Costs of buying and owning your own home

Karina Hutchins

Head of Home by OpenMoney

July 20, 2021

The cost of buying and owning a home

We want to make the process of buying your home as easy as possible, but it’s important to consider all the costs before you do so. We think it’s important to be transparent and so we’ve listed all the costs you need to think about before starting your mortgage application:

Deposit

Let’s be honest most people aren’t able to afford the cost of a house out right. You’ll put a deposit down on a house and then borrow the rest of the money through a mortgage. The minimum deposit you can put down is 5%, which comes to £10k on a £200k home, although if you can, there are benefits to putting down more than 5%.

If you’re able to put more in your deposit, the less you’ll have to pay back through your mortgage. You are also likely to get a lower interest rate and over time you’ll will pay back less interest overall to your lender.  

Mortgage fees

Mortgage fees are sometimes charged by lenders and cover the cost of setting up the mortgage or arranging a valuation, often ranging from £0-£2000. When recommending the best mortgage for your needs, we’ll always consider these fees, as it could mean you’ll get a lower interest rate, helping you to save more in the long run. We’d recommend paying the fees upfront if possible, as it means you wont have to pay back any added interest, but they can be added to your regular mortgage repayments if you prefer.

Solicitor fees

Solicitors are another up-front cost you’ll need to consider when buying your new home. These costs can really vary between each firm, but as your solicitor will play such a big role in your house move, it might be worth considering paying that bit extra to make sure you have a good one on your side.

Your solicitor will work through all the legal documentation and make sure everything is legally correct so that you can buy your home with confidence. We will recommend a solicitor for you (we take absolutely no commission by recommending them – we just think they’re great!) but you don’t have to take our recommendation if you would prefer to find your own.

Stamp duty

Stamp Duty Land Tax (SLDT) is a tax you might have to pay if you buy a home or a piece of land over a certain price.

From 1st July first-time buyers will pay no Stamp Duty on properties costing up to £300,000, and a discounted rate, up to £500,000. For properties costing up to £500,000, you will pay no Stamp Duty on the first £300,000. You’ll then pay Stamp Duty at 5% on the remaining amount, up to £200,000.

For example if you buy a house for £375,000, the Stamp Duty Land Tax you owe is calculated as:

  • 0% on the first £300,000 = £0
  • 5% on the final £75,000 = £3,750
Total SDLT = £3,750

If the property you’re buying is worth over £500,000, you will need to pay the standard rates of Stamp Duty and won’t qualify for first-time buyer’s relief.

Surveys

Surveys are carried out to see if your new home is worth the amount you’re asking to borrow. The surveyor will visit the property, check the value of the home and confirm any obvious defects.

The main types of surveys are:

- Level 1 survey (previously known as a mortgage valuation) – this will let you know how much the house is worth.

- Level 2 survey (previously known as a homebuyers report) – this is a detailed 25 page report, highlighting any areas of concern within the property.  

- Level 3 survey (previously known as a buildings survey) – this is a full in-depth inspection of the property and reports on any problems it finds. This is the most suitable type of survey for older properties.

Everybody who buys a home has to have a mortgage valuation. The valuation is set up by the lender and costs will vary based on the lender and the value of the home. We’ll always take these costs into consideration when giving your mortgage recommendation. The other types of survey are completely up to you, but we can advise you on what might be suitable for the property you’re looking for.

Search

A search is carried out by your solicitor to find out more information about the property you plan to buy. As part of the home-buying process, your solicitor will carry out a variety of 'searches' with the local authority and other parties.

The main searches when buying a home are:

  • Local Authority
  • Water and property
  • Environmental

These searches typically include details such as whether planning permission may be granted for a future development that would negatively impact your property, the quality of the ground on which your house is built, or details of common drains and access rights.

To understand the difference between a survey and a search it’s helpful to think of it as:

  • Surveys - to find out more about the value and structure of the home
  • Search - to find out more about the surrounding area of the home e.g. the land the house is built on.

Unlike surveys, you have to have these solicitor searches to find out if there are any obstacles in the way of you owning your new home. They are also required by lenders, who will want to be certain that there’s nothing which could affect the property’s value before your mortgage is completed.  

Moving in  

Whew! Well that must be all the costs right? Not necessarily! You’ll still need to think about all the costs involved with moving in such as:

  • The cost of hiring removal experts
  • Transporting all your belongings to your new home
  • Buying new furniture and the ‘essentials’ for your new home

It’s worth making a note and budgeting for these costs now so they don’t catch you by surprise if you’ve left them as an afterthought.

Emergency savings

Once you’ve moved in, it can be tempting to spend any final savings on new furniture and other bits for your home. Before you get ahead of yourself you should always keep a cash safety net of emergency savings should anything unexpected happen.

We’d always recommend having at least 3 month’s worth of income saved away, just in case you have to fork out to repair a boiler or for any of life’s other unexpected emergencies. Whilst these scenarios might not be at the forefront of your mind when moving in, it’s always best to be financially prepared for any outcome that comes your way.

Monthly costs

When buying your first home, it’s important to think about bills for utilities as well as the cost of living in the local area. You can do your own research online (places like Zoopla show estimates for energy, water & council tax etc) or even speak to the homeowner to get a rough idea of how much your expenses would be every month. An example of some of the costs you’ll want to think about before you move are:

Home based costs:

Other costs:

Planning properly and looking at the monthly costs to live in the area, will not only give you peace of mind but make sure you can afford your home in the long term. Proper budgeting can be done through the OpenMoney app to help you find the best deals on utilities and broadband in your area.

Once you’ve worked out the monthly costs for living in the area, you can start your Home application and our mortgage tool will help you decide the amount your comfortable putting towards your mortgage repayments.  

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