When planning to buy a property, first time buyers tend to focus on the deposit saving process. After all, with the average price of a starter home now standing at £215,000, the majority of first-time buyers now need to save more than £20,000 to put down a 10% deposit.
This means some prospective home buyers are overlooking other property purchasing costs, such as mortgage arrangement fees and conveyancing expenses.
Here, we run through some of the key costs to take into consideration when saving for a property.
Mortgage account fees
This may include a booking fee of between £99 and £250, an arrangement fee of up to £2000 and a mortgage valuation fee, which usually costs upwards of £150.
Most lenders give you the option of either paying these costs upfront or adding them to your mortgage. It’s usually best to pay them upfront, as the alternative will see you paying interest on them for the duration of your mortgage.
Conveyancing costs
When purchasing a property, a solicitor or conveyancer will be required to carry out all the legal work. Legal fees are typically between £500 and £1500.
Your solicitor or conveyancer can also carry out local searches to reveal whether there are any local plans or issues that could arise in future and impact the property’s value.
Surveys
It’s widely recommended that first-time buyers seek the help of a qualified property surveyor. This RICS-qualified professional will visit the property, assess its quality and notify you if any work needs to be carried out.
If you find your dream home only to discover there are underlying issues in the structure of the property, you may choose to offer the seller a lower price so you can pay for improvement works to be carried out. However, this isn’t always a cost-effective solution and if significant work needs to be done, it may be best to walk away and find a new home.
Surveys can vary in cost from just few hundred pounds into the thousands. The price will all depend on how in-depth the survey is.
Valuation fees
Your mortgage lender will assess the value of the property to establish how much it will lend you. The cost of this assessment can vary between £150 and £1500 depending on the property’s value, but not all lenders will charge buyers for this service. Although it will assess the property’s value, a valuation is not a substitute for a survey because it will not identify all the repairs or maintenance that is required.
Mortgage broker fees
Not all home buyers choose to seek the help of a mortgage broker, but they can come in handy if you’re a first-time buyer and need help understanding the wide range of mortgage options available.
An experienced broker will know the mortgage market inside-out and as a result, will be able to find you the best deal and point you in the direction of the lenders that are most likely to offer you a mortgage. This can be particularly beneficial if you have a less than perfect credit rating, a modest salary or you think you may struggle to secure a mortgage for another reason.
If you do choose to use a mortgage broker, there are likely to be fees involved. However, providing your broker finds you a great deal, this should be a cost-effective arrangement.
Stamp duty
Stamp duty is a tax that must be paid on residential properties valued at more than £125,000 in England, Wales and Northern Ireland. The amount charged is tiered and will depend on the property’s value.
Paul Longmire is Marketing Manager at Gorvins, a conveyancing solicitors in Manchester.
