Hidden costs of buying a house​

What's it all about?

This article's designed to help you:

• Build a clearer picture of what it costs to buy, move into and live in a new home.
• Organise your finances ahead of time
• Make the most of benefits and avoid pitfalls

Buying a house – particularly if it’s your first time – can be a pretty daunting prospect. The whole process is packed with little rules and costs that are all too easy to overlook if you’re not used to them. Yes, taking on a mortgage means shouldering the biggest single debt that most people will carry in their lives – but there are plenty of other expenses involved and you’ve got to keep them all factored in to keep your financial feet. Here’s a quick breakdown of the biggest hidden costs of house buying.

Stamp Duty

Stamp Duty Land Tax (or SDLT) is a tax you have to pay when you buy land or property that’s worth over a certain amount. It applies in England and Northern Ireland, with Scotland and Wales running their own similar systems. Scottish homebuyers, for example, pay Land and Buildings Transaction Tax, while the Welsh pay Land Transaction Tax for sales completed after the 1^st of April 2018.

So, what are the Stamp Duty Rules? Well, you have to pay SDLT when you:

• Buy a ‘freehold property’ (where you own the land the property's built on).
• Buy a new or existing leasehold (where you only own the property for a limited time).
• Buy through a shared ownership scheme (where you split ownership with a landlord).
• Receive property or land in exchange for payment (like buying a share of a house, for instance).

You won’t have to pay Stamp Duty automatically on any property or land you buy, though. There’s a threshold where the tax kicks in, based on the type and value of the property you’re dealing with. For the 2022/23 tax year, for instance, residential properties worth under £125,000 don’t get hit with Stamp Duty. The same goes for non-residential land and property worth under £150,000.

If you’re a first-time buyer, though, things get even better. First-timers buying a home won’t pay SDLT unless their property’s worth over £500,000.

Read our guide: How to budget for stamp duty

The Deposit

Before you even get off the house-buyer starting blocks, you’ve got at least one high hurdle to get over, and that’s the deposit you’ll need. Deposits are simply the down payment you have to make up-front before you can kick off your mortgage. Depending on your mortgage agreement, you could be looking at fronting up a minimum of 5% of the property’s value from the outset – but in many cases it’ll be a lot more.

There’s a careful balance to strike when you’re picking the right mortgage deal for you. The more you can save up as a deposit, the lower your eventual mortgage payments will work out. That means you’ll own your home outright sooner and have to pay less interest along the way. However, deposits can be a serious challenge to budget around, and a lot of first-time buyers feel like they’ll never be able to sock away enough to get a foot on the property ladder. See our guide, “6 Ways to Save for a House Deposit ” for more on this. For now, though, the government’s own mortgage guarantee scheme’s here to make things a little easier. If you qualify for it, you can put down as little as 5% up-front, with the scheme kicking in up to 20% of a newly-built property’s value (or 40% if it’s in London).

6 ways to save for a house deposit

Conveyancing fees

Buying a house comes with a hefty stack of paperwork attached, and dealing with that paperwork costs money. What we call ‘conveyancing’ covers a lot of these fees, which you’ll run into at pretty much every stage of the purchase process. All told, your conveyancing costs (including solicitor’s legal fees, exchanging contracts, etc.) will tend to average out at around £1,040 if you’re a buyer and £1,000 if you’re a seller. Those numbers are based on a typical freehold property price of £277,000.

Survey costs

Whether you’re buying or selling, a property’s condition is an important factor. That’s where surveys come in – along with the price you pay for them. A professional surveyor comes in, checks the property over thoroughly for problems that need fixing, and makes a full report. It’s a specialised and critical job, so you’re looking at anything between £400 and £1,425 on average to get it done. A lot depends on the size and price of the property itself, along with its location and the kind of survey you’re paying for.

Generally speaking, it’s the buyer who foots the bill for this kind of work, after the seller has accepted their offer. There’s a slightly different system in Scotland, though, so check the rules to see where you stand.

Mortgage fees

There are 3 types:

• Valuation Fees

While we’re talking about surveys, your mortgage lender’s going to want to check your potential new home out as well – and they’ll expect you to foot the bill for it. Basically, what’s happening here is the lender needs to know that the property you’re buying is a safe bet for their money to ride on. When you take out a mortgage, you’re essentially putting up the property itself as security for the loan you’re getting. Naturally, enough, the lender’s going to want to give the place a once-over before committing. The costs for this will vary from lender to lender, so make sure to ask questions up-front to avoid any nasty surprises later.

• Arrangement Fees

This one’s supposed to cover the cost of actually setting up your mortgage deal. As with valuation fees, every lender’s going to have their own fee structure for this, so make sure you know what you’re getting yourself into ahead of time. For example, one lender might charge a single flat fee, while another will base the charges on the value of the property – which might be a problem with larger mortgages.

You’ll have a couple of different approaches to choose form here. If your finances are up to it, you might decide to cough up the arrangement fees at the start. As with your house deposit, this can be painful at first but end up saving you money down the line. If you decide to lump the fee into the total mortgage amount instead, you’ll spread the payment out over the lifespan of your repayments, but get hit with extra interest charges along the way. Depending on your situation, picking a mortgage with a higher interest rate might actually work out better if it brings the arrangement fee down enough

• Broker Fees

With all these factors to weigh up, picking the right mortgage and lender can be tough. That’s why so many buyers find themselves coughing up £400-£500 to a mortgage broker for advice. Not every broker works or charges the same way, though. Some, for instance, might not actually charge a fee at all, getting a commission from the lender instead. Others will do both.

Estate agent fees

Estate agents tend to base their charges on a percentage of the sale price of the property they’re handling for you. This means you’re typically looking at a fee of 0.75% to 3% of the property price plus VAT. This can vary depending on the type of contract you’ve got with them – so again, go in with your eyes open so you don’t get caught unawares by this.

Life insurance

Mortgage life insurance is a system designed to help your dependents cope with the costs of your remaining mortgage payments if you die. The last thing you’ll want is to leave your family without enough insurance cover to clear the amount left on your mortgage, so make sure it all adds up. Getting the maths right is important here. A decreasing term life insurance policy, for instance, will pay out less each year. To get the balance right, make sure the coverage is enough to handle the entire mortgage from the start, then arrange the length of the policy so it keeps pace with the amount you’re paying off in mortgage repayments each year.

Removal costs

Home-buying costs don’t stop mounting up the moment the ink’s dried on your contract. Even once the property’s yours, you’ll still have bills to pay. With removals costs, what you’re paying to move in has very little to do with your new home. Instead, it’s all about how much stuff you’re bringing from your old one. The more you’re shifting, the more you’ll be charged.

If you’re up to it, it’s perfectly possible to take care of the removals yourself, but you’ll still be footing the bill for van hire and fuel – not to mention the time it all takes. Weigh up your options either way and plan ahead.

Furniture and white goods

Even once you’ve moved all your existing stuff into your new place, you might not be finished. Maybe you’re moving into a bigger place than before, so your old furniture’s no longer fit for purpose. The previous occupant of the place, assuming there was one, probably won’t be leaving much of their own stuff behind, so remember to add in the costs of anything extra you need to buy to flesh out your new living space.

Redecorating

Maybe you’re lucky and your new home’s absolutely perfect for you. That’s great – but the rest of us will at least want to get a bit of redecorating done. Adding your own personal flair is what makes the difference between a house and a home, and it all costs money. Once again, this is something you can handle on your own if you’ve got the tools and the talent. If not, though, you’ll be looking at additional costs to call in the professionals. Even if you’re going full-on DIY, you’ll need to splash out on paint, brushes, ground sheets and so on.

Read our guide: How to save on home repairs

The cost of owning your own home

So there you have it. There’s a lot more to it that just buying it and moving in. Once you’re all settled, the real work – and costs – begin. Obviously, you’ve already thought about your monthly mortgage repayments. Beyond those, though, you’ve got water and energy costs to consider. Those alone can add hundreds of pounds to your monthly costs. Then you’ve got charges for your phone, broadband and TV services, which will largely depend on the packages you choose.

Read our guide: 6 ways to save on gas & electric

There’s also Council Tax to think about (see our guide, “Council Tax Debt Help: Where Do I Start ?” for more) and insurance costs to deal with. Depending on the band you’re in, Council Tax can range from hundreds to thousands of pounds over a year. Insurance costs will be based on the kind of cover you’re paying for (buildings, contents, etc.) and other factors from the value of your home to the materials it’s made from and the measures you’re taking to protect it.

Help with council tax debt

The list goes on. If you park your car in the street, for example, there may even be an additional charge for this – along with any permits you might need to buy for friends and family. For leasehold properties, there’s often a yearly ground rent and service charge to pay. Depending on your agreement, you might also have to contribute toward work done on common areas or the structure itself.

Your home might’ve been in perfect condition when you bought it, but over time you could lose tiles from the roof or need to fix water leaks or replace a dodgy boiler. It all mounts up, and you need to be prepared for it.

Keep checking back here for more money tips and updates. We’re experts at saving you cash and we’re always here to help. That’s the reason why you’re better off with RIFT.

RIFT Roundup: what it all means

• Stamp Duty Land Tax (SDLT): A UK tax you pay when you buy most kinds of land and property.
• Conveyancing: The deeds, leases and other paperwork that come with transferring ownership of land or property.