Thu 12 Jan 2023
THE COST OF OWNING A HOME IN SURREY
Is 2023 going to be the year when you take the plunge and buy a house?
This will probably be the most expensive item you have ever purchased and this article will explain all of the costs and fees to consider when you start the process – right through to ongoing costs once you have moved into your new home.
SAVE A DEPOSIT
Generally, the more money you can put down as a deposit on your new home, the lower the interest rate you will pay on the mortgage loan. It is good to aim for a minimum 10% deposit (of the purchase price you are paying for the property) although 20% will give you more mortgage options and 5% is still possible but will mean higher monthly repayments.
The terminology you may come across is LTV or Loan to Value – where a 10% deposit will equal 90% LTV.
CONVEYANCING OR LEGAL FEES
Once you have found the home of your dreams and had an offer accepted you will be asked to provide solicitors or conveyancer details. We are always happy to recommend our local solicitors/conveyancers – ones we know will do a fabulous job for you – but please do your own research and ensure you have also saved the cost of the work they will be doing for you. Legal fees are typically around £1,000 – £1,500 inc VAT and local search fees are around £300 inc VAT.
Some of the terminology you may come across during the conveyancing process:
Apportionment – this is usually when you are buying a leasehold property and the current owner has already paid the annual service charge or ground rent up-front, and now is going to ask you to cover the period of time that you will take over the ownership and “apportion” the large payment for the relevant period of time for your share of the cost.
Caveat Emptor – this is a term that used to be used a lot, meaning “buyer beware” or that it is the buyers’ responsibility to check that they are happy with the condition of the property and all of the facts related to the property prior to committing to the purchase. However, when the Consumer Protection Regulations became law in 2008, it placed the onus on the seller & their selling agent, to ensure that they have made you aware of anything to do with the property that would “change your transactional decision” meaning that you would not agree to buy the property or would not be happy to pay the stated price.
Exchange and completion – these are usually the days a buyer (seller and estate agent) cannot wait for! The exchange of contracts is the point in time when the buyer and the seller become bound by the terms of the contract and can no longer “pull out” of the deal. Completion is the date when the money changes hands (or banks) and keys are released from the seller to the buyer – who is now the new owner of the property. All of this is done electronically now, there is no physical meeting or the exchange of any paperwork/cash – other than collecting the keys from the seller or agent.
These are the fees to consider when you take out a mortgage:
Mortgage valuation fees: We have discussed these above, and suggested that you will probably want to upgrade your basic mortgage valuation for a more thorough survey. The most commonplace would be a Level 2 survey and if you are buying a property up to £250,000 the approximate cost would be £500-£600 but could go as high as £1000 for a larger property.
Mortgage arrangement fees (booking fees): Not all mortgages have an arrangement fee, but it is more common than not, so expect to pay around £1000 – £2000. If this is just one cost you cannot stretch to, ask if it is possible to add it to your mortgage loan.
First-time buyers do not have to pay stamp duty on homes that cost up to £425,000, and those who buy homes between £425,001 and £625,000 will get a discount. This is how it works:
- No stamp duty is paid on homes that cost up to £425,000.
- From £425,001 and £625,000, there is no stamp duty on the first £425,000 and 5% on the rest.
- More than £625,000, you’ll have to pay stamp duty at the standard rates.
If you are not a first-time buyer, and you buy a home that costs more than £250,000, you will have to pay Stamp Duty.
Stamp Duty rates do change but will stay the same until March 31, 2025, as announced in the mini-budget on 23rd September 2022. If you are buying a second home, such as a buy-to-let property you will also have to pay an extra 3% in Stamp Duty on homes that cost more than £40,000 at the current rate. This tax is paid on both freehold and leasehold properties, whether you pay cash or get a loan.
When you buy a home in Scotland or Wales, you will not pay Stamp Duty. Instead, you will pay Land and Buildings Transaction Tax (LBTT) or Land Transaction Tax (LTT).
The cost of moving will depend on how much furniture and other belongings you have, how far you are moving, and if you want a professional to pack your things for you (which will most likely insure your goods whilst in transit). If you are into a DIY move then you will probably want to hire a van and call in your friends and family to give you a hand.
- Hiring a Ford Luton Box Tail Lift van or similar locally will cost you around £230 per day.
- Packing boxes – 1 bedroom moving selection from £50.
- Hiring a local removal company from around £600 for a 1 bedroom property.
Your mortgage company will want you to take out buildings insurance in order to protect them from anything major that might happen to the property such as a fire, flood, or if the house starts to subside and needs to be underpinned. You may want to take out insurance to cover your life if you die and the mortgage needs to be settled by your spouse or joint owner. You will also want to insure your own possessions in the property (garden and outbuildings) should anything happen to them.
There are so many different insurance companies it is always best to research and possibly use a comparison site to look at which policy will be best for you and your circumstances.
THE COST OF FIXTURES AND FITTINGS
If this is your first home you may have rather a long list of items that you need to buy in order to kit out your rooms. It is advisable to revisit the property whilst the conveyancing is being carried out, perhaps discuss with the sellers if they are wanting to sell any of their items (if you like them) as this transaction can be completed within the legal process. Write down each room and what you need to furnish it, consider asking for smaller items for birthdays or Christmas presents, and always check out Facebook Marketplace, or second-hand stores to tide you over or give you a refurbishment project.
of owning a home
Apart from the everyday costs of living, buying food, petrol or transport to work and back, you will have a number of new utility bills heading your way:
If you have a leasehold property such as a flat or maisonette, you will most likely have a ground rent and service charge bill to settle annually. This is to cover the roof and guttering, underground pipework, communal areas, and any shared amenities. You may have already paid an apportioned amount within your initial legal fees if the previous owner had settled the payment in advance.
Utility bills: Gas, electricity, water & sewerage. When you initially viewed the property you would have been given an Energy Performance Certificate, which should have indicated how energy efficient the property is, and how you can improve it and lower your future bills (provided that energy prices stop rising!).
Council tax: This should also have been given to you at the point of viewing the property and is provided by the local authority. If you are a single occupier or claiming Universal Credit, you should be entitled to a discount. Council Tax is paid for 10 months of the year starting 1st March.
TV license and packages, cable or internet, phone bills: If you are under 75 years old and watch the BBC then you need a license, if you want to have Sky or Virgin, then these do not come for free. Check out the cost of the internet in your location, the faster the speed usually the more expensive it is. Do you need a landline telephone? All of these costs should be factored into your budget.
Maintenance costs: Houses need maintenance and the older the property the more likely it will need extra TLC. If you have a gas boiler, you should get this serviced annually, your electrics should have been checked whilst purchasing the property and you may have received an Electrical Condition Inspection Report, but this really should be re-checked every 5 years. Will you be decorating? If you are doing this yourself, there is still the cost of the materials you will need, add a little more in case the plaster has blown and you need to replaster before repainting or repapering.
Parking: Do you need to get a permit to park at the property? If so you should check out the cost of this with the local Parking Shop.