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Hidden costs to look out for when buying your first home

Couple getting keys to new home

If you’re buying your first home, the first thought that will pop into your head will be how much you need to save for your deposit.

Typically, most mortgage lenders will expect you to have a deposit that’s at least 10% of the property’s value.  According to the Office for National Statistics, the average house price for a first-time buyer is £239,000.  This would mean you’d need to find almost £24,000 for the initial down payment. 

However, when you’re buying your first home, the deposit isn’t the only financial hurdle you’re likely to come across.  There are a number of costs involved with buying a property that many people forget to take into consideration when saving up for their first home.

If you only concentrate on saving for a deposit, you may get a bit of a shock when you realise what other expenses you need to pay for.   So as soon as you start thinking about buying your first home, make sure you take all the costs into consideration.

What are the hidden mortgage costs of buying your first home?

These additional costs can include anything from mortgage arrangements to stamp duty and solicitors feed.   Once the purchase has been finalised you’ll also have to think about new furniture or removal costs, insurance and utility bills. 

These fees can soon add up. It’s wise to start thinking about these early in the process so you’re fully prepared by the time it comes to move in!

We’ve listed some examples below of what to consider when buying your first home:

Mortgage arrangement fees

These are charged by the lender to cover administration costs.  Mortgage arrangement fees can either be paid upfront or can be added onto your mortgage term.   Always remember to work out the overall cost over the full term of the mortgage if choosing the latter option.

Conveyancing fees

There is a variety of legal paperwork to consider when purchasing a property.  You’ll need to pay for the services of a conveyancing solicitor to take care of this element.

Valuation fees

In the majority of cases, a valuation or survey must be conducted on the property.  This provides proof to the mortgage lender that the property is worth the amount you are paying for it.   Some mortgage lenders will offer a basic valuation for free. However for some properties it may be worth paying extra for a more comprehensive survey to be done. 

Broker fees

Brokers earn their fees in two ways.  Some will charge an up-front fee, others will offer their services to clients for free. The latter then claim commission from the lenders.   Impartiality should not be a concern as brokers are regulated by the Financial Conduct Authority and must provide a fair service.   

Paying for a broker may seem like an expense that is not necessary, however they can save you money in the long run.  Using their services could help to find a cheaper deal that you don’t know about, saving you thousands over the life of the mortgage.  It’s certainly worth weighing up the pros and cons before you dismiss it. 

Stamp Duty

Stamp Duty is a government tax that must be paid on property over the value of £125,000.   It works on a sliding scale depending on the price of the home.  

At the moment the tax has been cut as a measure to keep the housing market buoyant during the pandemic.  Until 1st July 2021, properties up to £500,000 are exempt from Stamp Duty.  From 1st July – 30th September 2021, properties up to £250,000 will be exempt.  From 1st October 2021, the normal Stamp Duty rules will resume. 

The current exemptions can cut thousands off your overall costs, so if you are considering buying your first home, it’s worth moving fast before Stamp Duty returns later in the year.

Looking for a mortgage to buy your first home?  Get in touch with So Smart Money today and one of our mortgage experts will be on hand to help you find the right deal .

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