First-time buyers failing to factor in all buying costs

First-time buyers failing to factor in all buying costs
First-time buyers are feeling the pressure of rising mortgage rates, especially when they also need to factor in all the other costs associated with buying a property.

More than one in 10 (14%) of first-time buyers have paused their plans to get onto the property ladder according to research by The Mortgage Lender, because they didn’t factor in all the additional costs they’d have to pay and need to reassess their budgets.

Stamp duty is the biggest expense many first-time buyers are likely to encounter, but 24% said they hadn’t realised they may have to pay it. A further one in five (21%) said they didn’t consider stamp duty costs in their budgets.

Solicitor’s fees, valuation fees, and surveyor’s fees are other costs that first-time buyers often don’t factor into their budgets, with some unaware that they may also have to pay electronic transfer fees, indemnity insurance and fees for mortgage advice if they don’t use a fee-free broker.

Steve Griffiths, chief commercial officer at The Mortgage Lender, said; “Buying your first property is a big life milestone as well as a huge financial commitment. In addition to securing a mortgage and getting a deposit ready, there are an array of other associated costs involved with getting on the property ladder. But all too often these are either forgotten about or not factored into budgets, meaning many are hit with a financial shock when presented with the additional fees and charges they need to pay.”

Costs of buying a property

Here’s our rundown of some of the costs of buying a property, so if you’re a first-time buyer you can make sure you factor them into your budget.

Stamp duty costs

First-time buyers in England don’t have to pay stamp duty on property purchases up to £425,000. If you’re buying your first home costing up to £625,000, you don’t have to pay Stamp Duty on the first £425,000, but must pay it at a rate of 5% on anything above that.

If you’re buying a home costing over £625,000, you’ll have to pay Stamp Duty at standard rates. These rates increase depending on how much your house costs to buy. Between £250,001 and £925,000 it's 5% and it increases to 12% for properties worth over £1.5 million.
Find out more here

Valuation/ survey fees

When you buy a property, you’ll need to have a mortgage valuation carried out, so that the lender can check the property is worth what you’re paying for it. Sometimes this may be included as part of the mortgage deal, but if you also want a more in depth report or a full structural survey to check the property is structurally sound, you’ll be looking at additional costs. However, this can avoid any nasty surprises when you’re buying. You can find out more about valuations and surveys in our guide 'What are the different types of house survey? '

Solicitor search fees

As well as the costs of conveyancing, your solicitor will also charge for certain searches they need to carry out. For example, Local Authority searches should identify and prospective planning permission or restrictions and costs will vary depending on where you want to buy. Learn more about searches in our guide 'Solicitors searches - what are they? '

Mortgage product fees

Many mortgage deals come with arrangement or product fees, which can run into hundreds, or even a thousand pounds or more. It’s therefore always worth looking at the overall cost of any mortgage rather than the headline rate alone. Arrangement fees can usually be added to the mortgage amount, but bear in mind this will add to your monthly repayment costs.

The good news is that it is possible to avoid some fees, including mortgage advice fees, as certain brokers like L&C are fee-free. You can find out more in our guide to Mortgage Broker Fees . A broker can talk you through all the costs you’re likely to have to pay and support you through the mortgage application process from start to finish.

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