Hidden Costs of Buying Your First Home

First-Time Home Buying Guide

So, you’re considering buying your first home. Firstly, pop the cork - congratulations is in order. You’re going to be on the property ladder! Buying your first home is an exciting time, but it can be a little confusing, especially as there are so many things to remember and a lot of jargon involved.

When it comes down to the money you’ll need to buy your first home, there are some hidden costs to be aware of, particularly during times of financial uncertainty brought about by a cost of living crisis. In fact, our recent Health, Wealth and Happiness Report highlighted that 39% of Brits admitted that the pandemic negatively impacted their household finances and 45% of Brits fear rising bills, meaning looking after your money is even more important than ever.

We’ve researched the average costs of solicitor/conveyance fees, surveyor fees, average furniture price, leasehold price, stamp duty fees, removal van fees and your deposit.

Our research highlights first-time buyers in the UK can expect to pay an average of £35,839 in hidden costs, with costs soaring to £46,844 in the East and £76,742 in London.

Make sure to read through our first-time home buying guide to make sure you’re aware of all of the dos and don’ts when it comes to buying your first home.

This Guide Will Cover: 

• Average Hidden Costs of First-Time Home Buying in the UK
• First-Time Buyer FAQs
  
  - What Is Stamp Duty?
  - How Much Is Stamp Duty?
  - What Is The Difference Between Freehold and Leasehold?
  - How Much Are Solicitors’ Fees For Buying A House?
  - What Is A Home Buyer’s Survey and What Is Included In One?
  - Do I Need Mortgage Protection?

• Buying A First Home Checklist and Further Information
• You’ve Moved In, What’s Next?

Have a read through our first-time home buying tips for all you need to know.

Average Hidden Costs of First-Time Home Buying in the UK

• North East - £22,387.69
• North West - £28,066.69
• Yorkshire & Humber - £27,434.99
• East Midlands - £31,048.99
• West Midlands - £32,046.59
• East - £42,688.29
• London - £76,742.54
• South East - £46,844.09
• South West - £39,727.39
• UK Average - £35,839.99

Frequently Asked Questions About Buying A First Home

What Is Stamp Duty?

Stamp Duty Land Tax, also known as SDLT, is a fee you must pay when buying a property or land over a certain price, in England and Northern Ireland. No matter whether you buy a freehold or leasehold, buy a share in a house or are involved in a shared ownership scheme, you need to pay stamp duty.

How Much Is Stamp Duty?

Stamp Duty only applies to properties over £250,000. The amount of Stamp Duty you pay will depend on a number of factors, including how much your property is, when you are purchasing it and whether you’re eligible for Stamp Duty relief. You can use Gov.uk’s Stamp Duty Calculator tool to find out exactly how much Stamp Duty you can expect to pay.

Note to first-time buyers - from September 2022, first time buyers became exempt from paying Stamp Duty on properties up to £425,000, which is great news for many first-time buyers.

What Is The Difference Between Freehold and Leasehold?

Learn the difference between freehold and leasehold properties and don’t get caught out by this one.

Freehold - If you own a freehold, you will own the house and the land the house is built on, for an unlimited amount of time. The Civil Aviation Act 1982 states that with a freehold property, you'll also 'own' and have rights to the 'airspace' above your property too, up to about 500 feet.

Leasehold - If you own a leasehold, you will own the house but not the land the house is built on. The leasehold is set for a specific amount of time (varies from years to centuries you will need to check your deeds). If your lease expires, ownership of your property technically passes to the freeholder. You can find a guide on extending your lease here.

How Much Are Solicitors’ Fees For Buying A House?

Altogether, the average solicitor and conveyancer fee will total around £2,339 (data from 2022). When buying your first home, you will need a solicitor or conveyancer to complete the legal paperwork required. The fees are likely to be between £850 and £1,500 including VAT at 20%, depending on their seniority and expertise.

Along with this fee, they will also carry out searches on your home, which will cost between £250 and £300, plus additional fees as necessary, taking the total up to £2,339. 

What Is A Home Buyer’s Survey?

A home buyer survey is an expert inspection of a property's condition, carried out by a surveyor, which identifies problems to a prospective buyer. A basic survey might only take an hour to complete, whereas a mid-range to complex survey could take three hours or more. Home buyer survey costs vary hugely depending on the type of survey you get and what is included.

If you're buying a new build home, you won't need a fully-fledged house survey. However, you may want to consider a snagging survey to check the workmanship of your home. 

What Is Included In A Home Buyer’s Survey?

• A visual inspection of all major indoor features including ceilings, roof, walls, bathrooms, permanent outdoor buildings and exterior including gutters, walls, windows and roofing. 
• Inspection of heating, drainage, electric, gas/oil and water services. 
• An energy efficiency rating. 
• Confirmation of any serious structural problems with the building e.g. subsidence. 
• An inspection of damp-proofing, drainage, insulation, and damp test of the walls to ensure damp is not present in the property. 
• An inspection of timber for woodworm.

Buying A First Home Checklist

When buying your first home, or deciding whether you can afford to get onto the property ladder, it’s good to consider the costs behind the following.

• Solicitor/Conveyance Fees
• Surveyor Fees
• Furniture and Appliances Cost
• Leasehold/Freehold
• Stamp Duty 
• Removal Van Fees 
• Deposit

You’ve Moved In, What’s Next?

You’ve ticked everything off the checklist, and now officially own your home. Along with the birth of a child, owning a home is one of the top life events which prompts people into thinking about insurance.

A home is probably one of the biggest financial commitments you’ll ever make, so it makes sense to cover it, especially in times of such financial uncertainty.

Having the right insurance is key. Mortgage protection gives people the security and protection they need, especially in light of the cost of living crisis, and ensures people have peace of mind in case somewhere down the line, they struggle to keep up with their mortgage payments.

If you die before your mortgage is paid, mortgage life insurance covers the outstanding balance. This means that your loved ones don’t have to absorb your mortgage debt and, if it impacts your family home, your death doesn’t force people you love to sell up and move on. Mortgage life insurance is an additional cost, which is in most cases not mandatory, but is recommended when buying a home as it will take the financial strain off your family should the worst happen.

Emma Walker, from LifeSearch, commented: “Buying your first home should be an exciting time in your life, and not a time to be worrying about hidden costs along the way. A home is probably one of the biggest financial commitments you’ll ever make, so it makes sense to insure it, especially in times of such financial uncertainty. Cover such as mortgage life insurance is recommended when buying a home as it will take the financial strain off your family should the worst happen.”

If you have questions regarding anything you’ve read in our guide, or you’d like to get life insurance advice or quotes, speak to one of our advisors today.

References

Average house price - www.ons.gov.uk/economy/inflationandpriceindices/bulletins then go to /housepriceindex/july2022
Furniture - www.ikea.com/gb/en & www.argos.co.uk - Essential/priority furniture only. Cheapest option for each piece of furniture used. 
Deposit - If individuals put a 10% deposit down 
Solicitor fees - www.comparemymove.com/advice/buying-a-home/solicitor-fees-when-buying - The UK average price used for all regions
Stamp Duty - www.moneysavingexpert.com/mortgages/stamp-duty
Removal Van Fees - www.comparemymove.com/advice/removals/planning/removal-company-cost - The UK average price used for all regions
Leasehold charges - www.propertyinvestortoday.co.uk/breaking-news/2021/4/majority-of-leasehold-homeowners-consider-service-charges-unfair-research-finds
Survey fees - hoa.org.uk/advice/guides-for-homeowners/i-am-buying/how-much-does-a-house-survey-cost - Gone for survey 1 only and the middle of the amount (e.g. 300-500 is 400)