Planning for buying a home :Cross Stitch – Money, tax and benefits
Buying a property will probably be your biggest single investment. So it’s important to work out the total cost – not just the mortgage – and how much you can really afford. You also need to plan for increases in your future outgoings, like a rise in interest rates.
‘One-off’ buying costs
You’ll usually need to pay for the lender’s basic valuation survey – the cost varies by lender and property value but is usually a few hundred pounds. To check the property’s condition you’ll need a more detailed survey for which you’ll need to compare quotes.
These cover searches and legal paperwork. Costs vary by area and/or the property value (or loan amount if it’s remortgage) and include:
- legal fees
- land registry fees (use the calculator below)
- local authority searches
- drainage and environmental searches
- administration costs
Your solicitor will confirm the cost of the above fees.
You can also use the Land Registry fees online calculator below:
- to check fees for a mortgage, scroll down and choose the option ‘Transfer of whole for value’ then enter the property purchase price
- for a remortgage scroll down and select ‘Charge – registration (of registered land)’ then enter the loan amount
These vary by lender, but may include:
- booking fee (limited offer mortgages only)
- arrangement or completion fee (can often be added to the loan)
If you have a high percentage loan you may need to pay a one-off fee called a ‘higher lending charge’. This protects the lender if you can’t repay your mortgage. It depends on how much you borrow and how much deposit you put down. The premium can be high; ask your lender or mortgage adviser. You can usually add it to the mortgage if it doesn’t take you above the lender’s maximum loan for the property value, but this will increase your interest charges.
These vary according to:
- where you live
- the size of your property
- how much furniture you’ve got
- how far you’re moving
- how much packing you’ll do yourself
It’s best to get several quotes, and always check that your remover’s properly insured.
Ongoing monthly costs
You’ll need to budget for your monthly mortgage repayments – and take into account what effect a future change of interest rates would have on these.
If you have an ‘interest only’ mortgage, you’ll usually also need to budget for monthly payments into an investment to pay off the loan at the end of the term.
You might need to take out a life assurance policy such as ‘term insurance’ or a ‘mortgage protection policy’. The monthly payments can be relatively low and the insurance pays off what you owe if you die before you’ve finished repaying the loan. Ask your mortgage adviser for more details. (If you have a mortgage endowment policy, this includes life cover.)
You can also take out insurance that pays your monthly repayments if you’re ill or out of work – but this can be expensive.
Don’t forget that when you move, your monthly bills might go up.