What Are The Hidden Costs Of Buying A Home?
The average house price in the UK may still be on a slippery slope, but homes are by no means inexpensive in this country, where hidden costs lie in wait for unsuspecting buyers. In order to adequately compare mortgages buyers must know exactly how much a new property will cost them. Here are a number of hidden costs associated with buying a home to look out for.
Buyers should be aware that stamp duty – a type of tax on land and property – applies to all properties valued at £125,000 or more. In his 2012 Budget, Chancellor George Osborne made a number of alterations to stamp duty.
Existing stamp duty thresholds increase in proportion to the value of property. A house worth between £125,000 and £250,000 is subject to a duty of 1 per cent of the sale price. This figure extends to 3 per cent for properties valued at £250,000 to £500,000 and rises to 4 per cent for those worth more than £500,000 but less than £1 million.
Properties valued at between £1 million and £2 million will continue to be subject to a 5 per cent stamp duty, while properties exceeding £2 million will attract a 7 per cent charge. If a property sold for more than £2 million is purchased through a company, 15 per cent duty will be charged.
Ensuring that a property is structurally sound and on sale at a reasonable price ought to be important concerns for buyers. A valuation enables the prospective buyer to assess a property before committing to the sale. The valuation is usually carried out by a chartered surveyor.
Buyers need to be careful when requesting a valuation for a property. Some valuations are free, but surveyors or lenders often charge for sending out a surveyor. This charge is likely to be in the region of £250 or more.
A full structural survey will cost substantially more (at least £500) but could help to save money in the long term. Full structural surveys expose faults and damage that could result in many thousands of pounds’ worth of repairs in the future, so this cost ought to be regarded as necessary.
Legal fees can always threaten to spiral out of control if complications arise, but an experienced conveyancer can save many clients from a headache in the future. A typical conveyancing fee starts at around £400, but figures vary from one firm to the next.
Conveyancers help clients through the legal process of buying a home, so their role is certainly essential. Documents and contracts can be checked by conveyancers to ensure that there are no problems. Conveyancing also exposes possible problems with the property, such as easements (rights of way) and restricted covenants. Property owners don’t want to find out later that their driveway can be accessed legally by a neighbour or that they are unable to change a feature of their home.
It is important for prospective buyers to check that a conveyancing quote includes the full range of features available. Buyers ought to ensure that Land Registry charges, bank transfer fees, correspondence, property checks and VAT are covered by the fee.
Finally, buyers should be aware that there are plenty of other hidden costs, including the mortgage lender’s fee, deposit, insurance, moving costs, reconnection of service charges, decoration and so on. Buyers should also ensure that they compare mortgages carefully before committing to a purchase. If they fail to compare mortgages, they could end up paying more in interest and other charges such as mortgage indemnity guarantees.