The cost of home-ownership
This section gives details of some of the costs you will have to meet when you become a home-owner. Some of these are one-off costs, others you will have to pay regularly.
One-off costs
Once you have paid these one-off costs you will not have to pay them again until the next time you move (or remortgage, in the case of the mortgage-related costs). Such costs include:
- Mortgage application fees (also called arrangement fees and booking fees). Not usually refundable if you do not take out the mortgage.
- Valuation fees. Most lenders charge a fee to cover the cost of a valuer visiting the property you plan to buy to check that it is suitable for a mortgage.
- High lending fees (also called additional security fees). Not all lenders charge these, but if you are borrowing more than 80-90% of the value of the property you may have to pay a fee to offset the increased risk to the lender.
- Conveyancing fees and the costs of searches and registration with the Land Registry.
- Stamp Duty. Stamp duty is a government tax on home buying. You have to pay it if the property costs more than £175,000. Stamp duty is charged at different rates, depending on the price of the property. At the moment, you pay 1% on properties worth £175,000-£250,000, 3% on properties worth over £250,000 and up to £500,000, and 4% on properties worth over £500,000. Beware! This can result in a big difference in the stamp duty payable on properties of quite similar value. For example, a £250,000 property attracts 1% duty of £2,500, but a £251,000 property would attract 3% duty of £7,530. You should obviously think about this if you are buying a property at a price just above one of the tax thresholds of £175,000, £250,000 or £500,000.
Regular costs
There are regular costs that you need to pay once you become a home-owner. The costs most directly linked with your mortgage include the following:
- Your mortgage payments;
- Payments to an investment or savings scheme linked to your mortgage (if you have an interest-only mortgage);
- Buildings insurance premiums;
- Contents insurance premiums;
- Mortgage payment protection insurance or premiums for another sort of income protection plan;
- Life cover (especially if you have a family).
You should not forget the regular costs of council tax, household bills and regular property maintenance.
