What Fees To Consider When Buying A House
The first fee that will likely spring to your mind when saving for a house is the deposit.
However, when buying a house, there are various fees associated with purchasing a property that you might not be aware of if you’re a first time buyer.
The fees to consider when buying a house include, but are not limited to:
1. House deposit
2. Taxes
3. Surveyor’s fee
4. Conveyancing fee
1. House Deposit
One of the largest fees you will need to consider when buying a house is the house deposit.
The house deposit is a sum of money that you put towards the cost of a property.
Since the government launched the 95% mortgage scheme in 2021, you can ‘secure a mortgage with just a 5% deposit’ until December 2023.
Generally speaking, you’ll need to save a minimum of 5-20% of the overall price of the property for a house deposit.
That said, the bigger your house deposit is, the cheaper your monthly mortgage payment will be and the more likely you are to secure a mortgage.
2. Taxes
Depending on where you’re purchasing a property in the UK, there are different types of taxes to consider. These include, but are not limited to:
Welsh Land Transaction Tax
Land Transaction Tax (LTT) is the tax that you pay when you buy or lease a property in Wales.
However, as of 2022, no Land Transaction Tax is currently paid on the first £225,000 of a property if you’re a first time buyer.
That said, it’s important to note that there are different rules to consider if you already own one or more residential properties.
Above the £225,000 threshold, the amount of tax that you’ll pay will depend on the cost of the property. For instance, when it comes to buying a home between £225,000 and £400,000, you’ll be required to pay 6% Land Transaction Tax.
In addition to this, you will be required to pay 7.5% tax on properties between £400,000 to £750,000, 10% tax on properties between £750,000 and £1,500,000, and 12% tax on purchases more than £1,500,000.
Stamp Duty Tax
Stamp Duty Tax is the tax that you pay on a certain portion of the property.
If you’re purchasing a property in England or Northern Ireland, no Stamp Duty tax is paid on the first £250,000 of a property. As of 2022, first time buyers are exempt from paying Stamp Duty on properties costing up to £425,000, and this will remain the same until 2025.
That said, when it comes to buying a second home, you will need to factor in the fact that you’ll be required to pay 3% Stamp Duty on any freehold and leasehold properties that cost more than £40,000.
3. Surveyor’s Fee
Another cost associated with buying a house is a surveyor’s fee, which is what you pay for a more comprehensive survey of the property.
It is recommended that before you buy any property, you should get a survey carried out and state that your offer is subject to contract and survey.
This comes down to the fact that a survey is designed to inspect the property in detail, and flag any issues with the property, such as structural damage. With the information gathered from the survey, you can make an informed decision on whether it’s the right home for you.
A structural survey can cost anywhere upwards of £600, although this will depend on the area that you live and the company that you hire to carry out the survey.
4. Conveyancing Fee
When buying a property, you will also need to consider a conveyancing fee that is associated with hiring a solicitor or a conveyancer to carry out the legal work.
While it’s not a legal requirement to hire a solicitor to carry out the conveyancing of a property, it is highly recommended that you do so.
A conveyancing fee tends to cost around £800-£2,000 on average, which will also include the cost of VAT at the rate of 20%.
That said, you will also need to take into account the local searches that they carry out on the house.
These searches will give you a better understanding of any local development plans that could impact the property or problems they might find with the property itself, which will cost an additional few hundred pounds.
Hopefully this article has given you a better understanding of the kinds of fees to expect when buying a house.
Written by Jemima Thomas for James Douglas Sales & Lettings.
