First Time Home Buyer Costs: The cost of buying your first home ...
First Time Home Buying Guide - Page 10 of 11:
OK! Cards on the table time! Buying your first home is not going to be an inexpensive task, and the worry is that amidst all the excitement of buying your home for the first time, there's so much to take in and consider, it's all too easy to overlook some of the costs and fees that are inevitably going to rear their ugly head! And unfortunately there's no getting away from it, buying your first house can be expensive.
So it really is very important that you are organised and well prepared from the outset of your excursion in to the world of property buying. So why not have a 'heads-up' on the potential costs and fees that you may encounter when purchasing your first home? We've set out most of the likely costs and fees that you'll come up against below, and we feel it's probably also a good idea to take a look at our 'Worried about Mortgage Fees?' page for more detailed information.
Costs and Fees usually associated with buying your first house...
- Solicitors' Costs:
For undertaking all their obligations in the purchase of your new home, including confirming that you have clear title, paying out and receiving funds, and ensuring all legal documents have been properly dealt with, your solicitor will charge in the region of £600 - £850, including VAT and disbursements. Leasehold properties would usually be more in view of the additional work involved.
- Deposit:
Although strictly not a cost, unless you are borrowing a mortgage of 100% (or more) of the property value, you will need to pay a deposit.
- Stamp Duty:
Stamp Duty Land Tax is payable on most properties that have a purchase price of £125,001 or more, and increases in bands as shown in the table below:
The current Stamp Duty Land Tax Rates on UK property
| Purchase Price: |
Stamp Duty payable: |
| Up to £125,000 |
NIL |
| £125,001 - £250,000 |
1% |
| £250,001 - £500,000 |
3% |
| £500,001 or more |
4% |
Why not try out our Stamp Duty Calculator and see how much Stamp Duty Land Tax you may have to pay.
- Land Registry Fees:
This fee is charged by HM Land Registry to register you as new owners of the property. The fee charged is based on the purchase price of the property, and will range from £40 for a property with a purchase price of £40,000 or less, to £800 on properties valued at £1 million or more!
- Local Authority Search Fees:
The cost of a local authority search is generally between £80 and £250, depending on the local authority, and they are necessary to ensure there are no impending plans or potential problems that may affect your property such as planning permission on neighbouring properties or plans for new roads in the locality.
- Other Fees and Disbursements:
Your solicitor is likely to have to undertake other searches for which he will incur a cost on your behalf. These fees may include:
- Lender's Arrangement Fee:
Also known as a Mortgage Arrangement Fee, these are often charged with preferentially-rated mortgage products, such as a Fixed Rate mortgage, or a Discount Rate mortgage product. They will usually vary in cost between £200 to £995, and can generally be added to the mortgage advance. Some mortgage lenders now give the customer the option of paying a higher arrangement fee in exchange for a lower interest rate. This can be an attractive proposition, especially where you may be borrowing a larger amount (see our mortgage product fee page).
- Valuation Fees:
There are three levels of valuation.
The cost of a property valuation can be between £175 and £1,000, or more, depending on the property value, and the type of valuation instructed. Please see our Glossary page relating to the different types of property valuations.
- The Higher Lending Charge (HLC):
The HLC, which was formerly known as the Mortgage Indemnity Guarantee premium, or MIG, is a means of protecting lenders against higher risk cases, especially where a high loan to property value is being arranged. The charge is usually expressed as a percentage of the amount over which the lender would normally lend, this usually being amounts over 75% - 90% of the property value.
- Mortgage Broker Fees:
As you are probably aware, Mortgage Intermediaries are highly regulated these days, and just like any other professional, they have practice costs to meet, in order that they can provide a first class specialist service for their customers. Regulated Mortgage Advisors too have to be appropriately qualified, and all Shire Direct's Mortgage Advisors hold a minimum of the Certificate in Mortgage Advice and Practice (CeMAP) and the Certificate in Regulated General Insurance (CeRGI), although the qualifications held by Shire Advisors and Managers alike are considerably more extensive.
These qualifications together with our policy of ongoing rigorous and continual training, are designed to ensure you receive top quality service and advice. Our mortgage broker fee is only payable on successful completion of your mortgage. No Broker fee is payable if we are unable to arrange a mortgage, or if your purchase does not proceed.
- And finally... The Contingency Fund:
When buying a home, it's a good idea to plan for things that don't quite turn out as you may have expected! We never know what emergency may beset us, or you may find that certain household items may need to be replaced, or get damaged or lost in transit. Ensure you provide a sensible contingency fund in case of the unexpected!
Plan your monthly budget!
It's a good idea to plan ahead and work out your monthly budget. The following items will help you to focus on costs you should take into account. Above all, your new project and the running of your home should be comfortably within your means.
- Monthly Mortgage Payments
You must always ensure that these are paid. To miss mortgage payments can have an effect on obtaining credit in the future, and if serious enough, you could lose your home.
- Insurances and the Cost of Protection:
Remember that your mortgage will in all probability be your largest debt, and importantly, it is a priority debt. It really is crucial then, that you protect yourself and your ability to service the mortgage in the event of your inability to work as a result of illness, or becoming unemployed, or in the event of an accident, disability, and even premature death. Please take a look at our page on Mortgage Protection Insurance which explains the importance of protecting you and your loved ones from the unforeseen - always expect the unexpected!
Of course a Shire Direct Mortgage Advisor will carefully assess your circumstances, needs and aspirations relating to your protection, and will provide a statement of their findings in the form of a statement of demands and needs, together with their personal recommendation.
A Shire Direct Advisor will usually consider the following protection areas:
- Home Insurances (Buildings and Contents Cover)
- Life Assurance
- Mortgage Payment Protection Insurance (MPPI)
- Critical Illness Cover (CIC)
- Accident, Sickness and Unemployment Cover (ASU)
Further Resources...
Why not take a look at our online Mortgage Calculators, and more specifically our Monthly Budget Calculator that can help calculate your available monthly funds.
Furthermore, remember our Mortgage Glossary contains over 200 detailed explanations, definitions and guides to mortgage and property related subject matters.
Hopefully we've given you some kind of idea of first time home buyer costs and fees that you may well be up against when buying your first house.
On the next and final page in our guide, let's take a look at how Shire Direct can help get you on the housing ladder!
How Shire Direct can help you get
on the housing ladder! NEXT ›
The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.
There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.
THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Adding existing debt to your mortgage will increase the repayment term and overall cost.
