11 Overlooked Expenses When Buying A Home (UK)

When purchasing a home, you expect to spend some money on the process. But are you really prepared for all of the additional expenses that might come with purchasing a home?

In this article, we cover 11 expenses you need to factor in when buying a house in the UK.

Also consider checking out our post on the average rental yields in the UK.

Let’s dive in.

11 Expenses To Factor In When Buying A House

Deposit

When you make an offer on a home, you make a goodwill deposit towards the home. Think of the deposit as a downpayment, which factors into bringing down the amount of your mortgage. This deposit may make you more likely to qualify for your mortgage (a higher downpayment can increase your chances of being approved, as you won’t need to borrow as much.

Factor a deposit into the cost of buying a house, but know that it won’t be an extra cost as some things might be. It’s more of an up-front expectation that most homeowners have to fulfil. Most people will spend the bulk of their time saving for the deposit before they decide to purchase a home.

Wondering how much to spend on your mortgage? Check out our post on the ideal amount to spend on your mortgage in the UK.

Stamp Duty Land Tax

The stamp duty is another expense to anticipate when purchasing your home. The stamp duty land tax is a tax amount that is applied based on the cost of the property that you are purchasing. First home purchases and residential purchases all get the stamp duty land tax when you purchase. 

If you are buying a second home, you will have an additional 3% tax to the basic rate tax. 

This stamp duty land tax applies to both leasehold and freehold properties, regardless of your means to purchase. 

Under the Financial Conduct Authority FCA, this tax was waived for a very short period.

Valuation Costs

One of the costs of buying a house is the valuation cost. You will need to hire someone to review the property and give it a value based on that assessment. The valuation is often assessed by the lender and helps them to determine how much they are willing to lend to you for the property purchase.

Know that this fee doesn’t always apply. Some mortgage companies will waive it, depending on the type of mortgage you are using. It is separate and different from a survey fee, which we will cover next!

Surveyor’s Costs

Next up, you may need to have the property surveyed to know the true value of the property and whether or not there are potential problems with the home. A surveyor will complete a full analysis or review of the property to let you know if there will be additional costs buying a house.

The surveyor’s cost is out of pocket at your expense and the prices can vary depending on how detailed of a survey you request. The upside to spending a little bit more on a survey is that you might be better prepared for other costs that you need to anticipate for the home to save yourself some money in the future.

Mortgage Fees

You should be prepared to pay mortgage fees as part of the house buying process. The mortgage fees vary from company to company and they might vary as to what is required, depending on your selections and the mortgage company.

You can typically expect to pay that mortgage valuation fee that we discussed earlier, as well as a booking fee and an arrangement fee. The arrangement fee tends to be the most costly out of all of them.

These fees may need to be considered when calculating your mortgage or you will need to plan to pay them upfront. 

Insurance

Your new home will need to be insured as well. Insurance is usually required by mortgage companies, so there is no skipping this step. In general, the insurance is included in the mortgage payment through the use of escrow. At a minimum, you will need insurance for the building itself, but it’s a good idea to also insure the contents of the home.

For the most part, you can choose your own insurance company so be sure to consult with your insurance agent or perhaps get a few different quotes to compare your options and get the best deal possible.

Legal Costs

The cost of buying a house may also include legal fees as part of the cost. The legal fees cover the costs of the legal representative who covers the paperwork for purchasing a home. They take care of the legal side and make sure everything is clear and complete for your home purchase. 

The legal fees may be a set fee or they may be based on VAT, known as value added tax. When VAT is used, the fee is 20% of VAT. Some legal representatives use a base fee plus the 20% VAT, so keep this in mind. The legal representative will follow the requirements of the Financial Conduct Authority FCA. 

Transfer Costs

This is typically not a huge cost, but it is one that is going to inevitably be a part of the home purchasing process. The transfer costs are the charge that it takes for the mortgage lender to electronically transfer money to where it is supposed to go for the purchase. 

Most lenders are banks or financial institutions, and they control the loan. However, the loan proceeds will need to process through a representative or a solicitor in order to complete the transaction. This is typically done through an electronic transfer — the fee may vary, but is generally under £50.

Council Tax

In the UK, you pay a council tax, or in some areas a Wales land transaction tax. This amount will be an ongoing cost that you will be responsible for. This basic rate tax varies from location to location based on the location of the property as well as the valuation band that the property lies in. 

Moving Expenses

In addition to the mortgage and fee-related expenses that we’ve shared here, there may be some moving costs to be prepared for. The moving costs will not necessarily be set in stone, but are something for you to keep in mind.

Here are the basic moving expenses costs to consider:

1. Hiring movers
2. Labour and time for moving
3. Necessary storage costs 
4. Kennel costs during the moving process
5. Travel costs for relocations
6. Cleaning costs for the old home and the new home 
7. House removal costs as needed

Not all of these costs apply to everyone, but they are often costs that we don’t consider until we’re facing them. So have a think about what you might need to factor in, given your own personal situation. These can quickly add up!

Ongoing Maintenance and Repairs

Finally, when you purchase a home, there will be ongoing costs for buying a house that you need to plan and prepare for. While things like insurance may be part of your mortgage, your insurance and your mortgage expenses will not cover upkeep and repairs along the way. 

You will most likely spend some money getting settled and making the house your own, but you should also plan to set aside resources in case repairs are needed along the way. It’s always a good idea to create a nest egg, as you never know when something in the home may need to be serviced or repaired.

Wrapping Up

In closing, the house buying process is a big step and you should be proud of it. If you plan for the cost of buying a house before the time comes, you will be in a much better position to handle those pesky financial requirements before they come up. Being prepared pays off!