Saving for a deposit is often the biggest challenge for first-time buyers. It's the figure most people focus on, and understandably so. However, one of the most common conversations we have with clients is about the costs that sit alongside the deposit and mortgage itself.
There are several additional expenses that need to be factored into your budget, and overlooking them can leave buyers under unnecessary financial pressure just as they are about to collect the keys to their new home.
The good news is that with a little planning, most of these costs can be factored well in advance, which avoids any surprises and helps you set a realistic budget. We've listed our top things to consider before buying your first home.
Look Beyond the Deposit
What often comes as a surprise, is the number of additional costs involved in getting your property purchase over the line. Legal fees, property surveys, searches and mortgage product fees can all add to the overall cost of moving.
Stamp Duty: Know Where You Stand
Stamp Duty Land Tax is one area that can cause confusion for a lot of first time buyers.
Many buyers benefit from first-time buyer relief, which can reduce or even eliminate the amount of Stamp Duty payable. However, eligibility depends on your circumstances and the purchase price of the property. It is key to always seek advice from a qualified solicitor or tax professional before proceeding. This allows you to budget effectively, ensure you know exactly what is payable.
Property Valuations and Surveys
When applying for a mortgage, your lender will arrange a valuation of the property. This is carried out to ensure that you are purchasing the property at the correct value. This is not always for your benefit however, the mortgage lenders want to ensure in the event of a repossession they can get a return on the sale of the property.
Depending on the lender and mortgage product, the valuation may be included free of charge or attract a fee, typically up to around £200. It's important to remember that a lender's valuation is not a detailed inspection of the property's condition.
Many buyers choose to arrange a more comprehensive survey for peace of mind. A HomeBuyer's Report or Full Building Survey can help identify potential defects, structural concerns or maintenance issues before contracts are exchanged. Survey costs will vary depending on the property, but buyers should typically budget from around £500 upwards for a more detailed inspection.
Legal Fees and Property Searches
A solicitor will handle the legal aspects of your purchase, ensuring ownership is transferred correctly, they also carry out the necessary checks on the property. Alongside legal fees, you'll usually need to pay for searches. These commonly include local authority, environmental and water and drainage searches, all of which help uncover information that could affect the property now or in the future.
The exact costs will depend on the property's location and the complexity of the transaction, but they are an important part of the home-buying process and should be included in your budget from the outset. We would always recommend you speak to your solicitor - who will be able to give you an extensive breakdown.
Mortgage Product Fees
Not all mortgages are structured in the same way. Some products come with arrangement fees or product fees, these can range from a few hundred pounds to more than £1,000. This is why it's important not to focus solely on the interest rate when comparing mortgages. A deal with a slightly lower rate isn't always the cheapest option once fees are factored in.
As mortgage advisers, we look at the true overall cost of the mortgage rather than just the headline rate, this ensures that clients are getting the best applicable deal on the market.
In many cases, product fees can be added to the mortgage balance (e.g. a £1,000 arrangement fee added to the loan, will often increase your mortgage payment by approximately £5 - £10 per month). While this can reduce upfront costs, it's worth remembering that when you add the fees onto the loan, it will accrue interest during the mortgage term, provided it remains on the mortgage and you do not pay it off via an “Overpayment”.
Don't Forget the Cost of Moving
Once your purchase is complete, there are often additional expenses that buyers haven't considered.
Removal costs, furniture, appliances, decorating, repairs and utility set-up charges can quickly add up during the first few months of homeownership. Even if you're purchasing a property that's ready to move into, having something set aside can make the transition smoother.
Why Advice Early in the Process Can Make a Difference
A key advantage of speaking to a mortgage adviser early, is gaining a clear insight into the full costs involved. We always recommend you do this before you start viewing properties.
A mortgage isn't just about borrowing money. It's about ensuring the purchase remains affordable when all associated costs are considered. By understanding your budget from day one, you'll be able to search for properties with confidence, avoid unexpected expenses and make informed decisions throughout the process.
Buying your first home is an exciting milestone. With the right preparation and guidance, it can be a far smoother experience. Make sure to contact me on the contact form for free mortgage advice and guidance.
