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For many, buying a house marks a significant life milestone, especially for those stepping onto the property ladder for the first time. However, the process of purchasing a home comes with various costs that can sometimes catch first-time buyers by surprise. This guide will walk you through the essential costs involved in buying a house and provide tips on how to protect yourself from the financial risks if a sale falls through.
1. Deposit
The most significant upfront cost when buying a house is your deposit. Typically, deposits range from 5% to 20% of the property’s value. For instance, if you're buying a property priced at £200,000, you'll need a deposit of between £10,000 and £40,000. Generally, the larger your deposit, the better mortgage deals you'll be eligible for.
2. Mortgage Costs
Once you’ve saved your deposit, you’ll likely need a mortgage to finance the remainder of the property’s value. Key costs related to mortgages include:
Mortgage Arrangement Fees: Most lenders charge an arrangement fee, which can range from £0 to £2,000, depending on the mortgage product.
Valuation Fees: Lenders will require a valuation to confirm the property's worth. These can cost between £150 and £1,500.
Mortgage Broker Fees: Many first-time buyers seek help from mortgage advisors or brokers to find the best mortgage deal. These services usually come with fees ranging from £300 to £500.
3. Stamp Duty Land Tax (SDLT)
In England and Northern Ireland, buyers are required to pay Stamp Duty Land Tax (SDLT) on properties over a certain threshold. For first-time buyers, some relief is available:
Properties up to £425,000: No Stamp Duty is payable.
Properties between £425,001 and £625,000: You pay 5% Stamp Duty on the portion above £425,000. For buyers in Scotland or Wales, equivalent taxes are known as Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT), respectively.
4. Conveyancing Fees
The legal process of transferring ownership when buying a house is called conveyancing. Conveyancing fees typically range from £800 to £1,500, covering the solicitor or conveyancer’s services, including legal checks, contracts, and managing the transfer of funds.
5. Survey Costs
When buying a house, it’s wise to get a property survey to assess the condition of the home. The type of survey you choose will determine the cost:
Homebuyers Report: Suitable for most modern homes, costing between £300 and £500.
Full Structural Survey: For older or more complex properties, costing between £600 and £1,500.
6. Searches and Disbursements
Before completing the purchase, your solicitor will conduct legal searches to uncover any potential issues, such as local planning restrictions or flood risks. These searches typically cost between £250 and £450.
7. Insurance Costs
When buying a house with a mortgage, lenders require buildings insurance as a condition of the loan. This ensures the structure of the property is protected. Additionally, many buyers opt for contents insurance to cover personal belongings.
8. Removal Costs
Moving into your new home will involve costs related to transporting your belongings. Depending on the distance and size of the move, hiring a removal service could cost between £300 and £1,500.
What Happens If a Sale Falls Through?
Unfortunately, not all property transactions proceed smoothly. If you’re a first-time buyer, it’s essential to understand the risks of a sale falling through. Common reasons include:
Gazumping: When a seller accepts a higher offer from another buyer.
Mortgage Issues: Changes in your financial circumstances or problems with the property valuation may cause your mortgage lender to withdraw their offer.
Survey Problems: Serious issues revealed by the survey, such as structural damage, may lead you to pull out.
Chain Breakdowns: If another sale in the chain collapses, it could delay or cancel your transaction.
When a sale falls through, you could lose the upfront costs you’ve already paid for, such as conveyancing, surveys, and mortgage fees. This can be a huge financial burden, especially for first-time buyers.
Protecting Yourself with Advanced Rents Abortive Transaction Insurance
To avoid significant financial loss in the event of a failed sale, first-time buyers should consider Advanced Rents abortive transaction insurance. This insurance covers key costs if your property purchase falls through, providing a financial safety net for the following:
Up to £1,500 for essential home-buying costs, such as:
Mortgage lender arrangement fees
Mortgage lender valuation fees
Conveyancing fees
Survey fees and searches
Disbursements
£300 to cover mortgage advisor or broker fees.
£500 for alternative accommodation costs if needed.
This insurance gives peace of mind, ensuring that you are financially protected even if the property transaction doesn’t go ahead.
Final Thoughts
For first-time buyers, understanding the full costs of buying a house is crucial to avoid surprises during the process. While purchasing a property involves significant investment, protecting yourself from the risks of a sale falling through can save you from financial stress. With Advanced Rents abortive transaction insurance, you can ensure that your outlay is covered, allowing you to focus on finding and buying your ideal home without fear of financial loss.
By being informed and prepared, first-time buyers can navigate the process of buying a house with confidence.