What are the Costs of Moving for a First Time Buyer?
When buying a property, as well as your deposit there are costs you will need to take into account and budget for. It’s a really important part of the buying process – you don’t want to find yourself caught short on moving day!
Below is a list of all the fees you can usually expect to pay when buying, and when you’ll likely need to pay them.
You may need to pay your mortgage adviser (often called a mortgage broker) a fee for acting as an intermediary between you and the lender. This fee is typically between £299 & £999, but some brokers may charge more depending on your circumstances, and some brokers don’t charge at all. Whatever the charging position, this should be explained to you as early as possible in the process, including when their fee is payable and their refund policy. This disclosure should take place before you make any commitment to use the broker’s services. If a broker doesn’t charge, make sure you check whether they’re truly independent and ask to see their reviews.
Solicitor Fees & Searches
You will require a solicitor to take care of all the legal work that comes with buying a home. This includes dealing with transferring ownership between parties, checking for any hidden problems that could affect you immediately or in the future, checking that your paperwork is correct, and registering the property in your name with the Land Registry.
Typical costs range between £500 for an online firm to £1,500 or more and you should use your judgement, recommendations and reviews to work out whether you’re happy to instruct a firm. Remember price is what you pay – value is what you get. The majority of the legal bill is collected at the end (on completion) but usually a few hundred will be required at the outset, to cover disbursements such as searches, which are reports your solicitor will request for you, relating to the local environment in which the property is located.
Lender Arrangement or Product Fee
This is charged by your lender primarily for their administration costs. These fees are now an integral part of a mortgage and often directly affect the interest rate offered. You can either pay the fee up front or add it onto the cost of your mortgage. If you add the arrangement fee on top of your mortgage you will save money up front, but pay more in the long run as it becomes part of the amount you borrow and attracts interest. The typicall mortgage arrangement fee charged by lenders is £999, but products with higher and lower fees are usually offered and which one offers the best value for you will take some calculation, which a good mortgage adviser will help you with.
Some lenders that may charge you a booking fee/admin fee to secure you a rate, this fee can range between £100-£250 and is paid upfront to the lender. This trend is dying out though and most lenders now don’t charge any fees up-front.
Charged by your lender, the valuation fee covers the cost of determining your property’s value. This confirms they are happy to lend on the property and happy with the purchase price. Generally speaking, a basic valuation is free of charge with the majority of lenders. However some still charge and the typical cost if there is a fee can vary significantly around £100-£1,000 or even higher for higher value properties. These days lenders won’t always send a surveyor out to value the property, sometimes they will carry out a valuation remotely using available information and sometimes an AVM (Automated Valuation Model) will be used, which is just a computer algorythm factoring in house price data to give a pass or fail result. As such, you can’t rely on a mortgage lender’s valuation to give you any steer on the condition of the property. Instead you should consider instructing a….
You are not required to pay for a detailed survey but it is certainly recommended. A homebuyer’s (or level 2) survey is the most popular when buying your first home and this would give you a thorough report on the property and confirm whether there are any issues that need to be dealt with, such as structural problems, damp, or plumbing issues. If there are any problems, this survey may be used to renegotiate a lower purchase price. The cost for a survey will be dependent on the valuation of the property and can range from anything between £500-£1,000 or more for larger properties. This survey can sometimes be carried out through a lender but it’s recommended to arrange your own survey independent from the mortgage lender. For older or more complex properties you might also want to consider a Level 3 survey, also referred to as a Building Survey or Full Structural Survey.
Stamp Duty and Land Tax
Stamp Duty Land Tax (SDLT) is a tax levied on the purchase of property in England and Northern Ireland. Other similar taxes apply in Wales and Scotland.
SDLT is charged at different rates depending on the purchase price of a property. There are a number of stamp duty tax bands with rates rising from lower to higher bands.
On 23rd September 2022 the initial zero rate stamp duty threshold was increased from £125,000 to £250,000 and first time buyer relief is available for property purchases below specific thresholds. First time buyers will not pay any stamp duty on property purchases below £425,000 with further relief available for transactions up to £625,000.
To calculate exactly how much stamp duty you might have to pay you can use this simple calculator (which is on a third party site whose content we are note responsible for).
Moving can be expensive – the cost of a removal company could be between £100 for a ‘man with a van’ rising to £1000s depending on the amount of stuff you need to be transported and whether you want to pack or pay someone else to! You could save yourself some money if you have some loyal friends and family members that can help you out.
Well, at Mortgage Medics we offer a free Costs of Moving service as part of our first meeting with you, so if this has got you thinking, we’d be delighted to help. Get in touch and we’ll be help you understand what’s possible, or sign up to our monthly newsletter, to keep your finger on the pulse.
Undray Griffith – 30th May 2023