10 Things You Need To Budget For When Purchasing A Property | First-time Buyer Help

Podcast Hosts:

Gemma (Host)
Ifthikhar (Ifthi) – Accountant, Mortgage Advisor, and Founding Director at WIS

Introduction

Gemma:
Today we’re covering additional costs you need to budget for when purchasing a property, ways to save, and when you’ll need to pay them.
This is particularly important for first-time buyers to avoid surprises.

Q&A Discussion

Q1: What are mortgage application costs?
Ifthi:
Some lenders charge a mortgage application fee, though not all.
Consider the overall cost; sometimes paying the fee still results in a cheaper overall deal.
Some application fees may include part of the property survey.
Budget for it, even if it might not always apply.

Q2: What are valuation fees?
Ifthi:
Lenders conduct a valuation to confirm the property is worth the amount you are borrowing.
Helps the lender recover money if resale is needed.
Cost varies: free with some lenders; others £200–£600.
Optional upgraded valuations or homebuyer surveys can cost an additional £400–£500.
Budget £0–£1,000 depending on property type and lender.

Q3: What about surveys?
Ifthi:
Different from valuation; buyer-arranged and independent.
Recommended for older properties.
Costs vary based on property size and type:
Homebuyer survey: ~£500–£600
Full structural survey: ~£800–£1,000+
Always ensure surveys are RICS-certified.

Q4: Are there broker fees?
Ifthi:
Some brokers charge fees, others don’t.
Fees can range: £200 up to 1.5% of property value.
Timing varies: upfront, on mortgage offer, or on completion.
Important to shop around if you’re on a budget.

Q5: What solicitor costs should I budget for?
Ifthi:
Fees vary based on property and complexity.
Typically two stages:
Upfront search costs (~£350) – covers drainage, local authority, and other third-party searches.
Solicitor fee (~£1,500–£2,000 depending on property/area).
Don’t always go for the cheapest; quality can prevent legal issues later.
Some solicitors charge no fees if the deal doesn’t complete.

Q6: What is Stamp Duty Land Tax (SDLT)?
Ifthi:
Tax paid on property purchases (not always applicable for first-time buyers).
First-time buyers: up to £300,000 – no SDLT.
Standard buyers: tax depends on property value; check online calculators.
Payable at completion, not upfront.
Paying via credit card is possible, but may complicate mortgage approval.

Q7: How much are moving costs?
Ifthi:
Can be significant depending on household size.
Average family: ~£2,000.
Often 50% upfront, 50% on moving day.
Declutter beforehand to save costs.
DIY or man-and-van options can reduce expenses.

Q8: What are mortgage product fees?
Ifthi:
Some mortgages have product fees (£999–£1,499, occasionally £1,999).
Choosing a fee-free product may result in a higher interest rate, increasing overall cost.
Most banks allow adding fees to the mortgage, though interest accrues on it.

Q9: Is home insurance necessary?
Ifthi:
Compulsory with almost all mortgages, typically required at exchange.
Can be paid in installments, but interest may apply (~20%).
Cost varies depending on area, burglary/flood risk, and property value.
Ensure coverage includes valuables; don’t just choose cheapest option.

Q10: Should I get life insurance?
Ifthi:
Optional but highly recommended, especially for families.
Protects mortgage payments if you die or are unable to pay.
Recommended to arrange at exchange to cover obligations before completion.
Usually payable in monthly installments, not a large upfront cost.

Closing Remarks

Gemma:
Budgeting for these additional costs helps avoid surprises during the property purchase process.
Always consult a qualified advisor if unsure.
Reminder: Mortgages are secured against your home or property and may be repossessed if repayments are missed.