Costs of Buying a House: Numbers You Need to Know

The price of the property you want to buy is just one part of the total cost. You'll also have to include a range of fees for services.

John Fitzsimons Published on 13 January 2021. Last updated on 20 January 2021.

There are all sorts of costs to take into account when buying a new home, beyond the price of the property itself. Here are just a few to consider.

The deposit

You can’t buy a property with a mortgage alone, you will also need to save some sort of house deposit. This will need to be at least 5% of the value of the property you’re buying, though if you are able to pay a larger deposit you will benefit from a wider range of mortgages to choose from, as well as lower interest rates.

The mortgage costs

Most mortgages come with a fee. This is sometimes called a product fee or an arrangement fee, and is a sum of money you have to pay to secure that specific product.

These fees can range in size, but tend to cost around £1,000 on average. You can pay it all in one go, or add it to your mortgage. If you go the latter route, bear in mind that as you’ll be charged interest on it along with the rest of your mortgage, it will end up costing you far more overall.

Some mortgages do not come with a fee, though the trade-off is that they may have slightly higher interest rates. This is why it’s important to compare the total cost of any loan you are considering, rather than just selecting the one with the lowest interest rate.

» MORE: What is a mortgage and how it works

Valuation fee

You will have to pay for the property to be valued on behalf of your mortgage lender. Once they have an idea of what it’s worth, they can work out what they are willing to lend you. Some lenders will cover the cost of this valuation for you.

Property survey

While not compulsory, it’s recommended that buyers have their own survey conducted on the property they are buying. This will identify any existing issues with the property, such as damp or potential structural problems. Fully establishing the condition of the property you are buying can help you avoid costly surprises once you have moved in.

Mortgage broker fee

Many homebuyers use a mortgage broker to arrange their home loan. In addition to pointing you towards products that best suit your needs, they will have access to some lenders and deals that you can’t get directly. They will complete the application for you, and if progress is slow they will be able to chivvy the lender along on your behalf too.

Some mortgage brokers charge an additional fee for their advice, while others do not and just earn a commission from lenders. Ensure any broker you use is regulated by the Financial Conduct Authority.

Stamp duty

Stamp duty is a tax paid by those purchasing a home, and it is determined by the price of the property transaction. It operates across a number of ‘bands’, with the tax you pay based on the portion of the purchase price that falls within that band.

The tax can add a substantial chunk to your home buying bill.

» MORE: What is stamp duty?

You will need to hire a conveyancer to handle the legal side of your property purchase. This includes tasks such as property searches to clarify the exact boundaries of the property and the drafting of the contracts.

You can expect to pay conveyancer fees between £850 and £1,500 for their work, as well as extra for searches, bank transfer and Land Registry fees. Fees will also be higher if you are buying a leasehold property, as more work is involved.

Removal costs

Some home buyers hire a professional firm to assist with house removals. They can help pack up belongings and cart them to the new property. Whether you need to do so really depends on how many possessions you need to move. It’s possible to simply hire a van and do it yourself.

Home insurance

If you are buying a property on a freehold basis, one of the terms of your contract with the mortgage lender will be the requirement that you take out buildings insurance. This policy protects the structure of the property, so covers you against things like subsidence, floods and fire.

There is also contents insurance, which will offer cover against anything happening to the possessions you keep within the property, for example in the event of a burglary.

Do I have to pay the estate agent?

No, the vendor has to pay the estate agent fee, which is typically a couple of percent of the property transaction price.

» MORE: What you should know about mortgage payments

Source: Getty Images

About the author:

John Fitzsimons has been writing about finance since 2007. He is the former editor of Mortgage Solutions and loveMONEY and his work has appeared in The Sunday Times, The Mirror, The Sun and Forbes. Read more

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