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The first time buyer’s financial checklist: all the costs you need to know

POSTED: 15th May 2014
IN: Personal Guides
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Buying a home is probably the biggest but most rewarding financial commitment you will ever make.

In recent years, the cost of housing has increased so dramatically that it’s now commonplace for people to spend over seven times their annual salary on a first home. Only a fortunate few manage to climb onto the property ladder mortgage-free, and for the rest of us, years of repayments lay ahead.

Despite the financial tug, however, home ownership has become a basic British ambition. From the benefits of owning of a valuable asset, to the pride of staking one’s own claim in British soil, there’s no doubt that buying a home is a desirable prospect. But with the many and varied costs that come with getting that first foot onto the property ladder, how can you tell if you’re able to buy?

To help you out, we’ve detailed the true cost of home ownership, from the obvious mortgage deposit and stamp-duty to some of the more oft-overlooked but none-the-less significant fees you’ll need to overcome.

The true cost of buying

The mortgage deposit is the first big payment you’re likely to face, and can be a real make or break point for aspiring homeowners. With the introduction of the new government Help to Buy scheme in Q4 of 2013, it’s possible to secure a mortgage with just a 5 per cent deposit. However, some lenders may require more and as a general rule, the bigger your deposit, the better the deals that you’re eligible for, so it’s always advisable to save as much up front as possible.

And aside from the cost of the actual property, there are a number of other fees and charges that can slip under the radar in all the flurry of excitement of house-hunting.  These include:

-         Mortgage application (or booking) fee:  Some lenders will also charge a ‘mortgage application fee’, which ‘reserves’ your mortgage funds as the deal is drawn up. This generally costs around £200 and is usually refundable should the deal fall through.

-         Mortgage arrangement fee: in addition to any application fee, your lender will recoup costs for the admin of setting up your mortgage through an arrangement fee. This is usually required up-front before the agreement starts, but some lenders allow their customers to pay this back as part of the monthly repayment instalments. Sometimes, cheap mortgage deals are offset by higher arrangement fees so before you commit to any deal it’s important to do your sums and determine whether you really are getting the best deal.

-         Early  repayment fee: in the instance that a fixed rate arrangement is closed down (usually because you’re moving house or switching lender), many lenders will charge what’s referred to as an ‘exit fee’.

-          Valuation / survey fee:  whether you’re buying a grade II listed building or a brand new house, it’s really important to have it inspected by a qualified surveyor beforehand. Different levels of surveys can cost anywhere from £150 to £1,000 and beyond, and the one you’ll need to go for will largely depend on the property you want to buy.  Although this might seem like an extra expense that’s not strictly necessary, according to RICS, more families are cutting out the building survey from the buying process – and are costing themselves a fortune in the process.

-         Stamp duty: whenever land changes hands in the UK, there is a one-off tax charge to pay known as ‘stamp duty’. Most UK transactions will incur a charge of 1 – 3% of the property’s value, but all houses under £125,000 are exempt from stamp duty and for property over £500,000 the rates start to increase. The highest bracket is 15% for mansions of £2m or over.

-         Legal fees: legal assistance through the conveyancing is another cost that’s absolutely impossible to avoid.  It’s prudent to budget between £500 – £750 for this as legal fees are something you really don’t want to scrimp on.

-         Furnishing: don’t forget that once you move in, money spent on furnishing a property will start to stack up quickly. First time buyers typically spend around 3% of the cost of their property kitting it out with furniture, which equates to a national average of just under £4,000.

 Negotiate a good deal

Although it’s easy to get carried away by period features and exposed brickwork, it’s important not to neglect some questioning when viewing potential properties. If you miss something vital, it could end up costing you a lot more in time and hassle further down the line.

As a general rule, try to secure answers to the following questions before you consider buying:

  1. How many viewings has it had?
  2. How many offers has it had?
  3. How long has it been on the market?
  4. How long is the lease (if it has one)?
  5. What (if any) renovations have been done?
  6. Have there been any subsidence problems?
  7. How long has the seller lived there?
  8. Can I see the EPC (Energy Performance Certificate) reports?
  9. What council tax bracket is this property in?
  10. How old is the boiler and when was it last inspected?
  11. Who lives in the surrounding properties?
  12. What fixtures and furnishings are included in the sale?
  13. Is there any record of – or any obvious – parking issues?
  14. Has the property got a murky past (i.e. has anybody been murdered here)?


These questions should help you to avoid buying a property with hidden drawbacks that may prevent you from being able to sell it easily in the future, as well as potentially help you to negotiate a better deal.

Don’t get caught up in the hype

The internet is rife with predictions for the housing market and there are an awful lot of experts out there willing to offer their two pence. As a general rule, it’s advisable not to get too wrapped up in this. All you can go off is what’s right for you at this moment in time.

That said, it doesn’t hurt to exercise some due diligence. A mortgage is a big financial commitment. Yes, it’s exciting, but that excitement can quickly turn to anguish if you sign up for a deal that is financially unrealistic for you.

Whilst this is by no means an exhaustive list, it does cover all the main, unavoidable costs associated with buying your new home. There can be no doubt that purchasing a property is a costly affair, and for that reason, it’s vital to be prepared. Do your research and build an awareness of the costs you’re facing so you can complete as quickly and easily as possible.

For more information about Aldermore arrangements, check out our residential mortgages product pages for the latest deals and rates, or don’t hesitate to get in touch to be put through to one of our expert mortgage advisors.

The content published on this website is intended to provide information only. The reader should seek advice from experts on the subject matter and independently verify the accuracy and relevance of any information provided here before relying upon it or using it for any reason. You can view our terms and conditions here.

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