After years of having a turbulent relationship with money, accruing lots of debt and subsequently paying it off, I finally now find myself in a position to buy my first home. The work that goes into getting yourself ready to jump onto the property ladder is not to be underestimated. Home ownership is a goal for many people of my generation - millennials - but one that seems less and less achievable as house prices continue to climb. Having been able to quickly save a deposit thanks to a brilliant quarter in my business as a financial influencer and author, and having worked on my credit report Link opens in a new window and spending habits Link opens in a new window over a longer period of time, I was excited about searching for a house. We quickly found our ideal new-build development, reserving a plot off-plan (i.e. a house that hasn’t been built yet) and excitedly waiting for it to be released. Then came all of the surprises.
Our plot was due to be completed in March, but we quickly learned that we would need to exchange contracts - and hand over the 10% deposit - within six weeks of formalising our reservation. We would also need to pay 50% of any upgrades we wanted from the standard build upfront, as well as broker and solicitors’ fees. We were floored - this was so much more money, and so much sooner, than we were expecting. After a couple of sleepless weeks, we decided to pass on the house, and were thankfully able to move our reservation to a later plot in the build schedule, this time armed with all the information that we needed to make a proper plan. But I found myself wondering: why are all of the schedules and extra costs so shrouded in mystery? Here’s an outline of some of the costs outside of that huge deposit:
For such a significant cost (to some), it’s odd that we don’t tend to factor stamp duty into our house savings. First-time buyer discount is offered by the government and, in fact, first-time buyers do not have to pay stamp duty on properties up to £300,000 Link opens in a new window in England and Northern Ireland. If you’re purchasing a property at a higher price than this, you’ll need to factor this cost into your savings – remember, our Virgin Money Home Buying Coach Link opens in a new window can help guide you through the home-buying process with our checklists, digital coach and much more. If you’re moving into a new build, the developer may offer to pay all or part of your stamp duty for you, as an incentive - it’s always worth asking.
Stamp duty levels and discounts do vary across the UK, with the equivalent tax in Scotland (LBTT) and Wales (LTT) operating on different rates and bands - find out more at www.gov.uk/stamp-duty-land-tax Link opens in a new window.
I chose to use a broker as I have a more ‘complex’ financial set up, as I’m self-employed and have a turbulent credit history but many people choose to use a Broker for many reasons. This can come at a fee, and it could be argued that it’s worth fronting up the cash for a broker who could help you to get the best mortgage deal Link opens in a new window, as this can save you thousands in interest. A benchmark advisory fee is £500, although there are plenty of brokers who will advise you for free so it’s worth shopping around. Also, going direct to your bank is a great option, banking advisers will help you find the best deal they can and best of all, their advice is usually free!
If you’ve been browsing mortgages lately, you might have noticed a ‘product fee’ attached to some of them, and it’s important to be wise to this. Fees are usually in the region of £1,000 but can vary, and some mortgages will have a high fee with a low interest rate, so it’s worth doing the maths to find out exactly what will be best for you. It’s also worth noting most lenders will have no fee options so be sure to ask them first. There’s also the risk that, if you apply for a mortgage with a high fee and pay the fee upfront, you might lose the fee if your house purchase falls through. You might have the option to add your mortgage fee to your actual mortgage, but this will then accrue interest along with the rest of your loan.
When you take out a mortgage, your lender will want to know how much the property is actually worth, regardless of how much you’ve offered for it, before offering you a mortgage. Sometimes, they will charge you a valuation fee of around £250 to do this – however this varies per lender and is generally linked to the value of the property, so this is another thing to be aware of in advance, along with the product fee. However, some lenders might offer this for free. In Scotland the home report contains a valuation which some lenders may accept.
Slightly different from the valuation by your lender, a survey is a more thorough inspection of your prospective home, to make sure there aren’t any hidden problems with the property that could end up costing you a fortune further down the line, or worse. A good surveyor will check your home for structural issues, damp, plumbing and anything else that could affect the value or safety of the building. Surveys are not a legal requirement, but they’re highly advisable, and you can either arrange your own survey independently, or ask your lender if they can upgrade the valuation to include a survey.
Surveyor fees range from £400-£1,500 and will vary significantly depending on the location, size and type of property and depending on the level of survey you opt for. One of the best ways to find a good one is through personal recommendations - but you should also check that they are registered with the appropriate trade association, such as Rics Link opens in a new window. Which? has a brilliant explainer for surveys Link opens in a new window.
Also known as ‘conveyancing fees’ this is the cost of hiring a solicitor to handle the purchase of your home for you. When you approach a conveyancing solicitor, they should send you a full breakdown of the fees that will be payable, including things such as handling the transfer of funds, land registry fees and any developer fees to be paid on completion if you’re buying a new build property. These fees will usually be in the region of £500-£1,500.
Home and Life Insurance
Two completely different insurances. Home insurance consists of two parts and can be taken together or separately - building insurance and contents insurance. Buildings insurance is a condition of most mortgages (including Virgin Money) e.g. lenders will require it. Contents insurance isn’t compulsory but is advised if you want peace of mind with protection for your precious possessions.
Life insurance Link opens in a new window, unlike buildings insurance is not a requirement when taking out a mortgage. However, it’s important to consider how your loved ones will cope financially if the worst was to happen. You might also consider critical illness cover and, if one or both of you are self-employed, income protection.
And finally, the cost of actually getting your stuff from one home to another. Moving costs can vary wildly, and it really depends on how hands-on you want to be with the move. For a full packing and moving service, you can expect to pay anywhere up to £2,000, while a simple move will likely be in the region of £500-£1,000. Hiring a van and moving everything yourself is entirely possible, but make sure that you factor in the stress, physical exertion and time off work into the cost vs value equation here.
When we were first looking at buying our first home, absolutely none of these costs occurred to me, and they came as quite a rude awakening when they started revealing themselves. Hopefully this guide will help you to be prepared, and to ask the right questions throughout the process so that you can keep these additional costs to a minimum.
Make sure you check out the Virgin Money Home Buying Coach app which is our clever app that guides you through the journey of buying your first home.
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