Extra costs & solicitor fees when buying a house
What extra costs & fees could you be liable to?
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Extra costs & solicitor fees when buying a house
Looking at the extra costs and solicitor fees involved when buying a house...
When it comes to buying a house, we are all familiar with the typical costs involved: estate agent's fees, conveyancing fees, and moving fees are all standard, but what about the extra costs that come along with buying a house?
On this page, we will be looking at the expected and unexpected fees that come with both buying and selling a house.
What extra do you have to pay when buying a house?
Now that we have looked at the costs involved with selling a house, we can look at the costs you can expect when it comes to selling.
As you will already be aware, you will have the estate agent's fee to pay, but are there any others?
Below we take a look at some of the fees you will need to look out for when buying your next home:
Deposit
One of the most important upfront fees you will have to pay when buying a house is the deposit. The deposit is the amount you put towards your home when you purchase your home.
A deposit is usually a minimum of 5% of the total property price and can range from 5% to 20%.
The more money you have in your deposit, the more likely you will be to secure a mortgage and the lower your interest rate will be as a result.
Valuation fee
When it comes to purchasing a property, your lender will assess the value of the property to make a decision on how much they will lend you.
Exactly how much a valuation will cost varies from property to property, but they can be anywhere between £150-£1,500 based on the property's value. Whether or not you will pay for your valuation depends on your lender and the mortgage product that you have chosen.
It is worth bearing in mind that the lender's valuation is very superficial and so may not pick up on any potential issues like a survey would.
Surveyors fee
Before you commit to purchasing a property, you should get it checked by a surveyor. A surveyor will conduct a search of your property and uncover any potential problems that it may bring.
The exact price of a survey varies depending on the type you commission. A basic home condition survey can cost around £250, whereas a full structural survey can cost £600 or more.
Whilst it may be costly, paying for an in-depth survey may help save you money in the long run.
Legal fees
Unless you are very confident in your ability to progress a legal house sale, then chances are you are going to need to hire a conveyancer or a conveyancing solicitor to help you tackle the legal side of the house sale.
Legal fees vary from sale to sale, depending on the type of property, location of the property, and complexity of the case amongst other factors.
They are typically £850-£1,500 including VAT at 20%. Your conveyancer or conveyancing solicitor will also conduct local searches that will cost you £250-£300, to make sure that there are no local plans or problems in place.
Electronic transfer fee
When you transfer your mortgage funds from the lender to the solicitor, you will be charged an electronic transfer fee. This will usually cost you between £40-£50.
Estate agent fee
Whilst they may seem like an obvious cost, many people forget to include them in the final tally. Estate agent fees are another cost that can vary from property to property and estate agent to estate agent.
They are often negotiated after the property is put on the market and can cost between 1- 3% of the sale price plus 20% VAT.
Stamp duty land tax
Stamp duty tax is a tricky cost that is paid when you purchase a property in England and Northern Ireland.
Exactly how much stamp duty you will be liable to pay will depend on the property you have purchased, the location of your property and your status as a home buyer
Stamp Duty rates were announced on 23 September 2022 as part of the mini-budget and will stay the same until 31st March 2025.
You pay stamp duty if your residential property costs more than £250,000 unless you are a first-time buyer. If you are an eligible first-time buyer, then you will pay no stamp duty on properties costing up to £425,000.
If you are purchasing a second home, then you will pay an extra 3% stamp duty on properties costing more than £40,000.
In order to work out how much stamp duty land tax you owe, you can check out free stamp duty calculators online.
How do I get a refund from a Stamp Duty UK?
The good news is that it is possible to get a refund from Stamp Duty. If you sell your main property within three years of completing on your new property, then you will be entitled to claim a stamp duty refund.
If you have bought your main residence on the 1st of January 2017 or after, then you may be eligible for this refund.
If your claim is successful, you will receive a 3% surcharge, which is the amount you would have been charged had the home not been an additional property.
In order to apply for your refund, you simply need to fill in an online form, print it off and post it to HMRC.
According to The Times, in order to be able to process your claim, HMRC will require the following information:
Your name and address
Address of the property where you paid the higher rates of Stamp Duty Land Tax (SDLT)
SDLT transaction reference number
Address of the property you have sold
Sale date
Buyer's name
How much tax you paid on the property that attracted higher SDLT rates
How much tax repayment you want
Bank account and sort code details of who is entitled to the payment
After HMRC has received all of the relevant information, they will be able to process your refund within 15 working days.
Ongoing costs when buying a house
Now we have covered some of the upfront costs that purchasing a property brings with it, we can delve deeper into the ongoing costs involved.
Below, we take a closer look at what you may expect during your house purchase:
Insurance
Often your lender will require you to take out buildings insurance.
This protects your property against any issues that may crop up, such as subsidence, fire, floods, or any other potential problems. You don't have to take out buildings insurance, you are able to shop around and find your own deal.
Whilst not mandatory, it is also wise to take out life and contents insurance, as these will cover you in the event of the worst happening.
Council tax
Council tax is the annual fee that your local council will charge your local council for services it provides, like rubbish collection and libraries, It is typically paid in ten monthly instalments, followed by a two-month break.
Exactly how much council tax you will pay depends on the valuation band the property is classed in, as well as the location of the property.
Basic running costs
Before purchasing, it is a good idea to ask the sellers how much they spend on running utilities, such as water, electricity, and gas - every year.
You should also remember to factor in your phone charges, as well as charges for TV packages and broadband.
Maintenance & repairs
On average, new homeowners can expect a bill of around £5,750. It may be more or less than this depending on the results of your survey.
Hidden costs when buying a house
You may think that once you have found your new home that the extra costs are over.
Wrong! Even once you have found your new dream home, there are still extra costs that will need to be paid before you can get packed up and moved out.
Below are some of the extra hidden costs you may need to be aware of:
Storage costs
Before the big day rolls around, it is a good idea to start shopping around for storage quotes. This way you can get an idea of what the average cost may be, and be able to start looking for deals early.
Postage redirection costs
An aspect some people forget about in the buzz of moving house is what will happen to the post that you will still have coming to your property. Thankfully, the Royal Mail has a redirection service that for a fee will forward all of your post to your new address.
Cleaning costs
If you have been renting whilst looking for your next property, then a cost you may want to consider is cleaning. Will you hire a professional cleaner to give the property a once-over?
House removal costs
When it comes to hiring a removal team it is important to start shopping around early, not only so you can find the best deals, but also so you can do your research beforehand.
It is a good idea to check reviews for your company of choice across a variety of platforms, as well as getting multiple quotes from different companies so you can find the right price.
The average cost of removal is between £300-£600. However, if you don't fancy a team to move for you, you can always rent a van and do it yourself.
Home removal insurance
Once you have found a team that you are happy with, it is crucial that you make sure they are insured.
If you decide to do removals on your own, it is a good idea to take out home removal insurance cover.
Check and see if your current home insurance policy will cover you for this, if you are using a professional firm, you may find that many lenders will cover this.
Extra moving day costs
Even once you have everything packed up and ready to go, there are still little extras that can sneak up on you and add £££ to the grand total.
Extras such as kennels for a pet that you may be moving with, childcare for the kids, and money for takeaways, if you won't have time to cook for the first few days, are all things to keep in mind when budgeting your move.
Cost of moving
When it comes to buying a new home, one of the things you will need to be wary of as a first-time buyer is the legal fees.
The good news is, as a first-time buyer chances are you are chain free and without a property to sell. This means you will cut down on the cost of some of the legal fees, as you will only have to progress one sale.
Depending on who your mortgage lender is, you may get your legal fees covered for you. Many lenders will pay your conveyancing fees, as long as you use one of their approved solicitors.
Some lenders may offer you cash back instead once everything has been completed. If you decide to use your own solicitor, then you will need to have this cleared by your mortgage company, as when they do legal work for you, they are also doing legal work for the mortgage company.
The exact cost of your legal fees is hard to predict as they depend upon a variety of factors, however, you can expect to pay between £800-£1,500.
The final total of your bill will depend upon the price of your property,the condition of your property, the complexity of your case amongst other factors.
What is capital gains tax and when do you pay it?
Another tax that you may have to pay on your new home is capital gains tax. It is a tax that you pay on the profit of any asset you sell that has increased in profit.
An example of capital gains in action would be if you bought a painting for £3,000 and sell it on for $20,000, you will have had a gain of £17,000. It is the amount you make that is taxed, not your earnings.
Whether or not you need to pay the tax depends on how much you have. If all of your gains within the year are under the tax-free allowance, then you will not have to pay it.
Any of the following counts as disposing of an asset:
gifting or transferring it to someone else
getting compensation for it
selling it
swapping it for something else
However, these rules are different if:
You live abroad
Are a company registered abroad
Sell your home
How much is capital gains tax on buying a property?
If you are selling a property in the UK, then there is a chance that you may have to pay Capital Gains Tax.
Exactly how much you will pay will depend on the price of the property when you bought it, against what it was worth when you sold it, and whether your gains throughout the year exceed the limit.
In the following circumstances the rules for capital gains tax are different:
You do not pay if the gain is a gift to a husband, wife, civil partner, or charity.
If the property is a business asset then you may be entitled to tax relief.
If a dependent relative was occupying the property, then you may not have to pay.
However, if you do not fall under these categories, then you will need to work out your gain.
This will be the difference between what you paid for the property and how much you got when you sold it. If throughout the year your combined capital gains are over your allowance for the year, then you will need to pay Capital Gains Tax.
What is land and buildings transaction tax?
If you live in Scotland, then Buildings and land transaction tax is something you may have to pay when you buy either a piece of land or residential property.
You will not have to pay land and buildings tax if the property you are buying is your main residence and costs up to £145,000, even if you are a first-time buyer or if you have owned a property before.
If the property that you are purchasing is a second property with a total cost of more than £40,000, then you may need to pay an additional dwelling supplement of 4%.
How much does it cost to sell a house in 2023?
When it comes to buying a home, unless you are a chain-free buyer, chances are you have to sell a house as well.
The amount of money you can spend on your house purchase will more than likely be governed by how much you spend whilst selling.
Below we have broken down some of the expected costs whilst selling a house, as well as the potential extra costs:
| Service | Cost |
|---|---|
| Estate agent fees | £2,770-£8,310 (1-3% of final sale) |
| Conveyancing fees | £1,690 (+VAT) solicitors legal fee |
| Energy Performance Certificate | £60-£120 (inc VAT) |
| Removal company costs | £1,191 - for a 3-bedroom house, travelling 50 miles |
| Mortgage exit fee | £50-£300 |
| Early mortgage repayment charge | 1%-5% of the outstanding mortgage |
| Porting your mortgage | Up to £450 for a valuation |
| Capital Gains Tax | Varies |
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