Understanding the costs of buying a house

The most important step to owning a home is understanding what you can afford to buy.  The actual cost of buying a house or a flat goes well beyond the asking price. You'll need to consider a range of additional expenses, from solicitor to removal fees. This article will help you create a realistic plan for saving and budgeting... after all, buying a home is one of the most important financial decisions you could make! 

How much do you need?

The average house price is 9 times the average salary in the UK. Saving all that money to buy a home outright would be a gargantuan challenge! So it makes sense to borrow the money from a regulated lender and pay it back later. When taking out a mortgage loan, all customers are expected to pay a sum upfront towards their home purchase. This is known as the deposit.

Generally, buyers will need between 5% and 20% of the property price.  The more money you can put towards your deposit, the less money you’ll need to borrow and the better rates you can unlock on your mortgage.

How much could you borrow?

In short, most buyers can get a mortgage for between 4 and 5 times their salary. This may change depending on a few factors such as your monthly outgoings, any outstanding debt and the number of dependents you have. You can use several online calculators to get an idea of your affordability.

Your affordability will always be assessed and confirmed by a mortgage broker. The role of the broker is to help you find the best deal based on your financial circumstances. They will take you through a “fact find”, where your financial circumstances are analysed before recommendations can be made. 

Although all mortgage brokers are regulated by the FCA (Financial Conduct Authority), there are three different categories of brokers.

Tied brokers

These are tied to a single lender and can only offer products from 1 lender (eg from a bank).

Multi-tied brokers

These are tied to a select few lenders and can offer products from their selection.

Whole of market brokers

These can offer all products available through mortgage brokers and have the greatest variety of products.

Most initial conversations with brokers are free of charge and non-committal until the application stage. Only whole of market brokers can offer you access to all mortgage products. 

What else adds to the cost of buying a house?

While saving for the deposit, you’ll need to think about saving a little bit extra for the fees that come with purchasing your first home. The true cost of buying a house will normally include.

Stamp duty

This is a government tax paid on any property valued over £150k. First time buyers do not pay stamp duty on properties worth up to £300k. The amount payable depends on the property value - use this online calculator to find out how much you would pay. 

Broker fees

Usually around £500 and often only paid upon loan application, once you’ve had a property offer accepted. As some brokers charge a consultation fee, we suggest you confirm if this is the case during your initial call with the broker.

Legal fees

All the legal work must be carried out by a solicitor or conveyancer and this can cost anything between £950 and £1800. You may also choose to have additional checks carried out, and these typically would cost around £300. 

Buildings insurance

Most lenders will require you to buy buildings insurance as part of your mortgage agreement and this needs to be organised before you move in. A normal cost might be between £150 and £200, however this will vary depending on the property.

Removal costs

This usually ranges between £300 to £600 and will depend on the vehicle needed as well as the amount of belongings. If you need to keep your belongings in a storage facility while moving, you’ll need to budget for this too. You can find lock up garages for roughly £20 - £50 per week.

Proportunity Tip

For a first time buyer purchasing a property of £300k and above, the additional costs could range from £5,000 up to £25,000. It’s worth doing some planning and research on these costs before you start your property search and remember - better to have saved too much than too little!

Further reading

Home buying timeline from start to finish
Tips on saving for a mortgage deposit
Loan-to-value (LTV) explained

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SSM One Limited (trading as Proportunity Loans) is an intermediary only lender authorised and regulated by the Financial Conduct Authority (with firm reference number 716565). SSM One Limited is registered in the UK at Companies House with reference number 09273700, with its registered office at GG 405, Metal Box Factory, 30 Great Guildford St, London SE1 0HS, United Kingdom.
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