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 will 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 fees involved when buying a house for the first time.

Contents

Deposit

  • What is a deposit on a house?
  • How much is a deposit on a house?
  • How do I get a deposit for a house?

Mortgage

  • What is a mortgage?
  • How much is a mortgage?
  • How do I get a mortgage?

Stamp Duty

  • What is stamp duty?
  • How much is stamp duty?
  • Stamp duty for first time buyers

Surveyor Fees

  • What is a property survey?
  • How much are surveyor fees?
  • How do I pay my surveyor?

Conveyancing Fees

  • What is conveyancing?
  • How much does conveyancing cost?
  • How do I find a Solicitor?

Estate Agents Fees

  • Don’t I need to pay an estate agent too?

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 the deposit on a house?

It’s the money you pay upfront towards the cost of your home. The size of your deposit can affect the size of the mortgage you can get, and whether you can get one at all. The rest of the money is covered by your mortgage.

Deposits are usually made up of savings, financial gifts from family members or inheritance.

How much is a deposit on a house?

It’s usually between 5% and 20% of the purchase price of the home you are buying. According to the Lloyds Banking Group (January 2023) in 2022, the average first-time deposit for the whole of the UK was £62,470 1 (or 21% of the total cost of the property 2). However, it’s important to remember this will vary depending on where you live.

For example, if you were to purchase a property in Greater London, you’d be likely to need a much larger deposit than elsewhere in the UK. Lloyds found the average deposit for a first-time buyer in 2022 in Greater London was almost 67% higher than the UK average – sitting at £125,378 1.

The larger your deposit, the lower your Loan to Value (LTV) will be, which will mean lower monthly mortgage repayments.

How do I get a deposit for a house?

The short answer is that you’ll probably need to save up – unless you’ve already got savings, family who can help or you’ve received an inheritance. 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. This means if you can’t keep up your repayments against the money you’ve borrowed plus the interest which is added, the lender can repossess (take back) your home and sell it to get their money back.

There are many different kinds of mortgages, ranging from fixed-rate mortgages (where the monthly interest rate on repayments remains fixed for a set period of time) to standard-variable rate mortgages (where lenders have their own standard-variable rate which can go up or down; it’s usually much higher than a fixed-rate).

What is the loan to value (LTV) on a mortgage?

Loan to value (LTV) is the ratio between the amount you want to borrow against the value of a property and your deposit. It’s a percentage value.

For example, if you have a deposit of £20,000 for a property with an asking price of £200,000, you’ll need a mortgage of £180,000 to complete your purchase.

In this instance, your deposit would be 10% of the property purchase price, meaning your LTV would be 90%.

Higher LTV ratios present a higher risk to lenders – as they’re lending a higher sum. It means interest rates and fees are often higher as a result. The lower your LTV, the more likely you are to get a mortgage and access one with a better interest rate.

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, based on your LTV.

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.

Lloyds Banking Group found the average monthly cost of buying a home in the UK reached £971 in 2022 3.

How do I get a mortgage?

You can get a mortgage directly from a bank or building society, or you can use a mortgage broker. A mortgage broker may charge a fee, but they will help you find the best rate and arrange the mortgage for you.

In order to prepare for the application process, you’ll need to collect a number of documents. These can include:

  • Your last three months payslips
  • Your P60 form from your employer
  • Your current bank account statements from the past three to six months
  • Your passport or driver’s license (for identification purposes)
  • Your accounts for the past two or three years from your accountant – if you’re self-employed
  • Your tax return form SA302 if you have earnings from multiple sources or if you’re self-employed
  • Your recent utility bills

It’s worth checking your credit rating with the three main credit reference agencies before making your application – Equifax, Experian and TransUnion.

Having your finances in order – i.e., making sure you’ve paid or reduced your debts – will help to ensure your credit score is in the best place. Ultimately, your credit score will have an impact on whether your application is successful or not.

You may be offered a Decision in Principle (DIP) or an Agreement in Principle (AIP), which is a statement from a lender outlining the amount they’ll lend you before you finalise the purchase of your first home. However, this is not a mortgage offer – but it is a big step towards getting a mortgage.

Stamp Duty

What is Stamp Duty?

Stamp Duty Land Tax (to give it its full name; you’ll also see it referred to as SDLT) 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
  • £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.

England and Northern Ireland Stamp Duty Rates

Property purchase value  Stamp Duty rate
Up to £250,000 0%
£250,001 to £925,000 5%
£950,0001 to £1.5 million 10%
Above £1.5 million 12%

Rates updated on 23/09/2022 (valid until 31/03/2025).

Scotland Land and Buildings Transaction Tax rates

Property purchase value LBTT rate
Up to £145,000 0%
£145,001 to £250,000 2%
£250,001 to £325,000 5%
£325,001 to £750,000 10%
£750,000 and over 12%

Wales Land Transaction Tax rates

Property purchase value LTT rate
£0- £225,000 0%
£225,000- £400,000 6%
£400,000- £750,000 7.5%
£750,000- £1.5 million 10%
£1.5 million and over 12%

Residential property rates from 10/10/2022

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 for first time buyers

The rules around Stamp Duty differ for first time buyers. Following September 2022’s mini-budget, 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 you 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 LBTT-free limit for properties bought by first-time buyers is £175,000.

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, and 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 property 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 before you finalise your purchase.

Property surveys are conducted by expert surveyors and focus specifically on examining the condition of the property to build up a full report.

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?

You’ll find different types of surveys available. These include:

  • RICS (Royal Institution of Chartered Surveyors) Valuation – an assessment of a property’s value, looking at its general condition, its size, its features, its location, house prices in the local area and recent sale prices.
  • RICS Level 1 Survey – an assessment of the property’s condition, any risks or potential legal issues, and any urgent defects.
  • RICS Level 2 Survey (HomeBuyer Report) – a thorough assessment of external and internal elements of the property, as well as the overall condition of the home, services, such as gas, electricity, water and drainage. It also features a traffic light system to highlight the severity of any issues identified and any urgent repairs that are required.
  • RICS Level 3 Survey (Building Survey) – this is the most comprehensive option available, providing an in-depth assessment of structural defects, hazardous materials, signs of dampness, the property’s construction material, damage to roof or structural timber, potential repairs required for urgent defects and structural work completed without permission.

Depending on the type of survey you choose, you can expect the price to vary quite significantly. According to research carried out by Compare My Move, the average UK house survey costs between £320 and £800 (based on a house price of £267,000) 4.

Bear in mind that you could end up paying for a survey and the sale might later fall through.

How do I pay my surveyor?

You can sometimes ask your mortgage lender to upgrade their valuation to a full survey so you pay the difference – this can be cheaper. However, if you have your own surveyor you will have more control over the process and be less likely to pay for surveys on purchases that fall through.

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 conveyancing cost?

Conveyancing fees can typically be split into two separate parts – the legal fees (the amount your solicitor charges for doing the work) and the disbursements (the amount third parties charge for services, such as searches).

The amount you’ll spend on legal fees will vary depending on a number of factors, including, but not limited to:

  • Whether the property you’re buying is leasehold or freehold
  • Whether you’re using a solicitor or a licenced conveyancer
  • Where in the UK your solicitor or conveyancer is based
  • Whether you’re using a scheme such as Shared Ownership, or Right to Buy to purchase your property
  • Your property’s price
  • Any additional searches that need to be made – for example, if your property is near a river

Likewise, the amount you’ll spend on disbursements can also vary significantly. These disbursements can include:

  • Anti-money laundering checks to verify your identity
  • Local authority searches, such as drainage and environmental searches
  • Telegraphic or bank transfer fees
  • Stamp Duty
  • Lifetime ISA
  • Gifted deposit fees to prove the source of your deposit

Compare My Move has reported the average legal fees as ranging between £1,270 and £1,490 (for buying and selling properties both leasehold and freehold valued between £201,001 and £300,000 5. However, they could be higher.

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.

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.

References

  1. Lloyds Banking Group. (2023). Average house deposit for first-time buyers in the United Kingdom (UK) from 2021 to 2022, by region (in GBP). Statista. Statista Inc.. Accessed: November 17, 2023.
  2. Lloyds Banking Group. (2023). First-time buyer average deposit as a share of purchase price in the United Kingdom (UK) in 2022, by region. Statista. Statista Inc.. Accessed: November 17, 2023.
  3. Lloyds Banking Group. (2023). Average monthly costs of buying a home versus renting an apartment in the United Kingdom (UK) from 2012 to 2022 (in GBP). Statista. Statista Inc.. Accessed: November 17, 2023.
  4. Compare My Move (January 3, 2023). How Much Are Conveyancing Fees in 2023? Accessed: November 17, 2023.
  5. Compare My Move (January 3, 2023). How Much Does a House Survey Cost in 2023? Accessed: November 17, 2023.

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.