Buying a house is one of the biggest purchases you will ever make. The amount you will pay for the house is just one of the many costs involved in the purchase.
Mortgages and deposits
Assuming this is your first house purchase and you are not a cash buyer; you will need a deposit and a mortgage. The ratio of the mortgage loan required to the purchase price of the house is called the loan-to-value (LTV) ratio. Generally, a minimum deposit of five per cent is required, which gives an LTV ratio of 95 per cent. Having a bigger deposit means a better mortgage deal would be available.
If this is not your first house, the sale of your existing property would normally be used as a deposit for your next purchase. Further information on buying a house with a mortgage can be obtained from a mortgage broker or bank.
Other costs and fees
Besides the cost of the mortgage and any associated arrangement and valuation fees, there are other costs involved with a house purchase.
The solicitors will charge for conveyancing, which includes the cost of searches, the land registry fees, and the cost of transferring the money received from the mortgage company to the seller’s solicitor. Fees can range from a few hundred pounds to a couple of thousand, depending on the work required.
Stamp duty is usually payable on house purchases, but first-time buyers do not pay stamp duty on the first £300,000 provided the house price is no more than £500,000; however, until 31 March 2021, all buyers will not pay any stamp duty on the first £500,000. After this time, the normal stamp duty rates of 2 per cent to 12 per cent will apply depending on the purchase price. It is best to get up-to-date information on buying a house before proceeding with a purchase.
It is best to get a surveyor to provide a report on the house so that any issues can be identified before completion, such as damp, structural problems or subsidence. Depending on the depth of the report needed, the cost can vary from a few hundred pounds to around £1,500.
There are a number of costs when undertaking a house purchase, and there are no easy or sensible ways to avoid such costs.