Hidden Home Buying Costs: You Need More Money Than You Thinkfeatured

When thinking about buying a house, the first thought that generally pops into a person’s head is the deposit. With a 5% deposit on a £150,000 property standing at a £7,500, saving this money is by no means an easy fete.

However, the deposit isn’t the only financial hurdle associated with buying a property. In fact, there are a number of costs many people forget to take into consideration when saving for a property. Once these people have their deposit saved, they get a nasty shock when they realise there are so many other expenses to budget for. Even though I’ve managed to save £10,000 over the last year towards my first home, I now need to start thinking about the other costs associated with getting a mortgage. It’s exhausting!

These so-called hidden mortgage costs can include anything from mortgage arrangement fees and broker fees to the cost of the valuation and stamp duty. Once the deal has been finalised you have to consider removal hire, furnishings and insurance. Depending on the price of the property you’re purchasing and the percentage you’re putting down, these extra costs could potentially double the amount you need altogether.

The table below shows the most common costs and how much, on average, they are likely to set potential home owners back.

What are these costs for?

Arrangement fees - These are paid to your lender to cover the expenses for administration.

Booking fees - Also paid to the lender in order to secure fixed rate or discounted mortgages.

Mortgage account fees - This is charged for the opening, maintenance and closing of the account.

Legal fees - Also called conveyance fees, these are paid to the solicitor for undertaking all the legal paperwork involved with buying a house.

Valuation fees- In many cases, a valuation must be conducted as proof to the bank that the property is worth the amount you are paying for it.

Mortgage broker fees- If a property buyer uses a mortgage broker in order to find the best mortgage for them, a fee will be required.

Stamp duty- Stamp duty is a tax that must be paid on each house with a value of over £125,000. The amount paid will vary on the property’s price, so a buyer purchasing a house for £130,000 will pay less stamp duty than someone buying a house for £230,000.

Surveys- Surveys are conducted as part of the moving process in order to assess any potential work that needs to be done to the house. The buyer can then try and get the cost of these repairs taken off the price of the house.

This is just the tip of the iceberg, there are plenty more charges that first time buyers have to cough up. These are just the most financially draining. It is vital to always be aware of these costs and advisable to have more money to hand than you think you need.

Who’s who in the mortgage process?

Another thing people are often unprepared for is the sheer number of professionals that need to be involved in the process.

Estate agents

If you want to find your dream home then you’re in need of an estate agent. These guys are known for their gift of the gab when it comes to haggling. They also deal with tons of paperwork so you don’t have to. Advertising and marketing is in their job description, so they’re always first to know when a great find pops up.

Lenders

Unless you’ve come into a significant amount of money, whether that’s following the passing of a rich relative or a lottery win, first time buyers are unlikely to get very far in the house buying process without the backing of a lender. These are the guys that give potential home buyers the funds to get the mortgage. They also access each individual request and calculate how much they are willing to lend. It is vital to shop around as each firm will have their own deals and rates.

Advisor

Mortgage advisors and mortgage brokers are experts when it comes to securing a mortgage and buying a property, whether you’re a first time buyer or an existing home owner. Their job is to guide buyers through the whole process and offer them realistic mortgage suggestions to find them the best deal. Some mortgage brokers charge a fee, but others don’t. As a result, it’s vital to shop around to find a service that will offer you value for money.

Solicitor

Solicitors handle all the legal stuff, such as the transferring of ownership, legal paperwork and even handling the funds.

Surveyor

The chartered surveyor is an important asset to all first time buyers. They’re responsible for assessing any work that may need doing to the building before you hand over the cash. If they spot a problem that will affect the property’s value or require you to pay for significant renovation works, you could ask the seller to remove the cost from the property’s price. There are a wide range of surveys to choose from and these can differ in cost. Although it may be tempting to choose the cheapest one, these won’t be as thorough as a more expensive survey.

It seems like a lot to take in at first glance, but once all these people are in place it becomes a lot easier and they are all there to help you get the best deal and property you can.

The most important advice you can follow is to ask tons of questions in order to ensure you’re fully informed at all stages of the process.

For more information about buying a property for the first time, take a look at this guide: First Time Buyers Guide to Getting a Mortgage by Voucher Codes Pro.

Photo credits: All images courtesy of Voucher Codes Pro