Buyers are often shocked to discover the additional costs associated with purchasing a property particularly if they are experiencing the process for the first time. Setting aside a realistic budget for the total costs of buying a property is a critical first step to ensure that there are adequate funds available for the both the house purchase and the associated costs that you may not have budgeted for. Here are 4 costs that many First Time Buyers in St Helens forget about when buying their first home.
When buying a property, a solicitor (or licensed conveyancer) conducts conveyancing on your behalf; the process to legally transfer property ownership from seller to buyer. The solicitor is responsible for conducting local searches (e.g. environmental, land registry, bankruptcy); following up on any legal points raised in the property survey; acting on the mortgage lender's behalf and drawing up a contract detailing what is included in the property and set out the completion date.
Conveyancing costs can vary from £700 to £1,000 depending on the amount of work and the solicitor you choose. Of a £700 fee, approximately £300 relates to Purchase Disbursements which are the costs related to the solicitor conducting enquiries with the land registry etc. The remainder is the solicitor’s fee.
Stamp duty is a tax that is payable for anyone buying a property over £125,000 if no other properties are owned. Tax is calculated on the part of the property that falls within a band for example, the Cost of Stamp Duty on a £130,000 property would be £100 (the property falls within the £125,001 to £250,000 band which means that 2% is payable on the £9,999 portion above £125,001). There are 5 stamp duty bands which, as of April 2016, are as follows:
£0,00 - £125,000 = 0%
£125,001 - £250,000 = 2%
£250,001 - £925,000 = 5%
£925,001 - £1,500,000 = 10%
Over £1.5million = 12%
An additional surcharge of 3% is applied to all bands if you will have more than one property at the same time after the completion of the one in question.
A purchaser needs to know if the prospective property is sound and that the purchase price is a reasonable proposition. There are several different types of survey to consider. A Standard Mortgage Valuation Survey (SMV) will be requested by your mortgage lender before funds are granted and the fee for this is generally included in the price of your mortgage application but some lenders do differ. An SMV survey will tell you the buyer very little about the condition of the property and is more concerned with the past, current and future potential value of the property to enable the mortgage company to secure your finance against the property.
Some mortgage lenders give you the option to upgrade the report to a Home Buyer Survey. The Home Buyer Survey will offer a valuation in addition to a general comment on the condition of the property, highlighting any major issues that should be considered before completing your purchase. This report may give you cause to ask for a quote from a tradesman for any repairs that will be necessary. If there are any structural issues that had not been anticipated when agreeing the price, it is at this stage that you can revert to the vendor to perhaps renegotiate the price you’ll pay.
A Full Buildings Survey report will comprehensively highlight are any structural or cosmetic remedial works or repairs that will need to be considered in addition to any non-urgent issues that will eventually require attention. It will also highlight any legal enquiries that need to be followed through as part of the solicitors due diligence such as boundary clarifications, building regulations documentation for an extension etc.
The costs of a many types of survey can vary from free (included with mortgage arrangement fee in some cases) to between £265 to £475 plus VAT (1). To arrange a survey, search the register of the Royal Institute of Chartered Surveyors to ensure you find a fully qualified and accredited company.
Mortgage Arrangement Fees
Arrangement fees are charged to cover administration and reservation of funds for a mortgage. These could be charged in addition to a brokerage fee although there is an endless combination of the ways in which mortgage lenders compensate their affiliated brokers. Brokers tend to have the means to access better mortgage deals which could potentially include discounts on arrangement fees or favourable terms. It is always advisable to shop around for the right lender and/ or broker but be aware there will always be a fee either for arranging the lending, negotiating the deal on your behalf or both.
Typical costs range from around £1,000 to £1,500(2).
Example Property Purchase Costs(3) – all prices are approximations and do not constitute a quotation
Based upon a £130,000 purchase price:
£19,500 Deposit (15%)
£860 Legal Fees
£100 Stamp Duty
£350 Survey Fees
£1,250 Mortgage Arrangement Fees
£ 22,060 Total cash required
The above example is also exclusive of any additional costs associated with repairs, maintenance or additional checks and searches that need to be conducted on your chosen property (if applicable at all).
(1) reallymoving.com provides an easy to use tool to find and compare costs for solicitors, surveyors and removals
(3) fees shown area based upon average costs and do by no means constitute an indicative cost or quotation. All cases are different and are dependent on many factors
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