Little Known Costs of Buying Your First Home
Are you looking into buying your first home but want to know about the other costs that come on top of your deposit, and even once you’ve got the keys - and how much to save before you buy your first home? Don’t worry, we’ve got your back. It’s important that you take some time once you start saving for a property, to budget for extra fees, as you can’t use your Lifetime ISA to pay for them. You may want to know about aspects like stamp duty, removal costs, house search fees, and solicitor fees. You may choose to open an extra savings account alongside your Lifetime ISA (or Help to Buy ISA), to have peace of mind that your savings are all in order.
Fees before Moving into your Home
Saving for your first home is an exciting time, but unfortunately, it’s not as simple as saving towards the goal of your deposit, and some charges could catch you off guard if you haven’t put some savings aside first.
Stamp duty
Stamp Duty is a type of tax you may have to pay when you’re buying a residential property over a certain price.
If you buy a residential property that costs over £250,000 in Northern Ireland or England, you’ll have to pay stamp duty. If you’re a first time buyer however, you only have to pay Stamp Duty on properties costing £425,000 and above.
Stamp Duty only applies to the remaining value after these limits; for example, if you're a first time buyer purchasing a property at the Lifetime ISA maximum house price of £450,000, you'd only pay stamp duty on the remaining £25,000 - after you've exceeded the stamp duty limit. Stamp Duty is priced at 5% of the remaining value - so, for a first time buyer purchasing a £450,000 property, you'd need to set aside £1,250 for Stamp Duty.
Unfortunately, the special rate for stamp duty only applies if everyone buying the property is a first time buyer. If your partner or one of the people you’re buying with already owns a property, you’ll need to pay stamp duty on any property over £250,000 in value.
Whether you’re buying a home with a mortgage or paying outright, this applies to you. You can use a stamp duty calculator to calculate how much you’ll have to pay. The amount you pay is based on stamp duty bands. The price of your property falls into a certain band, showing how much you’ll pay.
Removal costs
Removal costs covers the fees you’d be likely to pay to hire a company to help you pack up and move your furniture and belongings into your new home. The amount you’d be likely to spend depends on prices in your area, and how many belongings you have. For example, if you are moving from your parents’ house into your first home, you may be getting the majority of your furniture brand new, and delivered straight to the property – but if you’ve already been renting or are already a homeowner, you’ll definitely need to budget for removal costs.
Removal costs on average cost around £800-£1,500 and it may be a good idea to ensure the removal company is insured. On the other hand, a little trick when learning how to save for a house could be renting a van or using your own van to remove your belongings yourself. This could be cheaper than hiring a removal company. You can arrange insurance cover for yourself too. Your current home insurance company may already cover your house move, too.
You can, of course, knock the removal fees down a little if you have a big clear out before you move into your new home. Out with the old, and in with the new – ready for your fresh start. Besides, you don’t really need those flared jeans you bought 8 years ago, do you? Or the exercise bike you’ve been using as a coat hanger for the last 2 years…
Solicitor fees
When buying a new home, there’s legal work that needs to be processed first. You’ll likely need to hire a solicitor to conduct this work, or a licensed conveyancer. This is both for buying and selling your house.
Solicitor fees tend to be around £850-£1,500 with 20% VAT. Furthermore, your solicitor may do a local search to see if there are any problems or plans locally.
Searches
You may pay your mortgage provider a fee to conduct searches around the property to make sure it’s the perfect fit for you. This can include searching for any planning issues, highway issues, and building control issues.
These searches will look around the neighbourhood to ensure the house is situated in a place that you want it. For example, if you have kids, you may not want them living by a main road.
The searches can also check if there’s any local development planned for after you move in. Therefore, there won’t be any surprises! These searches are likely to cost around £350 plus VAT.
Land Registry Fee
The Land Registry charges a fee whenever someone new moves into a property in England and Wales. This is so the register can be transferred to the new homeowner. The price of the fee depends on how much the property costs, but it can be around £150.
Mortgage Upfront Fees
If you have upfront mortgage fees, these can be added to your mortgage. You may not have to pay mortgage upfront fees, but it’s important to check. The price will depend on the mortgage itself.
Mortgage Survey
The majority of mortgage providers will request a mortgage survey before you move in. This is to ensure that you have enough money to cover how much the mortgage lender may be lending you. Things like this can often be forgotten, but it’s important to check how much it will cost upfront. Mortgage surveys can often cost around £650.
Additional Damp Survey
You may choose to have an additional damp survey done in your new home. This can be helpful if you’d like to see how much damp is in the home so you can avoid damages to your new home that can be caused by damp. It can also help to prevent any future illnesses occurring, such as colds. These tend to cost around £100.
Additional Items from the Seller
The house seller may offer you items they already own so that you don’t have to buy your own, such as furniture. This is completely your choice, but it can save a lot of time (and perhaps some money) buying brand new furniture when there’s already a sofa in the property. Another example could be blinds, which you can buy off the seller instead of buying yourself, and often save money on purchasing brand new and paying for instillation.
This can be handy as it means you won’t go your first night without blinds. We all know what issues can arise with that…The whole neighbourhood seeing you getting changed may not be the best first impression! These optional fees will be included in your final bill by your solicitor.
Bank Transfer Fee
When transferring money to your mortgage provider, there’s likely to be a bank transfer fee. This can cost around £35, and is not included in the money you’ve saved for your deposit, and is usually paid by the solicitor/conveyancer, and then totalled into the fee they charge you for handling your deposit.
Fees Once Moved into your Home
- WiFi setup
WiFi is something the majority of us need and use on a daily basis. However, you may not have thought about this hidden cost when buying a new home. If you use the internet or a landline, you’ll likely need to set up a new WiFi plan. This cost will vary depending on the provider you choose.
I know I can’t live without Instagram or Facebook and many others can’t either. It can be fun to read a few books for the first few days, but there’s only so long most of us millennials can go without WiFi before we end up nearly dying of boredom!
- House developments
If your new home needs any changes or developments, you will have to factor this into your house expenses too. You can hire a builder, plumber, electrician etc. to make these amendments for you.
- Furniture
You may not have thought about additional costs such as furniture when you’ve moved into your new home. It can be easy to get swept up in the technical costs, such as stamp duty and survey fees, but what happens when you don’t have a table to eat meals on?
Eating a takeaway on the floor the first night can be fun, but it’s not a great idea in the long-term. If the property seller has left any furniture, such as blinds, you may wish to use that. However, it’s a good idea to check what’s being left so you know what furniture you have to purchase yourself.
Speaking of which, if you fancy finding out how much on average your ‘moving day take-away’ would cost in the area you’re thinking of moving to, click here.
How to Save for your First Home
If you’re purchasing a home, you may decide you’d like to open a Lifetime ISA* (LISA). We have lots of information on our website about how to open a Lifetime ISA and how to save money for a house. A LISA is an Individual Savings Account that can give you an incredible boost when saving for a deposit on your first home.
On top of your monthly instalments or lump sum, the government can pay a 25% bonus on top of the money you’ve already saved. The government is literally paying for part of your house!
You can save up to £4,000 per year in your LISA, to take advantage of up to £1,000 in government bonuses, and if you open an account with Unity Mutual, you can take advantage of the market leading interest rate available to the general public of 1.5%** too. If you’re saving the maximum annual allowance, you could have £10,000 ready for a deposit in just 2 years!*
How to Save for the Extra Fees
If you’re using a Lifetime ISA or Help to Buy ISA, the funds you have saved are only eligible to use on the deposit for your first home. This means that all other fees, such as the stamp duty and survey fees mentioned above, must be paid using your additional savings. A FISA can be a helpful for this as you can pay money into it once you’ve maxed out your LISA for the year.
You may also be interested in a Flexible ISA* (FISA). A FISA gives you the opportunity to pay in more money or access your money whenever you need to. This allows you to see monetary growth but also offers flexibility. If you were caught short and needed to access your funds – like with an unexpected gigantic bill after your MOT – you can access your funds without facing penalties.
With the FISA, your money is invested into our Unity Mutual Equity Fund, which invests in more than 600 companies to monitor the stock markets average performance. This means you don’t have to make any complicated decisions yourself. Please be aware as your money is invested in stocks and shares, whilst the value can rise it can also fall meaning you may get less back than you paid in.
To apply for a Flexible ISA*, click here.
To apply for a Lifetime ISA or learn more about how to open a Lifetime ISA, click here.
Terms and conditions apply to all our products, if you’re in any doubt about whether our products are right for you, it’s a good idea to talk to an Independent Financial Advisor (IFA). You can find a local financial advisor by visiting www.unbiased.co.uk. You may need to pay for a financial advisor’s help, so make sure you ask them about their fees first.
*Terms and Conditions Apply
**Figures based on independently verified research conducted by Mustard Research – accurate as of April 2022
