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First Time Buyer Fees: A Finance Guide for Buying a Home

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Wondering about the cost of buying a house?

Fees are possibly the most daunting aspect of the process, especially if you are a first-time home buyer with little to no experience or knowledge of buying a house. 

From solicitors to deposits, there’s a lot to get your head around – and budget for.

To help you from start to finish, here’s a handy guide to first time buyer fees.

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First Time Buyer Costs Checklist

First things first, here’s a quick breakdown of some of the fees you should expect to pay when buying a house:

  1. First time buyer mortgage costs
  2. Stamp duty
  3. Conveyancing or solicitor fees
  4. Deposit
  5. Survey 
  6. Removal costs
  7. Insurance
  8. Council tax
  9. Maintenance costs
  10. Leasehold fees

Costs Involved in Buying a House: Mortgages

Before completion day, you’ll have to pay mortgage fees to your lender. This often consists of arrangement, booking and valuation fees. 

How Much Can you Afford to Borrow?

It’s not surprising that the biggest and most consistent cost of buying a house is the property purchase price. This is mainly covered by monthly mortgage payments over many years, so it’s essential to use a mortgage affordability calculator to help you estimate how much you can borrow.

How Much Could You Borrow?

This is a vital step in determining whether you can afford a mortgage. Remember, there aren’t just the upfront costs, but ongoing monthly payments.

Find the Right Mortgage For You

Carefully consider your options here, don’t simply go with the first offer you see. There are many different types of mortgages, each with their pros and cons and some lenders offer a specialist first-time buyer mortgage. 

Speak to an adviser to see what’s open to you. Tip: don’t just look at interest rates when choosing your lender. Low rates could be disguising very high fees. It’s important not to overlook this when comparing mortgage deals. It could dramatically impact how much you end up paying.

Get a mortgage quote to explore your options further. How much your monthly repayments will be depends entirely on your situation.

Mortgage Quotes

Monthly Repayments 

The amount you pay a month will depend on:

  • How much you’ve borrowed
  • Your interest rate
  • The duration of the loan term

Your lender will also look at your individual circumstances, such as salary.

The longer your loan term, the smaller your repayments will be each month. Of course, the more you borrow, the longer it will take to pay it back. You’ll also be paying interest on the debt for longer – so this is something to keep in mind. 

Interest Rates

The interest rate will play a huge role in how much you’ll have to pay back each month. There are a number of different options:

  • Fixed – rates can’t change for a set period, usually between 2 and 10 years
  • Variable – interest rates can go up and down month to month
  • Tracker – where the rate ‘tracks’ another, for example the base rate (with an added percentage on top)
  • Capped – the rate is variable but won’t rise above a certain level

Each has pros and cons, so speak to your mortgage adviser to find out the best option for you. It’s vital you understand how a mortgage works before going any further.

Cost Breakdown

Remember, it’s not just monthly repayments – but upfront costs as well. So, how much are you likely to have to pay in the beginning? 

Booking Fee

Also known as an application or reservation fee, paid to your lender once you’ve chosen your mortgage. Essentially, it pays for ‘booking’ the mortgage while your application is processed.

Prices can range from anywhere from £100-£200. 

Arrangement Fee

This is what you pay your lender to set up your mortgage. Prices vary lender to lender, but you’re looking roughly at £1,000-£2,000. Remember, to secure the best interest rates, you may want to pay more for arrangement upfront. 

This can sometimes be charged as a percentage of the loan, rather than a flat fee. However, it’s important to be aware you’ll be charged interest on this also. Particularly if taking out a big mortgage, this could make keeping up with monthly repayments harder.

On the other hand, if anything was to go wrong with buying the house, you’d likely lose the arrangement fee altogether. You need to carefully consider what’s right for you. 

Valuation Fee

This pays for your lender’s survey on the property you’re looking to buy. It can vary in price, but you’re looking at around £250. Some lenders will pay it for you, but don’t budget for that, most have to pay.

Note: this survey is about the security of the loan. It gives them an independent confirmation of the property’s value. It is not the same as a property survey, so won’t uncover any issues, such as structural damage or mould. 

First Time Buyer Stamp Duty

Stamp duty is a tax all home buyers must pay on properties over £125,000. It varies depending on the price of the property itself. However, if you’ve never owned a home before, it works a little differently.

First time buyer stamp duty was abolished for properties costing up to £300,000. This means you will pay nothing if your property is under £300,001. This could save you up to £5,000.

However, if you were to buy a property that’s £500,000, you would pay stamp duty on the remaining £200,000 – for example. 

The tax can be anywhere from 2-12% of the purchase price. 

Use a stamp duty calculator to get a better idea of what you’d be paying. 

Stamp Duty Calculator

Legal Costs of Buying a House

Solicitor fees are another expense you’ll have to factor into your budget. It’s essential to find a solicitor to help you from start to finish. The conveyancing process is highly complicated, concerned with everything from paperwork to the transferring of fees. 

The average cost of solicitor fees for first time buyers is between £800-£2,000, plus 20% VAT. They may also conduct local searches that could be up to £300. Plus, the transfer fee for the mortgage money from the lender to the solicitor will be around £50.

To ensure you secure a good deal, get a conveyancing quote to help you explore your options. 

How Much Do You Need for a House Deposit? 
Saving for a house deposit can be daunting, and involves making a few sacrifices here and there. Usually, you need between 5-20% of the purchase price of the property. 

It’s recommended to save as much as you can here, as it can help you secure a mortgage with more attractive monthly repayments.

Of course, that might sound easier said than done, so here are some top tips:

  • Leverage existing government schemes to help you buy
  • Downsize your current rental 
  • Move back in with friends or family 
  • Set a spending budget and try not to go over it
  • Make cost-saving swaps e.g. food items

Property Survey

First time home buyers often fall into the trap of being unprepared when buying. One common mistake is to skip the property survey. However, this is essential. 

While it’s another cost to add to the list, it could save you money in the long term by uncovering nasty hidden surprises that could be expensive to fix. 

There are many different types of property survey, the cheapest being the least in-depth. They tend to range from £250-£1,500. Particularly for very old properties, it’s recommended to get a full structural survey. 

If you’re buying a new build like many other first time buyers, don’t assume that means you’re safe. You should still put together a new build snagging list. ‘New’ doesn’t mean ‘perfect’!

Moving Costs for First Time Buyers

An easily forgotten cost in buying a house is removal costs. These can be up to £1,000, but you’re most likely looking at around £600. 

Some home buyers choose to simply hire a van and do the move themselves to save money. However, this isn’t recommended. For your possessions to be covered, most insurance companies require you to use a professional removals service. Therefore, if something was to get damaged during the move, that would be another cost you’d have to cover yourself.

So, it’s best not to risk it, get a removals quote to ensure you’re protected. 

You can choose different packages, for example professional packing to be included or not included. Carefully consider the size of your home, and the amount of valuables you have, to help you make the right decision. 

Insurance Expenses When Buying a House

Struggling to get your head around first time buyer insurance? Let’s take a closer look.

You’ll be required by your mortgage lender to take out buildings insurance. The cost of this will depend on your individual situation, e.g. where you live and the property itself.

It’s important to take this out from the moment you exchange contracts. You’ll be legally responsible for the property at this point, even if not living in it. Get a home insurance quote to find out how much you’ll be paying.

Other Types of Insurance 

Of course, building insurance isn’t the only type of insurance you can take out to protect yourself.

Home buyers’ protection insurance can cover you should the house sale fall through for any reason, such as the seller changing their mind. It’s there to protect buyers from losing the full amount of costs already paid, e.g. survey fees. It can cost anywhere between £250-£1000. 

Mortgage protection insurance is another extra safeguarding measure, covering the cost of your mortgage per month should you lose your job. There is no one-size-fits-all when it comes to price, this depends on your household and situation. 

Of course, these and contents insurance policies are other added costs that some home buyers look to avoid. However, they could end up saving you money in the long term.

All Costs to Consider When Buying a House – Ongoing 

Of course, there are a number of ongoing costs you need to factor in. 

Council Tax

The amount of council tax you’ll pay depends on where you live and how many people live with you. It’s charged per household not per person. 

Check your banding to see how much you’ll be charged. 

Maintenance Fees

Running a property can be costly! The different fees can add up, including:

  • Redecorating 
  • Electric bills 
  • Gas bills
  • Water bills
  • Broadband 
  • Damage/repairs 
  • Service charges e.g. maintenance for shared building 
  • Parking
  • Television and telephone charges

When looking to buy, it’s vital you factor all of these into your budget. Don’t assume upfront costs are the only ones you’ll have to contend with.

Leasehold Costs

Is your property freehold or leasehold? If it’s the latter, you’ll have to pay ground rent charges.

With leasehold properties, you do not own the land that the property sits on. The most common example is a flat. Therefore, you will be required to pay a certain amount to the freeholder (who does own the land) in order to keep your property. You will only own the property for a certain amount of time – hence the ‘lease’ part.

Before you buy, it’s always worth checking how long the lease has left on it. It can be harder to get a mortgage, or to eventually sell, properties with 50 years or less on the lease. 

Average Cost of Buying a House

The costs involved in buying a house depend on a range of factors, such as location and property size. 

It isn’t just the property price itself, but the extra costs involved, as mentioned above, that you need to factor into your budget.

As of May 2021, the average UK house price is £255,000. However, this will see significant rises in places like London. 

Fluctuations in the housing market will also cause prices to change. You should pay close attention to when you’re buying – and if it’s a good time.

How to Save Money

Here are some tips to help you save money on first time buyer costs.

Use Chain-Free Status

When buying a house for the first time, you should leverage this status, as you’ll be more attractive to sellers.

The reason? You’re chain free. Use this to your advantage when it comes to negotiating a house price

Some sellers have been known to accept lower offers from first time buyers as there’s more security of a sale.

Save, Save, Save...

The higher a deposit you manage to save, the lower your monthly repayments will likely be. So, the more you can save now, the better your position will be later. 

Compare Service Providers

Why pay more than you have to for your bills?

Gas and electricity quotes for first-time buyers can be compared online to help you find the best deal.

Switch energy supplier today to save yourself money each month and leave you with more cash in your pocket. 

Switch Energy Supplier

The same applies to your internet. Not only could you find a better connection, but you could also save money by switching broadband supplier. 

Consider Location Carefully

You’ll need to weigh up what’s most important to you. City living is significantly more expensive, but offers benefits such as good transport links. 

Before you move, do thorough research on an area to determine if it’s a good place to buy. This includes everything from crime rates to local schools. Remember, you can change many things about your home – but not its location! 

Get a property report to find out everything you need to know.

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Last Updated: August 12th, 2021