Estimate your overall cost of buying a house and moving in England.
Other than a deposit and mortgage, you also need to consider Stamp Duty, legal fees, moving costs and a budget for initial fixes.
This article covers buying your main home in England only.
As previously covered in our article about mortgage interest, we’ve established that a bigger deposit, shorter-term and monthly overpayments can save you serious money in the long-term. However, there’s more to moving house that just the mortgage and the rest of the costs will take serious saving to cover. Buying a house in England is expensive and there are a lot of upfront costs that need to be paid all at once.
Your mortgage deposit and fees
A house deposit (or mortgage down-payment) is a percentage of the house value that is paid to the mortgage company upon purchase (completion). Essentially, this is a mechanism for reducing the risk of lending; so if the mortgage isn’t paid, the mortgage company can repossess the house and sell it quickly (albeit this is an action of last resort), without losing money.
Typical mortgage deposits for first-time buyers are between 5% and 20%, depending on the type of mortgage you are applying for, if you are using a scheme like ‘Help to Buy’, and what the mortgage lender deems your risk-profile to be.
For a £200,000 house – a 5% deposit is £10,000 and a 20% deposit is £40,000.
For a £300,000 house – a 5% deposit is £15,000 and a 20% deposit is £60,000.
For a £400,000 house – a 5% deposit is £20,000 and a 20% deposit is £80,000.
For a £500,000 house – a 5% deposit is £25,000 and a 20% deposit is £100,000.
Also be sure to check for any mortgage arrangement, valuation and booking fees. These are usually payable on completion or added to the mortgage and could be several thousands of pounds in total. Your mortgage broker may also charge a fee for their services.
Legal fees
Once you’ve found a house to buy, you are going to need to hire a solicitor (or conveyancer) to do all the legal paperwork and ensure the property is legally transferred from the existing owner to you. Where you are taking out a mortgage, they will ensure the mortgage lender has a legal right to the property if the loan is not repaid.
As part of their research, your solicitor will undertake several local searches. These are investigations with the local authority, planning department, environmental agencies and the like to ensure that there are no surprises at completion.
These legal fees will typically cost between £1,000 and £2,000 and expect to pay up to a further £500 in search charges.
Surveys
Depending on the type of property you are buying, you may wish to instruct your own, independent surveyor to undertake a detailed inspection of the property. Your surveyor can inspect the condition of the structure, check the roof space, look for damp and a whole host of other issues you haven’t thought of. This is useful so there are no surprises and you may be able to renegotiate the purchase price if a major fault is found. Expect to pay between £500 and £1,000 for this service.
Stamp Duty
At the time of writing, the Government has introduced a zero per cent Stamp Duty rate on buying your home, up to a value of £500,000 until the end of March 2021. This is a huge saving versus previous years, where the tax-free amount was £125,000 (for repeat buyers) or £300,000 (for first-time buyers).
If the house you are buying costs more than £500,000, you will need to pay Stamp Duty (technically known as Stamp Duty Land Tax) in various tiered bands based on the current rates:
The first £500,000 is tax-free
The next £425,000 is taxed at 5%
The next £575,000 is taxed at £10%
Anything above £1.5 million is taxed at 12%
Therefore, if you buy your main home for £125,000, £275,000, £395,000 or £498,500 – you will not pay ANY Stamp Duty (up until 31 March 2021).
However, if the house are buying is £675,000, for example, you will pay £8,750 in Stamp Duty (5% of £175,000). Equally, if the house you are buying is worth £1.25m, you will pay £53,750 in Stamp Duty (5% of £425,000 is £21,250, plus 10% of £325,000 is £32,500).
As you can see, Stamp Duty can be a huge amount of money that needs to be paid to HMRC within 14 days of completion. Don’t let this one catch you out, particularly if the house you are buying costs more than £500k, or more than £125k after 1 April 2021.
Interestingly, Stamp Duty was originally introduced in 1694 as a tax on various paper products to help fund the war against France. After proving successful in raising revenue, it was added to further products in the 18th and 19th Centuries (including dice, gloves and newspapers), before finally being imposed on property transactions in 1793. The attempted imposition of Stamp Duty in the British Colonies in 1765 can also be partly attributed to the outbreak of the American War of Independence.
Moving fees
Enough history. We’ve got a house-load of stuff to move! Moving fees are another item that needs to be paid when buying a home. In the simplest form, you can load up your worldly goods in your car and move in. This is a great, free option if you hardly own anything. The next step up is asking a friend with a van (or renting one) to move your things. Again it’s nice and simple, but you may end up breaking a few items.
If you want to get the professionals in, expect to pay anywhere from about £500 for a local move of a two-bed house, to £1,500+ to move a 5 bedroom home 150 miles. Going further or having things like ride-on mowers and a piano to move? You could have to pay much more.
The initial fixes fund
One thing that is rarely spoken about is the myriad things you will have to fix when you first move in. It doesn’t matter if it’s brand new or a hundred years old, there will be lists of things to sort out.
Perhaps the boiler has broken down, maybe you need to get some blinds made for the bedroom, you’ll probably want to get your paintbrushes out and freshen up some of the rooms? The list is endless: hooks, clips, switches, locks, cleaning, appliances, shelves – there’s a reason that DIY shops do well in a property boom.
Depending on the types of home you are buying, you will probably want at least £1,000 to cover these little fixes and in a larger home, it could be as much as £10,000 (the broken electric gates won’t fix themselves, you know). If you budget for these things in advance, it shouldn’t affect your cash flow when you move in. Forewarned is forearmed.
Summary
Now you know all the different types of costs you face when moving home, all you need to do is add up the following things to find out what buying a house will cost (and how much you need to save in advance):
Mortgage deposit
Legal fees
Surveys
Stamp duty
Moving fees
Initial fixes
Buying a £300,000 home could look like this:
Mortgage deposit of 5%: £15,000
Legal fees: £1,500
Surveys: £500
Stamp duty: £0!
Moving fees: £1,000
Initial fixes: £1,500
TOTAL TO SAVE: £19,500
Buying a £1,250,000 home could look like this:
Mortgage deposit: Likely to come from rolling over existing equity
Legal fees: £2,500
Surveys: £2,000
Stamp duty: £53,750
Moving fees: £1,750
Initial fixes: £10,000
TOTAL TO SAVE: £70,000
What’s next?
If you need help calculating the potential cost of moving, you can talk through your options with one of our mortgage brokers right here in Tunbridge Wells.
This article offers information about mortgages and should not be taken as personal advice. Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.