The Must-Know Costs Of Buying Your First UK Home

Upfront costs for buying a house in the UK

1. Mortgage Deposit

You'll need to pay an upfront deposit before you can buy a house with a mortgage. This deposit typically ranges from 5% to 20% of the house's total cost. For example, if you're buying a £300,000 home, your deposit can be between £15,000 and £60,000. A larger deposit increases your chances of securing a mortgage with better deals and lower interests.

2. Mortgage Broker Fees

A mortgage broker helps you decide what mortgage will work for you and what lender to choose.

You don't have to hire a mortgage broker, but they are an added advantage since they have access to mortgage deals most individuals don't. Depending on the broker you work with, you may not have to pay, and the ones that request payment usually charge around £500 to £600.

3. Mortgage Fees

These are charges paid to the mortgage lender when setting up a mortgage. They are also known as Product fees. The amount varies and could be from £250 to £999. Some lenders usually offer refunds if the mortgage application doesn't go through.

You have two options for payment: paying upfront or adding the fees to your mortgage. While adding fees to your mortgage may seem convenient, you'll end up paying interest on them over the mortgage term. However, if your lender doesn't offer refunds for failed applications, you can add the fees to your mortgage and pay them off after approval.

4. Surveying Fees

Before purchasing a house, it's in your interest to check it out for any issues or problems that could cost you. You will need to do a complete survey of the property.

You could run a home condition survey, which costs around £250, or a full structural survey, which costs £600 or more.

Not sparing any cost for a good property survey will save you money and headaches when you finally buy your house in the UK.

5. Valuation Fee

This fee covers the cost of the lender assessing your home's value to decide how much they can lend you. It usually costs between £150 and £1,500, depending on your home's value and the type of mortgage you choose. Not all lenders charge for this, though. But remember, a valuation isn't as detailed as a survey. It won't flag repairs or future issues, so it's a good idea to get a survey just to be sure.

6. Stamp Duty

Stamp duty is the tax paid when purchasing a property in the UK. The amount of tax you pay depends on the cost of the house you want to buy. Usually, the stamp duty only applies to properties over £250,000, but if you are a first-time buyer, you will only pay tax on a property over £425,000. You can learn more about stamp duty here.

7. Solicitor Fees

You'll need to hire a solicitor or a conveyancer to handle the legal side of your house purchase. Hiring a qualified solicitor makes the purchasing process much easier. When buying a house, the solicitor costs are between £850 and £2000, including VAT at 20%. The fees also depend on the property's location, size, and value.

Extra costs for buying a house in the UK

1. Moving House Cost

Congratulations! It's time to move into your new home. You can rent a van and do it yourself or hire a removal firm. The cost to hire a removal firm ranges between £150 and £2,000+, depending on the size of the move.
A little tip: It's cheaper to move on a weekday.

2. Storage Cost

If you aren't moving in immediately, you need a place to store your things. Weigh your options based on price, security, budget, and how long you will use the storage space.

3. Mail Redirection Costs

When you move, the mail redirection services ensure you keep getting your mail in your new home. The costs for these services usually start from £33.99.

The cost of owning a home in the UK

1. Insurance

Lenders will require you to take out building insurance on the house to protect it against damage from floods, fires, and other unexpected occurrences. While you are at it, you should also get contents insurance for your possessions and life insurance to pay off your mortgage in case you die before you repay the full amount.

2. Maintenance and Repairs

These costs are acquired from the initial repairs and adjustments when you move in and routine maintenance to keep the house in good condition.

3. Council Tax

This is the annual fee you pay to your local council. The amount of tax you pay is based on where you live, and the money is used to maintain roads, rubbish collection, and other services provided by your local council.

4. Utility Bill

These are the money you spend on electricity, gas, and water. When shopping for a property, an energy performance certificate is available. This certificate helps you see how much energy the house uses and gives you an idea of how much your bills might be. A or B EPC ratings are perfect because they mean lower energy bills and smaller carbon footprints. Choose an energy company and payment plan that works for you. As for water, the bill depends on where you live, the availability of water in your area, and usage.

5. Parking Charges

These are payments made to allow you to park in resident-only parking bays around your home. If you don't have a garage, driveway, or free on-street parking, you will need to add this to your budget.

6. TV, Broadband, and Phone Bills

These bills take up a large part of your budget. To ensure you don't spend too much on them, take your time to consider the best deals.

7. Ground Rent and Service Charge

If you are a leaseholder, you may be required to pay the freeholder an annual ground rent and service charge. The ground rent is a fee paid to the freeholder in exchange for renting the house on the land. The service charge covers the management and maintenance of the property.

Things to consider before buying a house in the UK

1. Freehold or Leasehold

When purchasing a UK property, you can be either a freeholder or a leaseholder.

Freehold is when you purchase the house and the land. In that case, you are responsible for maintaining the property and the land. As a freeholder, you are your landlord; you don't have to pay ground rent or service charges and have no worries about the lease running out.

On the other hand, Leasehold means you own the property for the time stated on the lease and not the land. Once the lease term is up, ownership transfers back to the freeholder. If you are eligible, you are allowed to request a lease extension. As a leaseholder, you have to pay ground rent and service charges.

2. Review your credit score

Before lenders approve your mortgage application, they check your credit score, among other things, to ensure you can pay off the loan. It would help to have a good credit score before applying for a loan.

3. Work around what you can afford

Buying a house means a lot of spending in the short and long run. So before you apply for a mortgage, put in that deposit, and get that house, make sure you can afford and maintain it. Select mortgage plans you can pay off, buy a house that won't require a lot of repairs and maintenance, and try to live within your means.

4. Save up a higher deposit amount

The more money you have on your deposit, the better the mortgage deals. You can also save money in the future on lower interest rates on mortgage repayments.

Conclusion

Buying a house in the UK should take a lot of planning, research, and understanding of the housing market. Considering the current cost of buying a house in the UK, it is important that you budget and prepare yourself as a first-time homeowner for the upfront and extra expenses.

It's not a bad idea to consult a mortgage broker and seek the necessary help and advice from a professional before making any move.

However, when you are ready to make that move to owning your first home, you can easily and quickly make most of your payments through the the LemFi app.

You can download the LemFi app on the Apple App Store or Google Play Store.

Download the LemFi app.