It can be really daunting to buy a property in London due to the multitude of financial elements involved. You need to be aware of all the expenditure you need to incur when you buy a property in London so that you can be prepared for it.
Many make the mistake of just considering the cost of buying the house and ignore the other costs, thinking it’s negligible. However, when you total up all the additional costs that you have to spend apart from the buying cost, it would come up to a considerable amount and mess up your financial planning.
So, you need to be aware of all the places where you need to spend money and straighten your finances out to include these costs. Here are some of the vital expenses in addition to the cost of buying a property.
9 Expenses Involved in Buying a Property in London
1. Brokerage Fees
Most people in London take the help of a solicitor to find a new property to buy. In such cases, you need to pay the brokerage fees in exchange for searching and closing the deal on a property you liked. This brokerage fees will be discussed at the beginning. It will mostly be a small percentage of the total value of the property or a fixed brokerage fee.
2. Mortgage Fees
The mortgage fee is an arrangement fee or a booking fee that you have to pay towards the new property. This could include the cost of mortgage valuation, booking fee and arrangement fee. You can either pay it upfront or add it to the total cost of the mortgage.
3. Stamp Duty Fee
This is an on-time fee to be paid as a tax to the government for all properties above £125,000. If you are a first-time buyer, you don’t need to pay the stamp duty fee for properties below £300,000. Even if the property value is more than that, first-time buyers only need to pay for that amount that exceeds £300,000.
For property value between £125,000 and £250,000, the stamp duty fee is 2% of the purchase price. For rates between £250,000 and £925,000, it is 5% of the purchase and increases to 10% and 12% beyond that.
4. Valuation Fees
The valuation fee is paid to the mortgage lender for assessing the property that you are going to buy. They will hire an expert to check the cost of the property is worth it and verify if you can be given mortgage based on the property. This could be around £300 or so. Some mortgage lenders do not charge this fee.
5. Surveyor Fees
This is vital to ensure that the property is in good condition in all respects. While the valuation fee is for checking the worth of the property, the surveyor fee is for ensuring that the condition of the property is up to the mark.
Hire a good surveyor to check the entire property from top to bottom, checking the condition, its reliability and the state of the property and give you an honest report. There are two types of surveying methods.
One is the home buyer report which considers an overall condition of the property and it costs around £300 to £1000. The other kind is the building survey which gives an in-depth idea into the various elements that make up the property. This costs more than the homebuyer report.
6. Legal Fees
When you want to buy a property, you need legal help to ensure that everything happens smoothly. You will need a solicitor or any other legal person to carry out these proceedings.
The method in which they charge the legal fees varies all around London based on the individual or the firm. Some have a fixed legal fee depending on the amount of work involved while some others charge per hour. There is also another type of payment wherein you will only pay when the deal comes through. Else, you don’t have to pay them any legal fees.
Based on the amount of work involved and the expertise, the legal fee can be anywhere between £900 to £1500.
7. Searches Fees
This is different from the surveyor fee in the sense that, this report will be going to you as well as your mortgage lender. The solicitor will do a local search of details around the property including the environment, any future plans, the liability, the primary connections for water and drainage and other factors that make up the place usable. This fee will be around £300 and the mortgage lender will have a look at it and decide the loan amount.
8. Land Registry Fee
In England, the Land Registry keeps an account of all the properties with the name of the property owners. So when you are buying a new property, make sure to change the name of the owner with supported proof in the Land Registry. This cost varies based on the value of the property and is usually around £100.
9. Removal Fees
After buying the property, you will have to relocate to the new place or move some stuff there. So, you will also need to factor in the cost of removals in London. This relocation fee can vary depending on the distance of the move, the volume of stuff you want to relocate and the removal company you choose.
If you are moving inside the same locality, your relocation cost can be as low as £100 while for long-distance relocation, it can go up to £1000 or even more for an international move.
Therefore, when you are considering buying a property in London, make sure to include these costs when you are planning out your finances. It’s often best to have some extra money kept aside for such additional costs to ensure that you don’t find yourself shorthanded.