Guide

The true cost of buying a home: beyond the deposit

Most first time buyers spend months focused on saving their deposit. It is the big number, the headline goal, the milestone they are working toward. What often catches people off guard is the realisation, usually somewhere during the buying process, that there are significant additional costs on top of the deposit, and that these need to be paid from somewhere.

Underestimating these costs is one of the most common financial surprises in homebuying. This article lays them out clearly so nothing catches you off guard on the day.

Stamp duty land tax

Stamp duty land tax, commonly called stamp duty, is a government tax on property purchases in England and Northern Ireland. Scotland and Wales have their own equivalent taxes.

For first time buyers, there is meaningful relief available. At the time of writing, first time buyers pay no stamp duty on properties up to £425,000. On properties valued between £425,000 and £625,000, first time buyers pay 5% on the portion above £425,000. Above £625,000, the full standard rates apply and no first time buyer relief is available.

It is important to note that these thresholds have changed before and may change again. Always check the current rates directly with HMRC or confirm with your solicitor before budgeting.

On a £300,000 property, the current rules mean a first time buyer pays no stamp duty at all. On a £500,000 property, they would pay 5% on £75,000, that is £3,750. On a £650,000 property, standard rates apply throughout, which could be a cost of over £20,000.

Stamp duty is one of the costs buyers tend to underestimate simply because the relief for first time buyers is generous at lower price points, and many buyers assume they will pay nothing without checking what happens above the threshold.

Solicitor and conveyancing fees

You need a solicitor or licensed conveyancer to handle the legal side of your purchase. This is not optional, your mortgage lender requires it, and the legal transfer of property ownership cannot happen without it.

Conveyancing fees cover two things: the solicitor's own professional fee and a series of disbursements, third party costs that the solicitor pays on your behalf. The disbursements include:

• Local authority searches, which check for planning issues, upcoming road schemes, and other local authority matters that might affect the property. Typically £200 to £350.
• Water and drainage searches, which confirm that the property is connected to mains water and drainage. Usually £40 to £80.
• Environmental searches, which flag potential issues such as flood risk or land contamination. Typically £40 to £80.
• Land Registry fees for registering your ownership, which vary based on the property value. On a £250,000 property they are currently £250.
• Electronic bank transfer fees for moving funds on the day of completion. Usually £20 to £50 per transfer.

The solicitor's own professional fee varies considerably between firms. A straightforward purchase on a freehold property might cost £800 to £1,500 in legal fees alone, while more complex cases, leasehold properties, new builds, or purchases that encounter complications, can cost more.

Budget between £1,500 and £3,000 in total for a standard purchase, and do not simply choose the cheapest quote. A slow or poorly managed conveyancing process can delay your purchase by weeks or even cause it to collapse entirely, at significant personal and financial cost.

Survey costs

A mortgage valuation is not a survey. Your lender will instruct a valuation of the property to confirm it is worth what you are paying, but this is a brief desk or in-person check to protect the lender, not a thorough assessment of the property's condition.

If you want to know what you are actually buying, you need your own survey. For a first time buyer, a survey is strongly recommended, particularly on older, larger, or non standard properties.

There are two main options:

A homebuyer's report is a mid level survey that assesses the property's condition, identifies significant defects and risks, and provides a market valuation. It typically costs between £400 and £900 depending on the property's value and size. It does not cover every aspect of the building in detail, but it gives you a solid overview of any significant issues.

A full structural survey (also called a building survey) is the most comprehensive option. It examines the property in detail, assesses all accessible areas, and produces a thorough report on the condition of the structure and systems. It costs between £600 and £1,500 or more for larger properties. It is particularly recommended for older properties, listed buildings, unusual constructions, or any property where you have noticed something during viewings that warrants investigation.

A survey can save you a significant amount of money. If it reveals a problem, rising damp, structural movement, a roof nearing the end of its life, you have the option to renegotiate the purchase price, ask the seller to carry out repairs before completion, or walk away. Discovering the same problem after you have completed is far more expensive and far more stressful.

Mortgage fees

Some mortgage products carry an arrangement fee, also called a product fee or booking fee. These are typically between £500 and £1,500, though some products have no fee at all.

Arrangement fees can usually be added to the mortgage rather than paid upfront. If you add them to the mortgage, you will pay interest on them over the life of the loan, so the true cost is slightly higher than the headline figure. Whether it is better to pay upfront or add to the mortgage depends on your cash position and the size of the fee.

There is also sometimes a valuation fee charged by the lender, though many lenders include this in the arrangement fee or offer it free. Confirm this with your adviser or lender when you are comparing products.

If you are using a mortgage adviser, ask about their fee structure. Some advisers charge a fee for their service; others are paid by commission from the lender. Both models are legitimate and transparent advisers will explain exactly how they are paid.

Buildings insurance

You are required to have buildings insurance in place from the point you exchange contracts, not completion, but exchange. This is a condition of your mortgage and it is your responsibility to arrange.

Buildings insurance covers the structure of your home against risks including fire, flood, subsidence, and storm damage. The cost depends on the property, your location, and the level of cover you choose, but for a standard property expect to pay anywhere from £150 to £500 per year or more.

You do not have to use your mortgage lender's insurance product, despite any suggestions to the contrary. You are free to shop around for the best cover at the best price.

Contents insurance

Contents insurance is not a legal requirement, but it would be an unusual decision not to have it. It covers your possessions against theft, fire, and other damage.

Costs vary significantly based on the total value of your contents, your location, and the level of cover. Allow £100 to £300 per year as a rough guide, though it can be higher for valuable items.

Moving costs

The cost of actually moving your belongings is easy to overlook. If you are moving from a rented flat with modest possessions, a hired van and a day's effort might cost you £200 to £400. If you are moving a family home's worth of furniture and belongings over a longer distance, a removal company could charge £1,000 to £2,500 or more.

Get at least two quotes and book early, removal companies in popular areas can be booked weeks in advance, particularly on Fridays and at month ends.

Initial costs of setting up a new home

Depending on the state of the property you are buying, there may be costs immediately after moving in that you had not budgeted for. Redecoration, new appliances, replacement flooring, curtains and blinds, immediate repairs, these can add up quickly.

There is no standard figure here, as it depends entirely on the property and your standards. But it is worth setting aside a contingency of at least £2,000 to £5,000 if you can, so that the first few months of ownership are not financially stressful on top of everything else.

A summary of upfront costs to budget for

Here is a rough guide to the additional costs beyond your deposit for a standard first time buyer purchase at around £250,000:

In total, allow for between £4,000 and £13,000 on top of your deposit, depending on your choices and circumstances. For most buyers, a figure in the middle of that range is realistic.

The short version

The deposit is the big number, but it is not the only number. Stamp duty, solicitor fees, a survey, mortgage fees, insurance, moving costs, and initial home expenses all need to come from somewhere.

Budget for them explicitly and in advance. Running out of money partway through the purchase, or arriving at your new home with no financial cushion at all, is avoidable with proper planning.

If you are unsure what costs apply to your specific purchase, a mortgage adviser can give you a breakdown based on your target price, deposit, and the type of property you are looking at.

Have a chat, no pressure

This article is for informational purposes only and does not constitute financial advice. Always speak to a qualified mortgage adviser before making decisions about borrowing.