Your home may be repossessed if you do not keep up repayments on your mortgage
There are a number of costs that you may not even think about when you’re moving home. So we’ve listed some of them in this article to help limit the number of financial surprises you may encounter in your home-buying journey. We’ve given an example of what the costs might be. However, make sure you check before you rely on the figures – they all depend on your individual circumstances.
It’s usual to hire a solicitor to deal with all the legal aspects of buying your home. They’ll keep you right and make sure that you know what the costs related to your move are, and when they’ll fall due. Legal fees generally cost between £500 and £1,500 so get a quote from a few solicitors – it could end up saving you hundreds of pounds. Ask friends and relatives if they can recommend a good solicitor or look at the The Law Society of Scotland website.
In Scotland you pay a Land and Buildings Transaction Tax (LBTT) on property purchases. It replaced Stamp Duty in Scotland on 1st April 2015. It offers a progressive structure that operates thresholds, much like the UK’s income tax rates. The thresholds are shown below, alongside the rate of tax applicable.
If you’re buying a property worth £275,000 then the LBTT you would owe would be:
£0 + £2,100 + £1,250 = £3,350
LBTT is due within 30 days of the date of your completion. Your solicitor should advise you of this and make sure you have the funds to pay it.
In England and Wales you pay Stamp Duty Land Tax. It’s a lump sum that anyone buying a property valued at over £125,000 has to pay. Since 2104 a new system has been in place that means that you only pay the rate for the proportion that’s over each threshold. It’s sounds complicated, so here’s an example to illustrate the costs.
If you’re buying a property worth £275,000 then the stamp duty you owe would be:
So the total stamp duty payable would be £0 + £2,500 + £1,250 = £3,750
Stamp duty is due within 30 days of the date of your completion. Your solicitor should advise you of this and make sure you have the funds to pay it.
These can vary quite a lot depending on the type of mortgage you apply for. You may prefer to pay whatever these costs are up front rather than adding them to the cost of your mortgage. If you add them to your mortgage you’ll be paying interest on them for the full term of the loan/mortgage.
These occur when your mortgage lender assesses the value of your property. These generally cost between £150 and £1,500 based on the value of the property. This valuation is not an extensive survey so you may want to have an independent survey carried out to identify all the repairs and maintenance that the property requires.
In Scotland every house for sale has a Home Report. It will include a survey by a qualified surveyor. It will list the condition of the property, any repairs that are required and a valuation of the property (based on current market value). The Home Report is paid for by the seller and is available to all potential buyers.
You may decide to have a further, more detailed survey done. You can have a building or structural survey done. It’s the most comprehensive survey and is generally used for older, or non-standard, properties. This can cost from £600 upwards. But it can be a useful thing to get done. It will highlight any potential problems that might cost a lot of money to repair.
In England and Wales, you have to engage a surveyor yourself, as there’s no equivalent of the Home Report. Which means it’s the buyer who has to commission a survey. It’s important you do this, as it will identify any issues with the property before you buy it. Surveys can range from a basic home condition survey (at around £250) to a full structural survey (starting at about £600).
It’s a cost that could save you money later so it’s always worth getting a survey done for peace of mind.
Buildings insurance protects you should your home suffer from damage such as fire, flood or subsidence. Your mortgage lender will require that you have this in place. Contents insurance covers all your possessions in the event of loss or damage. Make sure you give a realistic valuation of your contents – to make sure you have enough insurance to cover the cost of repair or replacement.
Life insurance is a policy that will, ideally, pay off your mortgage if you die before you’ve repaid the full loan amount. It gives your dependents some security should the worst happen. You can also take out critical illness cover. It can help you remain financially protected against the impact a critical illness could have on you and on your family’s ability to repay your mortgage.
These are only paid by sellers of property, not by buyers. So if you’re a first-time buyer you don’t need to worry about these.
These generally cost between £300 and £1,000, but it depends on the size of the property and how many possessions you have. The costs can be higher than this if you are moving a lot of possessions or moving a great distance.
This is based on where you live and the valuation band placed on your property by the local council. You can see how much council tax you’ll be charged by looking at your local council website and seeing what band your property falls under.
Ask the seller how much they spend per annum on their gas, electricity, landline and broadband. This will give you an idea of how much your utility bills are likely to be. Make sure you do a bit of shopping around when you move and see if you can get a better deal.
There are lots of costs when you move house. Make sure you plan for them all and you can avoid a potential financial squeeze. Planning ahead makes your life a lot simpler.
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