Ready to buy your dream home? Hold on tight because there’s a bit more to consider than just the cost of the property. Hidden costs, also known as the “gotcha” costs, are expenses not immediately obvious, especially for first-time buyers. We all know that buying a house can be a rollercoaster ride, and unforeseen expenses just add to the drama. There’s no need to let the hidden costs of buying a house catch you off guard.
What are hidden costs?
Hidden costs refer to expenses that aren’t immediately obvious or included in the initial price of a property. They can relate to additional fees or charges, such as paying for a surveyor or needing insurance you hadn’t previously considered.
What are the hidden costs of buying a house?
The hidden costs of buying a house aren’t so much there to catch you out; they’re more likely to be things you probably haven’t thought about and aren’t at the forefront of your mind when thinking about buying a home. Here are some potentially hidden costs worth considering that you may have to pay:
Before purchasing a property, it’s good to have it inspected by a professional. A homebuyer’s report is a basic survey assessing the condition of the house, while a complete structural survey is more detailed and covers everything from the condition of the roof to the foundations. The cost of surveys varies depending on the survey type and the property size. Expect to pay anywhere between £500 and £1,500 + VAT.
Most buyers know they need to use a solicitor or conveyancer, but it’s not always clear what those fees entail. Plus, what you need to pay can vary depending on the transaction’s complexity and the property’s location. The average cost for a solicitor is around £1,000 + VAT.
Mortgage application and lender’s arrangement fees
You may be charged an application fee and a lender’s arrangement fee when applying for a mortgage. These fees can vary depending on the lender and the type of mortgage you’re applying for.
Removals and storage costs
If you need to move all that fun stuff like furniture and the entire contents of your life, then you’ll have to factor in the cost of hiring a removal company or renting storage space. These costs can vary depending on the distance you’re moving and the number of belongings you have. But expect to pay a few hundred pounds.
Buildings insurance is typically required by mortgage lenders, as it covers the cost of rebuilding or repairing the property in the event of structural damage. Additionally, it’s good to have contents insurance to protect your personal belongings. So expect to pay a couple of hundred pounds for annual cover.
Repairs and renovations
If the property needs repairs or renovations, you’ll need to factor in the cost of those repairs. While it might be evident if a property needs work before you buy it, the extent of the work can still catch you out. The cost of repairs essentially depends on the scope of work and the materials used.
What are the upfront costs of buying a home?
Beyond the hidden costs, you’ll also need to consider the upfront fees associated with buying a home. It can be costly, and some fees need to be paid in advance before you can progress the sale. Some may also be what you consider ‘hidden fees’. These can include:
- Stamp Duty. A tax paid on the purchase price of a property. The amount varies depending on the price of the home, as well as the buyer’s circumstances. Use a stamp duty calculator to get a better idea of what you’d be paying.
- Deposit. A sum of money paid upfront to secure the purchase of the property. The deposit is typically between 5-20% of the purchase price but can be any amount over 5%.
- Valuation fee. The cost of having a professional assess the value of the property, which is usually paid for by the buyer.
- Surveyor’s fee. The cost of having a professional survey the property to assess its condition. The buyer usually pays for this.
- Legal fees. This is the cost of using a solicitor or conveyancer to handle the legal aspects of the purchase. These can vary widely.
- Electronic transfer fee. Transferring money electronically to complete the purchase.
- Estate agent’s fee. Generally speaking, buyers don’t pay an agent fee. But if you’re using a buying agent, you may need to pay them for their service.
- Mortgage fee. Cost of obtaining a mortgage if the buyer is not paying the full purchase price in cash. These fees can vary depending on the lender and the type of mortgage.
- VAT. Payable on all VAT-registered services
What costs the most in a house?
Apart from the actual price of the house, which will likely be one of the most expensive purchases you ever make, stamp duty is usually the most considerable outlay. If, however, you’re a first-time buyer purchasing a home worth up to £425,000, you won’t pay any stamp duty. That means the second-largest cost will probably be the legal fees for the conveyancing process. These can cost anywhere from £800 to £1,500.
Monthly costs of owning a home in the UK
If you thought buying a home was expensive, just wait until you’ve got the keys. That’s not to put you off, but knowing how much you might need to pay each month after moving into your new abode is handy. Some ongoing costs to consider include:
- Mortgage payment. Monthly payment to the lender covering the cost of the loan to buy the house, including interest.
- Council tax. Taxes that are assessed on the value of the property and are usually paid on a monthly or annual basis.
- Homeowners insurance. Insurance that covers the cost of damage or loss to the property and its contents.
- Utilities. Services such as electricity, gas, water and internet, which are necessary for the operation and maintenance of the home.
- Maintenance and repairs. Regular(ish) maintenance and repairs are necessary to keep the home in good condition, and these costs can add up over time.
It’s good to keep in mind that these costs can vary depending on the property’s location, size and condition. Budgeting for these costs and factoring them into your overall expenses when owning a home can come in handy and help you avoid getting caught off guard.
Not so hidden costs
When buying a house, there are a lot of costs to think about, and not all of them are immediately obvious. Hidden costs aren’t fun if you weren’t expecting them. They can add up quickly and be significant, so it’s important to budget as much as you can and factor the costs into your overall home-buying budget.
Before you take the plunge and buy that dream home, make sure to do your research and be prepared for all the costs, both hidden and upfront, to avoid any surprise expenses that might pop up along the way.
Get a property report to find out everything you need to know.
Last Updated: September 25th, 2023