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 £125,000. (See below if you are a first-time buyer.) Stamp duty is charged at different rates, depending on the price of the property. At the moment, you pay 1% on properties worth £125,000-£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 £125,000, £250,000 or £500,000. If you are a first-time buyer, the threshold for when you start to pay stamp duty is £250,000. This is only if you have never owned a house or flat in the UK or anywhere else in the world. If you are buying with someone else they must never have owned property before either.
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.
