Budgeting for buying a house

Owning your own home may be one of your dreams. If that is the case then you are certainly not alone. If you have got your finances in the right place and have nurtured your credit file, there are some great mortgage products that you could be eligible for. Of late, there has even been a return of 5% deposit mortgages. When budgeting for buying a house, you need to make sure that you have covered it all: the last thing you want are unexpected expenses that get you off to a bad start on your homeownership journey.

Read on and we’ll give you a helping hand by showing you all that you’ll need to consider. This means that you will be able to set a realistic budget and know exactly how much you will need.

Valuation fees

As well as looking at the mortgage itself, budgeting for buying a house means that you also need to factor in valuation fees. Any application that you make for a mortgage will involve two basic steps: checking you out and checking the house out. Both are to mitigate the risk that the lender may face. Providing that you are good to go, the lender will want to check how much your future home is worth.

The valuation will be arranged by your lender, but it will be you that has to pay for this. Exactly how much this will cost depends on the value and size of the property, but you can expect the fees to range from £200 up to around £700.

The cost of a survey

Your lender’s valuation will tell you how much they think the house is worth, but that is pretty much all that it will tell you. To make sure that you aren’t walking into a nightmare property, budgeting for buying a house should include survey costs too. A survey is there to check for any structural issues and is for your protection.

You should look at appointing an independent surveyor who is RICs qualified. The most common report that they will provide is the RICs Home Buyer Report. This will look at the general condition of the property that you are looking to buy. Costs vary depending on the value of the property starting at £500 and going up to around £1,500.

Legal fees

Love them or loathe them, there is no getting away from the fact that you are going to have to budget for solicitor fees to buy a house. How much a solicitor costs can vary throughout the country. You will find some that charge a fixed fee while others will look at charging a percentage of the property value. You can expect the fees to range from £500 up to £1,500.

A breakdown of solicitors fees will show you what they have charged for. You will see money transfer fees for transferring money from the lender, a Land Registry fee to record you as the new property owner, and searches that show anything that may have a negative impact on the property that you are buying.

Paying leasehold fees

Something that people may forget when budgeting for buying a house is leasehold fees. Of course, these will only apply if you are buying a leasehold property rather than a freehold one. These fees tend to be fairly consistent regardless of the cost of the property you are buying. You will find that they come in at around the £200 mark.

Stamp duty

If you are budgeting for buying a house, this is one expense to keep an eye on. It is one of the taxes that the government seem to turn to when it wants to get the economy going. The threshold before you start to pay is often increased in times of crisis, the most recent example being the COVID-19 pandemic.

The amount of stamp duty that you will pay will depend upon the value of your property. It is based on the actual purchase price rather than how much you have borrowed as a mortgage. Generally, you will pay stamp duty on any property that costs more than £125,000. You will pay a percentage of the property’s value and this percentage increases along with the value of the property.

Removal costs

Moving costs will vary depending on your location and how much furniture and other items that you own! The more that you have to move, the bigger the expense is going to be. The cost will also be affected by the kind of service that you are looking for. It could be that you are happy with hiring a vehicle and moving yourself. For some, this just adds too much to the stress of moving day and so they opt for a removal company to take care of everything.

Using a reputable removal company means that the things that you care about are in good hands. The removal workers will be experienced and, should the worst happen, they will also be insured. Using this service can certainly take away a great deal of stress and strain!

Selling fees

Budgeting for buying a house will be different for first-time buyers and those who are looking to move on. If you already have your own home, the chances are that you are going to selling this before you can move. For many people, releasing the equity from their current home helps with funding the mortgage deposit for the new one. By selling your house, you are also going to incur fees.

You will find that a solicitor will charge you more when you are buying and selling. It isn’t the case that the costs will double, but there is more work involved so the fees do go up. Then you will also need to factor in estate agents fees. There are agents who will charge a set fee while others will take a percentage of the sale price. Be sure to check exactly what you will be paying and how long you are tied to an estate agent who is failing to perform.

Your mortgage

Unless you are one of the lucky ones, you’re probably not going to have the money laying around that will allow you to just buy a house. That means that you will need to look into securing a mortgage. This could be through your own bank or you may choose to go through a financial advisor who will try to find the best deal for you. We have already looked at the valuation fee that a lender will charge you, but there are other mortgage-related fees to be aware of too:

Arrangement fees

This is a fee that lenders charge for their administration costs for arranging a mortgage. You can expect these to range from completely free all the way up to £2,500. You can choose to pay this off in one go, and avoid any interest, or have it added to your mortgage repayments.

Booking fee

Not all lenders will charge this, but this fee relates to reserving a mortgage product. It could be that there is a fixed-rate mortgage or a tracker one that you are wanting to take. Paying this fee will secure the mortgage for you so that you get the product of your choice. This will cost between £100 and £200.

Broker fees

If you choose to use a mortgage broker, there may be fees to pay here too. Some brokers are paid 100% by commission. Others will also charge the mortgage applicant. This fee should never be more than the £500 mark.

Of course, when budgeting for buying a house, it is not just the upfront costs of a mortgage to consider. You also need to ensure that you have budgeted for the ongoing monthly mortgage payments. Missing these could see you losing your home and causing damage to your credit rating.

Ongoing costs

It is not just mortgage payments that you need to consider when budgeting for buying a house. Your mortgage will certainly be a priority debt, but there will be other ongoing costs to consider too. These include

  • Utility bills
  • TV licence
  • Internet
  • TV subscriptions
  • Council tax
  • Groceries
  • Fuel costs

By budgeting effectively you can ensure that your life is free from the stresses that others experience where money is concerned.

Getting the best from your mortgage

When it comes to applying for a mortgage, you need to be in a position where you can get the best deal possible. Your circumstances will affect the interest rate that you are offered as well as the products available and the deposit amount that you will need. Part of budgeting for buying a house starts with getting your credit file in the best place possible.

There are plenty of tips to consider that can see you boosting your credit score and getting your credit file in a better place. Two of the best actions you can take are ensuring that your credit utilisation rate is low and showing that you can maintain monthly payments.

If you want to build credit on your journey towards applying for a mortgage, then what we offer at Wollit could be a useful tool for you. The Wollit app allows you to start using our credit building service after signing up, which only takes a few minutes. By subscribing at a cost of £9 per month, we will report your monthly payments to all 3 UK credit reference agencies.

Feel better about your credit score

Terms apply. Results may vary. Improvements to your credit score are not guaranteed. Wollit Credit Builder plans are unregulated.