It is important to consider how much you will need to pay in total, over and above the actual cost of the property, when considering your budget. There may be costs you haven’t thought/ known about but will need to be budgeted for.
Things to consider:
- Stamp Duty – use the gov.uk calculator to estimate stamp duty costs in relation to the property price – https://www.gov.uk/stamp-duty-land-tax/residential-property-rates Remember this is a one-off tax which you will not get back. If you already have a property worth £1.5million plus, would like to stay in the same area but need more space, it is worth considering renovating/ extending your existing house for the price of the stamp duty you’d pay on moving. http://newlondonarchitecture.org/whats-on/dont-move-improve/dont-move-improve/dmi-2017-winners
- Solicitors fees – be sure to shop around though ensure you don’t choose expense over quality. Note that solicitors’ fees will be subject to VAT so make sure figures you are quoted include any applicable VAT.
- Building report – if you are buying using a mortgage, you will need to have a valuation prepared – depending on the sort of property it may be advisable to obtain a full building report. We advise always commissioning a full report, as expensive issues may be flagged, allowing you a chance to re-negotiate the cost with the seller (or ask them to address the issue before you move in). On older buildings it is strongly advisable to have a full report and flag to the surveyor any areas where you think there could be issues (damp is a common example). Factor in the cost of the report/ valuation when calculating your budget.
- Building and contents insurance – most banks/ building societies require you to have this in place from exchange. Make sure you have a quote in place and have added this to your budget.
- Wills and Life insurance – it is good to consider these when buying a house. No one wants to think about death but ensuring you have insurance and a will in place – you know you/ your family will be protected whatever happens. It is particularly important to consider if you purchase a property with another person using the legal mechanism of ‘Tenants in Common’ – in effect, each party owns a share in the property. Should one of you die, their share of the property will be dealt with via their will, so it’s advisable to budget for the cost of preparing a will and discuss what you plan to happen should one of you die. Additionally, you can purchase decreasing life insurance either jointly or in your sole name to cover the whole or simply your share of the remaining mortgage.
- Declaration of trust – again, if you are buying as Tenants in Common, you may like to consider a declaration of trust, which legally sets out your individual responsibilities as co-owners of the property. This is useful for couples/ friends buying together as it allows them to set out rules to be followed to protect both parties should there be a break down in the relationship. Your solicitor can usually advise/ provide a quote for the work to prepare this.
- Work to be done/ Furniture – If you don’t own any furnishings or require some initial work to be done before you move in, make sure you have budgeted for the costs of these. Always add a contingency as things inevitably cost more than you expect! In older houses, always add a 10% contingency as there are very often hidden problems which are found during renovation (for example finding rotten joists, damp issues or poor electrics which need updating to current standards).
- Moving – there is a cost to physically move which people don’t always consider – hiring a removal service/ hiring a van/ buying lightbulbs and eating out. Set a realistic budget for moving and add a contingency for ordering food when you are too tired to rummage through boxes looking for a saucepan! You may also want to have the house/carpets or furnishings cleaned – factor this in your moving costs.
- Setting up gas/electrics/water/internet and TV licence – get quotes in advance and add to the budget. It may be worth shopping around for gas/electric too.
- Specialists – before you buy you may like to take advice from a professional as to work required, or any potential for renovations or extensions. Getting professional advice absolutely pays for itself as you receive advice on what is possible, the best areas in which to save/ spend money and what potential large costs can/ should be avoided. You can pay for advice on a consultancy basis or as a percentage of the work depending on your project and budget. Ask APM…
- Contingency – Problems can arise when buying a new home, often in unexpected and surprising ways. As a new property owner you will need to be prepared for these. We suggest leaving a contingency amount in your budget just in case – perhaps you need a new boiler… Be prepared! The amount should be at least 0.005% of the cost of your property.
See our table showing approximate fees for two very different budgets.