If you think that mortgage repayments and the deposit are your total home buying costs – think again!
Other costs include legal fees, stamp duty, valuation/survey fees, insurance, furniture and moving costs. These can add thousands of pounds to your bill and need to be taken into account when totting up the total cost of buying a home.
Legal Fees
Legal fees include the cost of hiring a solicitor or licensed conveyancer to perform searches, deal with red tape, move funds around, and communicate with the vendor’s solicitor. Typically, legal fees cost anything between £500 and £1000 – best to shop around and obtain some quotes first. There’s more information on solicitors in Step 8.
Stamp Duty
Now don’t get mad at us, but a home buyer must pay Stamp Duty Land Tax (to give it its full name) for properties costing more than a certain value. Following the credit crunch-fuelled housing crash, the government temporarily raised the value at which stamp duty begins to help kick start the property market, but this welcome stimulus comes to an end on 31 December 2009.
The amount of stamp duty payable works on a sliding scale:
Stamp Duty Until 31/12/09
Stamp Duty until 31 December 2009
| Cost of your home | Rate |
|---|
| Up to £175,000 |
Zero |
| £175,001 - £250,000 |
1% |
| £250,001- £500,000 |
3% |
| £500,001 and up |
4% |
Stamp Duty From 01/01/10
Stamp Duty from 1 January 2010
| Cost of your home | Rate |
|---|
| £125,000 or less |
Zero |
| £125,001 - £250,000 |
1% |
| £250,001- £500,000 |
3% |
| £500,001 and up |
4% |
Look out for ‘Stamp Duty Paid’ offers
Before the credit crunch, some new build deals came with the stamp duty prepaid as an incentive to buy, but since the crunch, this practice has become much more common. In today’s depressed housing market, even some private sellers of older properties are offering to pay the stamp duty in an effort to shift their homes. Finding a seller offering to pay this tax instead of you can mean a huge chunkoff the total purchase price.
For example, from 01/01/10, a property costing £150,000 would mean £1,500 (i.e. 1%) knocked off the price. Not bad, but if a property costs, say, £260,000 – stamp duty is a hefty £7,800 (i.e. 3%) – that’s a hell of a saving if the seller is offering to pay. So keep an eye out for ‘stamp duty paid’ offers in press ads, online or in estate agent windows – it could mean thousands of pounds in savings.
Valuation/Survey
Before a bank or building society will part with any money, it will need to value your property. This is so the mortgage company can be sure that your home is worth what it is lending in the unlikely event that it will need to repossess. See Step 9 for more information.
Council Tax
This local tax pays for such things as policing and rubbish collection, and is divided into eight different bands – A (the cheapest) through to H (the most expensive). The cost of these bands may differ from county to county.
The bad news is that council tax has more than doubled since its introduction in 1997, and the average annual bill in 2009 hit £1,400. However, first-time buyers are likely to pay less as first properties are generally smaller than the average home, and therefore sit in a cheaper band. Click here for further info on council tax bands
Gas & Electricity
You pay for your gas and electricity according to usage. The good news is it’s a highly competitive market and you could make considerable savings by searching online to find cheap gas and electricity deals.
Transport
If you move further away from work, your transport costs will increase. Also, your new postcode could mean an increase in motor insurance costs, so make sure you search online for cheap car insurance.
Insurance
Here’s an overview of the different types of mortgage-related insurance available.
Home Insurance
There are two types of home insurance, buildings and contents.
Building insurance covers the structure, fixtures and fittings of your home, such as roof, walls, ceilings, floors, doors and windows, plus certain outdoor structures. Contents Insurance covers your possessions such as electrical goods, furniture, carpets etc. against loss, damage or theft. Check out the Confused.com Home Insurance Buyer’s Guide to find out more.
Life Insurance/Life Assurance
Sorry to get grim on our bright and happy web page, but many lenders require that you take out life insurance as a condition of the mortgage. Life insurance guarantees a lump sum payout in the event of the borrower’s death, and any debt outstanding on the mortgage is then repaid from this. For more information, read Confused.com’s Guide to Life Insurance.
Other Insurance products you may wish to consider are:
Crikey! Yet More Costs
Other costs to consider include home repairs, TV, broadband and phone, and service charges if your property is leasehold.
Right, now you have a rough idea of what you can afford, it’s time to decide on which type of mortgage to go for.
Next - Step 3: Types of Mortgage
Don’t know your assurance from your LTV? Check out our mortgage glossary.
