Costs to budget for when buying a property

Making sure you can afford your mortgage is one thing. But have you considered other costs involved when buying a property?

Your mortgage is the most obvious expenditure, however, if you forget to budget for other expenses it could cost you in the long run.

As well as upfront costs that can hit your pocket, there is always ongoing expenditure that needs to be included in your budget.

Forget any of them, and you may find your new property is stretching the purse strings further than you expected.

To help, the team at Jill Moore Select Properties has put together a list to help you work out your budget.

Upfront costs

Long before your first mortgage payment, you’ll need to budget for funds to leave your bank account. These include:

• Deposit. This doesn’t need paying as soon as you make an offer but you need to be aware from day one so it’s in your budget! You should allow between 5% and 10% of the property purchase price.
• Valuation fee. Mortgage lenders will assess the value of the property to work out what they are prepared to lend. Budget for around £150 but it can cost up to ten times more.
• Stamp duty. If you are buying a property in Washington or anywhere else in the North East and it’s more than £125,000 you need to pay stamp duty. The amount depends on your property’s value. To find out what that is, you can use the government’s stamp duty calculator.
• Legal fees. When buying a property it’s best to use a solicitor or licensed conveyancer. The legal work should only be carried out by someone who is qualified. You need to allow around £2,000. The cost of searches should be around £200 to £300 although they are usually part of the legal fees. Make sure you find out so you don’t get a surprise bill.
• Surveyor’s fees. It’s worth getting a survey carried out. A qualified surveyor will highlight any potential issues that will help you negotiate your price. Some surveys uncover major problems so a survey could help prevent you making a big mistake!

There are three levels of surveys:

1. A Condition Report. This is a basic survey. Budget for £400-£950
2. A HomeBuyer Report. These are suitable reports for properties less than 50 years old. Budget for around the same amount as a Condition Report.
3. A Building Survey. This is a comprehensive survey that includes an in-depth inspection. It’s useful for older homes, so budget for between £600-£1,500.

• Mortgage fees. Your mortgage lender will charge a fee for arranging your mortgage. Some banks charge a ‘booking’ fee which you pay as soon as you agree to take out the loan. Arrangement fees are around £1,000-£2,000. Mortgage brokers – who access deals not available on the high street – may charge a one-off fee meaning you don’t have to pay for future arrangements. Others may roll their fee into the mortgage cost. Make sure you know before you instruct.
• Removal costs. Unless you own a fleet of vans or trucks, you’re probably going to need help moving. Budget for a removal company’s costs as they may need paying upfront. The fees depend on distance and the amount of goods that need moving. Weekends tend to cost more as it is their busiest time.

Mortgage costs

We’ve mentioned mortgage fees, but one area to remember before you take the keys of your property is the cost of insurance. Mortgage lenders will insist on you taking out buildings insurance before they hand over the cash to your seller’s solicitor. The cost depends on various factors but you must remember to budget for the cost before you move in.

Ongoing costs

While the end goal is moving day, consider the ongoing costs in your budget before you start looking for your new home.

• Insurance. While building insurance is necessary before you move in, you should ensure you have contents insurance. This protects you should anything untoward happens to your belongings. Also, look at life insurance cover that will pay the mortgage if you die before the loan ends.
• Council tax. Each property pays council tax. The amount depends on the band it’s in, which is determined by its valuation. If you’re moving from one area to another, the cost of the band can vary dramatically, so do your homework.
• Utilities. Over the past year or so, utility bills have risen rapidly. Ask your vendor for a ballpark figure of what they’re paying for electric, gas and water, which may or may not be metered. Also, find out what broadband is available in the area. You might be getting a good deal but if your provider isn’t in the area you’re planning to move to, another provider might cost you more.
• Maintenance. A property might be perfect when you move in, but wear and tear takes its toll. So, make sure you have savings for any unexpected events, such as plumbing issues or heating problems.  

For help when buying a property, contact our team today.