reached a six-year high in the final months of last year.

But a study from the government-backed Money Advice Service (MAS) has found that many buyers feel they got in over their heads when buying a property and moving home.

Three-quarters of first-time buyers said they had stretched themselves financially to afford their home and a fifth admitted they should have bought somewhere cheaper.

Additional expenses ignored

A major problem the MAS found was that many people did not account for the associated costs of buying a property such as solicitors' fees, a survey and removal costs.

Caroline Rookes, chief executive of the MAS, says: "Being able to afford the mortgage doesn't mean you can necessarily afford the home and all the associated costs.

"I urge all home buyers, even those higher up the property ladder, to ensure they are not taking on too much if they've borrowed the maximum available."

So what extra charges will you face when you buy a home, and how much can you expect to pay?

Your mortgage

There are a number of potential charges that can be imposed by your mortgage lender once you've covered your deposit.

Mortgage deedIt will need to value the property, and this cost - roughly £250 - could be passed on to you.

"With some fixed-rate mortgages you may have to pay a non-refundable booking fee to book the fixed rate in readiness for completion," says Andrew Hagger from analyst Moneycomms. 

"The cost is usually £100 to £200."

Product fees can be much more expensive: in particular, mortgages with low interest rates may come with high fees, which can be between £1,000 and £2,000.

The good news is that you may be able to add these fees to your overall loan: this means slightly higher monthly repayments, but you won't have to find more cash up front.

Stamp duty

Buyers pay stamp duty at a rate of 1% on homes between £125,001 and £250,000, so a £150,000 flat would incur a £1,500 charge.

Between £250,001 and £500,000, the rate is 3%, so a £300,000 home will set you back £9,000.

The stamp duty bill is payable when you complete your purchase.

If you also have somewhere to sell, you can more or less double this figure.

He adds that some mortgages offer free legal costs.

"But you'll have to use a solicitor chosen by the lender: it may not be someone local and you'd have to do all the correspondence by phone or post.

Survey

A basic valuation is the cheapest option, and may come free with your mortgage, but it is unlikely to tell you whether the property has any faults to address.

"The next step up is a Homebuyer's Report where the surveyor takes a thorough look inside and outside the property - although they don't do any structural evaluation," Hagger says.

"A Homebuyer's Report normally costs around £450 to £600."

A full structural survey, at a typical cost of more than £700, is more appropriate if you're buying a very old or unusual property.

Removals

A parked white vanCosts here depend on how much furniture and appliances you have.

If you've been renting a furnished home or living with parents, you may be able to move in with a hired van and help from friends at a cost of little over £100.

A removal service could cost £500 or more, depending on the load and the distance involved.

You can use Confused.com's Moving Home service to compare both removal company and man with a van quotes for free.

Home insurance

You should arrange buildings insurance from the date you exchange contracts and not from the date of completion.

This way, if your property was damaged by a storm between exchange and completion, for example, you wouldn't have to rely on the seller claiming on their insurance to sort things.

Gareth Lane, head of home insurance at Confused.com says: "Buildings insurance costs between £150 and £200 on average for annual cover.

"But the final cost will depend on your house type, construction, the number of bedrooms and so on.

"Also, remember that you only need to cover the rebuild value of the property not the market value, which is higher."

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Chris Torney

Chris Torney

Chris is personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris



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