How much does it actually cost to buy your first home? What first time buyers need to know
Even if you’ve only just started thinking about buying your first house, you’ll know that it’s going to be expensive. But to help you plan ahead and avoid nasty surprises, it’s good to know more about the costs that are involved.
So, take a deep breath and read on to find out.
The cost of your first home is made up of:
- Deposit
- Mortgage
- Stamp duty
- Surveyor fees
- Conveyancing fees
Don’t forget that once the purchase of your first home is confirmed, there are some other costs you should also consider, like removal fees, new furniture, home insurance, utility bills, council tax and the cost of maintaining your new home.
Deposit
What is a house deposit?
It’s the money you pay upfront towards the cost of your home. The size of your deposit can affect the size of mortgage you can get, and whether you can get one at all.
How much is a house deposit?
It’s usually between 5% and 20% of the cost of the home you are buying. According to the Halifax First Time Buyer Review (Jan 2022) in 2021 the average first-time deposit was just over £53,000 (or 20% of the total cost of the property) although this varies depending on where you live.
How do I get a house deposit?
The short answer is that you’ll need to save up – unless you’ve already got savings, or family who can help. It might be hard and it could take a while. But it’s not impossible and there is even a first time buyer saving scheme, the Lifetime ISA, where the government will contribute to your savings.
Mortgage
What is a mortgage?
A mortgage is a long-term loan from a bank or building society. It’s secured against your home until you pay it off, which means if you can’t keep up your repayments the lender can repossess (take back) your home and sell it to get their money back.
How much is a mortgage?
With that in mind, the size of mortgage you get depends on what the lender and you are confident that you can comfortably afford to pay back. Lenders will look at your income, outgoings and debts if you have them, before deciding how much to lend you. The interest you pay on the mortgage (or the ‘mortgage rate’) will affect how much the mortgage costs overall so you should bear this in mind when deciding what kind of mortgage to get.
Our guide for first time buyers has more tips to help you decide what you can afford.
How do I get a mortgage?
You can get a mortgage directly from a bank or building society or use a mortgage broker who may charge a fee, but will help you find the best rate and arrange the mortgage for you. It will help to have as big a deposit as you can, to have your finances in order, making sure your credit score is good and trying to reduce your debts.
Stamp Duty
What is Stamp Duty?
Stamp Duty Land Tax (to give it its full name) is a lump sum tax which you have to pay if you are buying property or land which costs more than £250,000 in England and Northern Ireland, or more than £225,000 in Wales (stamp duty is referred to as Land Transaction Tax in Wales). In Scotland, you need to pay Land and Buildings Transaction Tax instead of Stamp Duty on properties costing more than £145,000.
How much is Stamp Duty?
How much you pay depends on the cost of the house you are buying: above certain amounts you will have to pay more tax. So in England and Northern Ireland, on properties up to £250,000 there is no Stamp Duty to pay, then on everything between £250,000 and £925,000 you pay 5% and so on. A Stamp Duty Calculator will help you work out the exact amount for the house you want to buy. You can use an equivalent Land and Buildings Transaction Tax Calculator for properties in Scotland and a Land Transaction Tax Calculator for properties bought in Wales.
Stamp Duty and First Time Buyers
Following the recent Budget announcement in September 2022, first time buyers in England and Northern Ireland no longer pay Stamp Duty on properties worth up to £425,000.
If the property you are purchasing is worth up to £625,000, as a first time buyer you will not be required to pay Stamp Duty on the first £425,000, but will pay Stamp Duty on the remaining amount. For example, if a property is worth £500,000 this would mean paying Stamp Duty on £75,000.
Stamp Duty will be paid as normal on properties worth over £500,000, whether you’re a first time buyer or not.
In Scotland the tax-free limit for properties bought by first-time buyers is £175,000, and in Wales there is no extra relief for first time buyers.
How do I pay Stamp Duty?
You have 14 days from the date of completion to pay Stamp Duty in England and Northern Ireland, 30 days in Scotland and Wales. Your solicitor will usually arrange payment and may ask for the money before you complete on the property so they can pay it straight away. It’s best if you can pay Stamp Duty upfront but if you can’t, it’s possible to add it to your mortgage, although you should be aware that the extra interest you’ll pay on this will really add up. A similar process is in place for Scottish Land and Buildings Transaction Tax.
Surveyor fees
What is a survey?
While your mortgage lender will do a property valuation, you can also choose to have a thorough inspection of the property done so you are aware of any problems with it. You don’t have to have a survey, but you run the risk that the property you purchase could have serious issues. Plus, if your survey does find anything wrong, you may be able to use this to renegotiate the price of the house.
How much are surveyor fees?
Depending on the type of survey, which ranges from a Homebuyer Report to a full structural survey, this can vary from £400 up to around £1,425. Bear in mind that you could end up paying for a survey and the sale might later fall through.
How do I pay them?
You can sometimes ask your mortgage lender to upgrade their valuation to a full survey so you pay the difference. This can be cheaper, but if you have your own surveyor you will have more control over the process and be less likely to pay for surveys for purchases that fall through. You can get tips on finding a surveyor in our guide.
Conveyancing fees
What is conveyancing?
Conveyancing is the legal work involved with passing ownership of a property from one owner to another – from the seller to the buyer. You will need to find a solicitor to do this for you. They will also check all the paperwork and do ‘searches’, which means checking for planning permission problems or environmental issues which could trip you up.
How much does it cost?
Depending on the cost of the home you are buying the total cost of conveyancing fees will be around £2,239. You’ll need to make some payments to the solicitor during the process as they incur costs on your behalf.
How do I find a solicitor?
Sometimes your lender will use their own solicitor and you won’t have to pay. But usually you will need to find your own solicitor. Download our first time buyers’ guide for more help on what to look out for when choosing a solicitor.
Estate agent fees
Don’t I need to pay the estate agent too?
No. The good news is that the seller pays the estate agent fees, so if you’re buying your first home, that’s one thing you don’t have to worry about.
Our guide has more advice to help you get the home you really want.
We do not offer financial advice. If you’re unsure as to the suitability of a product you should seek advice from a Mortgage Broker or Financial Adviser. You may have to pay for this service.