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The true cost of buying a house

Are you saving for a house? Then every pound counts. Especially if you’re taking your first step on the property ladder.

By Judith Parsons

When it comes to buying your first home, it can feel as though you’re paying for much more than bricks and mortar. And you’d be right. According to the HomeOwners Alliance, the hidden costs of buying a house can add 10% to the total bill. Considering the price of property in many parts of the country, this could be a hefty extra.

These costs relate to one-off charges and fees and should be budgeted for as you build your deposit. The sooner you start saving, the better, as there are no quick fixes – just smart moves to bolster your bank balance. 

Aneisha Beveridge, Head of Research at Hamptons International, says: "Saving for a deposit is still the biggest barrier to buying a home. It takes a single person more than a decade to save up and over 15 years to save for a 15% deposit in the capital."

Research by credit reference agency Experian suggests the average deposit for a first-time buyer is £30,989. More than a quarter of consumers interviewed admitted they relied on the Bank of Mum and Dad to get enough money together.

How to save for a deposit

The UK House Price Index for June 2019 shows that, nationally, the average cost of a home is £230,292 (it’s £466,824 in London). For a property priced at the UK average, you’ll need at least £11,515 for the minimum 5% deposit required by mortgage lenders. 

It may feel like scaling Everest but open a savings account, give it a name that will inspire you, and set up a monthly standing order. If you put something aside every time you get paid, it’ll soon start adding up.

Look out for accounts that tie-up your money for set periods and offer better interest, such as fixed-rate bonds, and use your yearly tax-free cash ISA allowance. To make your savings work a little harder, you could consider an Aviva Wealthify ISA.

As a first-time buyer, you can also take advantage of the Government’s Help to Buy scheme, which includes a Help to Buy ISA and Lifetime ISA (LISA) to boost your savings. The Help to Buy: Shared Ownership and Help to Buy: Equity Loan schemes are further ways to assist in saving for a house.

If you want to work out how long it will take to save for a mortgage deposit, Which? offers a handy calculator. But for tailored advice, consider talking to an expert. An Aviva financial adviser, for example, can help you set tangible goals.

What are the fees when buying a house?

The extent of your costs will depend on your property value, location and mortgage product, but here’s a rough idea of what to expect:

  • The first cost is your mortgage arrangement fee. This can vary from £1,000 to £2,500. On application, there’s likely to be a booking fee, which is non-refundable, of between £99 and £250, and a mortgage account fee that’s typically £100 to £300. Before your lender offers you a mortgage, they will ask for a valuation survey that costs £200 to £600. Don’t confuse this with a property survey. 
  • If you use a mortgage broker, there may not be a fee if they operate on commission, while others charge around £500, or sometimes 1% of the loan amount. 
  • A house survey will prevent any nasty surprises before you move in. Depending on the age and condition of the property, you could opt for a basic Home Condition Report, a more thorough Homebuyer’s Report or a full structural Building Survey. Costs range from £400 to £1,500.
  • Legal or conveyancing fees are what your solicitor or conveyancer will charge for the legal work that comes with buying a house, and they can vary from £800 to £1,500 plus disbursements. These costs depend on property value, location and solicitor and include transferring ownership under HM Land Registry (£20 to £910), local searches to check for issues that might negatively affect your property (£250 to £450), telegraphic transfer of your money (£50), a mortgage handling fee (£60 to £80) plus other checks, searches and copies (£40). You’re usually liable for these costs as they arise, with final payments on completion. This will include any Stamp Duty Land Tax, which your solicitor pays on your behalf to HMRC.

Stamp duty waiver for first-time buyers

First-time buyers are exempt from stamp duty on homes up to £300,000 in England and Northern Ireland. But if your purchase price is higher than that, expect to pay 5% on anything between £300,000 and £500,000.

If your new pad exceeds the half-million mark, you’ll pay the same as an existing homeowner. A stamp duty calculator can prove useful. Wales and Scotland have different tax rates so find out which band your house falls into. 

When you finally exchange contracts with the seller, you should have your buildings insurance sorted. You could also consider a combined buildings and contents policy. AvivaPlus Home Insurance, for example, offers three levels of cover to suit your circumstances.

Removal costs will depend on property size and the distance between your old and new homes. A professional firm can charge between £600 and £1,200. On top of that, you may need storage, cleaning services and mail redirection.

Don’t forget the running costs

If you’re considering buying a leasehold property, check the ground rent and service charges for management and maintenance of communal areas. This can total hundreds or thousands of pounds a year, so be clear about the arrangement.

Finally, don’t forget the homeowner expenses after you move in. Furniture and finishing touches quickly add up, along with utility bills, council tax, TV, broadband and phone, regular maintenance, commuting and perhaps a residential parking permit.

There’s no denying that buying your first home can be daunting – and expensive. But if you’ve factored all this into your deposit, a place on the property ladder could be just around the corner.