The Costs of Moving Home

The Costs of Moving Home

There are a number of costs to consider when buying a new home. I’ll run through them to help you get a feel for the kind of budget you’ll require.

 

 

 

Council Tax

 

This can vary from over £4000 per year right down to about £500 per year depending on the type of property and where it’s located. You should contact the relevant local authority to establish the charge for a property you’re interested in.

 

 

Deposit

 

This is the amount you put towards the cost of the property out of your own pocket when you buy your home.

 

You need to be able to put up at least 5% of the total purchase price as your deposit. The higher percentage deposit you can pay, the more likely you are to be given a mortgage and the more likely you are to get a lower rate of interest.

 

 

Estate Agent Fee

 

This fee is only paid by when selling a home, and is agreed between the parties prior to putting the property on the market. It is usually 1% to 3% of the sale price. Beware of agents quoting a fee with VAT on top. This is not allowed unless it’s a business-to-business transaction. Prices quoted to consumers must include VAT.

 

 

Insurance Fees

 

Home insurance (buildings and contents) is not actually a legal requirement, but it is sensible to have it.

 

If you have a mortgage then the lender will insist that you take out a buildings insurance policy, but they generally don’t insist on you having contents insurance.

 

The average home insurance premium is around £150.

 

There are other types of insurance to consider – there are policies to cover against failure of your central heating system, against problems with the electrics, and against problems with the plumbing and drains. Policies to cover these issues could cost around £10-20 per month.

 

 

Legal Fees

 

You’ll need to employ a solicitor or licensed conveyor to carry out all the legal work when buying or selling your home. Their fees are typically £850-£1,500.

 

Your conveyancer will also carry out searches to check whether there are any local plans or problems. These can cost up to £300.

 

There may be other small fees for indemnities too. E.g. ‘Chancel Repair Insurance’, which covers you against the risk of being forced to pay towards the repair of a church. People have been hit with hefty bills (£100k plus!) for this in the past, so you should definitely take the insurance if this situation applies to you.

 

 

Miscellaneous Fees

 

These cover the loose ends. E.g. do you need to put your dog into kennels whilst you move? Pay the post office to redirect your mail from your old address? Hire a van to move some items? Put anything into storage?

 

 

Mortgage Fees

 

Mortgage lenders have a mind-boggling array of fees they can hit you with. Not all do, of course, and not all fees apply in all situations. All the fees for your particular mortgage product will be included in an illustration that you should read carefully before agreeing to any deal that you’re offered.

 

Arrangement fee: up to £2,000. This is what you pay for getting the mortgage.

 

Booking fee: up to £250. This is what you pay for applying for the mortgage.

 

Broker fee: depends on the value of the mortgage. You pay this to the broker for finding you the mortgage.

 

Completion fee: see ‘arrangement fee’.

 

Early repayment fee: up to 5% of the mortgage balance.  If you need to come out of an existing mortgage in order to move, and you are still inside a discounted period (e.g. 8 years into a 10 year long fixed rate deal) you will have to pay a penalty when you exit the mortgage.

 

Exit fee: up to £300. This fee is due when you pay your mortgage off in full. It is independent of early repayment charges.

 

Higher lending fee: up to 1.5% of the mortgage balance. This fee is to cover the mortgage lender’s increased risk of having to sell your home at a loss if you default on the mortgage after having only paid a small deposit.

 

Own buildings insurance fee: around £30. You pay this fee if you decide to arrange your own buildings insurance rather than taking the policy offered to you by your mortgage lender.

 

Product fee: see ‘arrangement fee’.

 

Telegraphic transfer fee: up to £50. This fee is to cover the cost of your mortgage lender transferring funds to your solicitor.

 

Valuation fee: up to £1000. Your lender will carry out a valuation of the property in order to decide just how much they will be willing to lend you.

 

Side note: The valuation that the lender carries out is not the same thing as a full structural survey, so you shouldn’t assume anything about the inherent quality of the property from it. Sometimes they just ‘drive by’ the property to check that it’s actually there!

 

 

 

Stamp Duty Land Tax (SDLT)

 

SDLT is a tax for transferring the title of a property from one person to another.

 

From 1 July to 30 September 2021, you will not have to pay SDLT on residential properties costing up to £250,000. If you’re a first-time buyer, you will pay no SDLT on properties costing up to £300,000, and you will get a discounted rate up to £500,000.

 

For example:

In August 2021 you buy a house for £275,000. The SDLT you owe will be calculated as follows:

0% on the first £250,000 = £0

5% on the remaining £25,000 = £1,250

Total SDLT = £1,250

 

 

From 1 October the charges go back to pre-pandemic levels: so you will pay SDLT on properties costing more than £125,000 for residential properties, unless you’re a first-time buyer.

 

For example:

In October 2021 you buy a house for £295,000. The SDLT you owe will be calculated as follows:

0% on the first £125,000 = £0

2% on the next £125,000 = £2,500

5% on the final £45,000 = £2,250

Total SDLT = £4,750

 

 

If you’re buying a second home, you’ll have to pay an extra 3% Stamp Duty on properties costing more than £40,000 at the relevant rate at that time.

 

If you’re domiciled abroad for tax purposes (or are a foreign national) you’ll have to pay a further 2% on top.

 

This tax applies to both freehold and leasehold properties – whether purchased with ‘cash’ or with a mortgage.

 

You can use the government’s calculator to work out how much you’ll need to pay: Stamp Duty Land Tax Calculator

 

 

 

Surveyor Fees

 

Depending on the property you are buying, getting a full structural survey carried out prior to purchase varies from unnecessary (I.e. for a brand new property that comes with a 10 year NHBC warranty), through to vital (i.e. for that 17^th century country pile you always promised yourself).

 

Surveys range from a basic home condition survey costing around £250 to a full structural survey from £600 or more.

 

Side note: For people buying new builds it might make sense to get a so-called ‘snagging survey’, which is a special survey designed to spot faults with newly built properties.

 

 

 

Removal Fees

 

It makes sense to use a firm with a known track record. If you only find out that they weren’t insured after they’ve broken precious family heirlooms it can be difficult to get properly compensated.

 

Removal costs are usually around £1700 for a 3 bed home, although can be much more if storage is required.

 This article is courtesy of EXP Husbands Bosworth