
Costs associated with purchasing a property
When buying a property, there are several costs you might not be aware of until you begin your mortgage application. From the initial deposit to removal fees, here’s an overview of some expenses you should be prepared for before purchasing a property.
Stamp Duty
Stamp duty is a government tax that can significantly increase the cost of purchasing a property, sometimes by thousands of pounds. The tax thresholds and first-time buyer exemptions differ across England, Northern Ireland, Scotland, and Wales, making professional tax advice crucial.
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For those purchasing a second property or a buy-to-let investment, an additional stamp duty surcharge applies on top of the standard rate. Therefore, it's wise to seek professional tax advice before making such a purchase.
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Use the calculator below to see if you need to pay stamp duty:
Ground Rent and Service Charges
Ground rent is the fee a leaseholder pays to the freeholder for the right to occupy the land their property stands on. The lease agreement outlines the ground rent amount, payment frequency, and any clauses regarding future increases. It excludes any additional services provided by the freeholder, which are covered separately under service charges.
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A service charge is a fee paid by the leaseholder to the freeholder for services that the freeholder is required to provide under the terms of the lease. The details of the service charge are specified in the lease or tenancy agreement. Generally, this charge includes the costs for services such as:
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General maintenance and repairs
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Management costs
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Building insurance
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Caretakers
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Work on shared areas or the general building structure
Conveyancing
These fees are linked to the legal procedures involved in buying your new home. They include various local searches on the property, such as identifying if it’s a listed building or situated within a conservation area.
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The cost of conveyancing fees can vary depending on various factors, including the property's value, whether it’s freehold or leasehold, and the specific local searches required.
For more information about conveyancing, click here:
Surveys and Valuations Fees
The mortgage lender will conduct a valuation survey to assess the property's worth, but it won't cover structural issues or highlight potential problems, and you may be liable for the costs as part of your mortgage product. Depending on the property you're purchasing, it may be wise to consider an independent survey to identify any potential structural issues and problems, although these reports tend to be more expensive.
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There are various types of reports that assess the property in different ways, so it’s advisable to seek professional guidance before proceeding with one. Depending on the property's value and the type of report you choose, the cost could range from a few hundred to over a thousand pounds. The different types of reports include:
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Mortgage Valuation - This survey provides a basic overview of the property's condition along with a valuation.
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Homebuyer Report & Valuation - This survey gives a more detailed insight into the general condition of the property. It helps you determine if any specialist reports or additional work are needed before committing to the mortgage.
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Building Survey & Valuation - This survey offers the most comprehensive report and may be appropriate for older properties or if you are considering structural alterations. You can request the surveyor to focus on specific areas or address any concerns you have about the property. Due to its detailed examination, this survey is more expensive, and there may be additional charges for any extra inquiries.
Mortgage Arrangement and Other Fees
These fees are sometimes charged by mortgage companies and will vary depending on each lender's policy and the selected product. Mortgage lenders may require you to pay the fees upfront, which means you won’t be paying interest on them. Alternatively, they may allow you to add the fee to your mortgage loan amount, which could be more feasible if you can't afford an additional cost when purchasing your new home.
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Be prepared for additional fees, such as administration and electronic transfer fees. Each lender has a different approach to these costs, which makes consulting a mortgage adviser invaluable.
Estate Agent Fees
When selling your existing home and buying a new one, don’t forget to consider estate agent fees. But, if you're a first-time buyer, you can rest easy as these costs will be handled by the seller.
Removals or Furniture
If you already own furniture, you might need to budget for hiring a professional moving company, unless you have energetic family and friends ready to assist! Conversely, if you're starting from scratch without any furniture, purchasing it will be an essential expense to consider.
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Although this is just a brief overview of the additional costs you might encounter when buying a home, it underscores the significance of seeking professional advice. A mortgage adviser can assist you in finding a deal that aligns with your personal and financial situation.
Insurance (Protection)
​Having the appropriate protection in place is essential in case of unforeseen circumstances. Life insurance, critical illness cover, and income protection offer financial support for you or your family during challenging times, helping to cover expenses such as mortgage payments.
Additionally, general insurance is worth considering as it protects the economic value of your home and assets against accidents, damage, or loss.
How can Knightwood Mortgages help?
If you have any questions about the additional costs of purchasing a property, feel free to get in touch with us today by emailing services@knightwoodmortgages.co.uk or calling 03301 336045.