When it comes to getting on the property ladder, many first-time buyers focus most of their efforts on saving a deposit. And that makes a lot of sense, as it’s a huge chunk of money that you need to build up before you can really think about buying a home. But that’s not the only thing you’ll need to save for.
There’s a lot of costs associated with buying a house, and they range from mortgage fees to moving costs and everything in between.
To help you budget for becoming a first-time homeowner, here are all the costs that you’ll need to take into account.
How much do you really need to save to buy a house?
Let’s talk about the elephant in the room first – saving a deposit. In January 2023, the average UK house price was £290,0001 (£17,000 more than it was 12 months earlier), which means that in order to put down a 10% deposit for a property of that value, you’d need to stump up £29,000. Considering that the average UK salary is below £32,0002, that’s a significant amount of money to save.
Even if you can snag a 5% deposit, that’ll still be £14,850 you’ll need to pull together!
Luckily, there are a few ways that could help you get on the property ladder:
- Save sooner rather than later – if you have “buy a house” on your bucket list, the earlier you start saving the easier this can be. For example, if you started saving £200 each month when you turned 20, then by your 30th birthday you’d have £24,000. And if you’d invested this money instead, you could have built up around £28,148 during those 10 years.3
- Lifetime ISA – this type of ISA was created in 2017 and is designed to help people save for their first home (or retirement) with a 25% bonus from the government for using it. You can save up to £4,000 a year in your Lifetime ISA, and you’d get a bonus of £1,000 each year by doing so. This money can be used to buy a house worth up to £450,000 anywhere in the country.
- Help to Buy ISA – although this is no longer an option, if you managed to open a Help to Buy ISA before the deadline, you can keep paying into it until November 2029. Your monthly payments are limited to £200 a month, and the government will top up your savings by 25% (maxed at £3,000) when you buy your first home. With this option, you’re more limited on what you can buy, with the max house price being £250,000 anywhere other than London, or £450,000 in the capital.
- Partner up – buying a house can be a lot to do on your own, which is why many will wait to buy with a partner or even with friends. Buying with friends is a strong option for someone who isn’t in a relationship, and clubbing salaries together could help it make it easier and faster to buy a house in this market. There are a few things to watch out for though, as finding mortgage providers who are happy to split the costs more than two ways (if buying in a group) can be trickier and obviously, you’ll need to be very confident in your friendships.
- Bank of Mum and Dad – in the UK, 44% of parents are planning on helping their children with the purchase of their first property.4 For the majority of parents, this comes in the form of helping out with a deposit, with most saving between £10,000 and £30,000 for their little ones. While this may seem like a lot of money to cough up, it could be achieved by putting little amounts into their Junior ISA each month – and with things like friends and family payments, other family members can contribute too!
And these are just some of the more common ways to build up a deposit. Then there’s the other costs to consider…
Extra costs to think about when buying a house
Although the deposit is what most people talk about, you’ll need to be prepared to splash some cash on sorting your mortgage out as well. It may seem a bit weird as the bank or building society is about to give you a huge sum of money, but there’s typically fees you’ll need to pay in order to get it. Here’s a quick breakdown of what to expect.
Mortgage fees and charges
So, in addition to paying interest on this loan, there are some other fees that you’re likely to be charged when applying for a mortgage. Some of these may require paying up front, while others could be wrapped up into the cost of the mortgage (which would mean you’d pay a bit more on your mortgage).
It’s worth grabbing a calculator and working out the difference you’d pay by including it in your mortgage costs, as that amount will have interest applied to it, and could end up being a lot more expensive in the long run.
- Mortgage arrangement fees – depending on your lender, these can range from you paying absolutely nothing, to costing more than £2,000, and MoneySavingExpert tells buyers to expect to pay at least £1,000.
- Mortgage Broker fee – if you’ve used a mortgage broker, then there may be some additional costs here depending on how they work. Some brokers are paid by the lender for referring the customer (so there will be no cost to you), while others may charge a flat fee or a percentage of the total mortgage value. It’s worth understanding how the broker charges before using them, as even a small percentage on a mortgage can become a huge sum.
- Valuation fees – before lending you the money, the bank or building society will need to send someone around to check that the property is actually worth what you want for it. This cost is typically around £300 but can vary between providers. However, some banks and building societies may offer this service for free.
- First payment – one thing that can catch you off guard is that many mortgage providers have an additional charge on your first mortgage payment, often around 1.5x what your standard payment will be. It’s worth making sure you have this available beforehand, so it doesn't make your first month in the house financially tighter than it needs to be!
In addition to sending someone around to value the house, you’ll also need to pay for a qualified surveyor to check that the house is in an acceptable condition. It may sound like doubling up on work, but these surveys can help to uncover any issues with the house that you might want to be aware of before committing to the purchase. Additionally, your mortgage could be declined due to the results of the valuation survey.
There are three levels of survey that are available to you, ranging from cheap to expensive.
- Home Survey - Level 1 is the most basic survey that uses a traffic light rating system to give an overview of the property's condition and highlight any significant issues, but it doesn't go into too much detail. This typically will cost between £300-£900, depending on the value of your house.
- Level 2 is a Condition Survey that’s the standard choice for most properties in reasonable condition. This looks at everything covered in a Level 1 survey but will also highlight any problems that might affect the property's value and include the surveyor's advice on repairs and ongoing maintenance. It should also highlight any issues such as damp, subsidence, or areas that don’t meet current building regulations. There’s not much saving to be made between level 1 and 2, with the costs being roughly similar.
- Level 3 is a RPSA Building Survey and is the most thorough survey available, giving a comprehensive analysis of the property's structure and condition. Unlike level 1 and 2, the surveyor will be ‘hands on’ and will check things like the attic or under floorboards, and their report will include everything from level 1 and 2, as well as listing any defects and providing advice on repairs and maintenance. This type of report can cost from at least £630, all the way up to £1,500.
For more information on how much a survey may cost, please see: https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/how-much-does-a-house-survey-cost/
Your conveyancing solicitors don’t work for free! You’ll need to pay them too, although how much you’ll need to hand over to them will vary depending on your solicitor. This is because some offer fixed rates for conveyancing, while others may look to charge by time spent.
You’ll also find that the price of the property you’re buying is a factor into how much you end up paying. Because of these differences it’s really hard to provide an average price of conveyancing in the UK, but when it comes to budgeting for buying your first home it could be worth putting aside between £800 and £2,000, according to Quick Move Now. This will pay for their time, as well as the searches they carry out and things like the land registry fee.
Whether you’re buying a new build home or a fixer-upper, you’ll need to take out buildings insurance before most mortgage lenders will consider giving you the money. This is largely to protect their loan, but it should also offer you a little peace of mind. For example, if the worst was to happen and your house burned down, for example, buildings insurance would help you to cover the cost of rebuilding your house.
The peace of mind can come from the added-on extras in your home insurance, like accidental damage. This could cover anything from putting a nail through a pipe when you tried to hang a picture all the way through to a child accidentally smashing your window with a football.
And then there’s tax…
Of course, you can’t get away from tax. This is often the second largest cost when buying a house, and the amount you end up paying will depend on where you live, how much the house is, and if you’re a first-time buyer (in some cases).
Luckily, the government have put together some very nice calculators that make it really simple to know how much you’re likely to pay.
- In England and Northern Ireland, you’ll pay Stamp Duty: https://www.gov.uk/stamp-duty-land-tax/residential-property-rates
- In Wales, this is called the Land Transaction Tax: https://gov.wales/land-transaction-tax-calculator
- And in Scotland, you’ll have the Land and Buildings Transaction Tax: https://www.gov.scot/policies/taxes/land-and-buildings-transaction-tax/
In England, Northern Ireland, and Scotland, there are some tax reliefs for being a first time buyer, but you won’t receive any tax relief for being a first time buyer in Wales.
Moving day = Moving costs!
Depending on your previous housing situation, you may have some furniture that you need to move into your new home. If you do, then you’ll have the option of doing it yourself or paying a moving company. Naturally, one is cheaper while the other is easier, and which you choose is completely up to you.
If you need to hire a van then you could expect to pay anywhere from £35 to 120 per hour depending on factors such as how many men will be coming to help with the van and where you are based.5 You should probably budget for pizza for any friends that offer to help you too!
In 2022, the average removal company costs were around £1,181, though this could change due to factors like inflation and the rising cost of living.6 Obviously, that’s a lot more expensive than hiring a van and simply doing it yourself, but it will be less stressful, and everything will be handled by professionals who’ve done this countless times.
Whatever you decide, make sure you’ve budgeted for it in your house move!
Furniture and extras
If you’re moving out of furnished accommodation or are finally flying the family nest, then you’ll probably need to think about buying furniture too. A survey from 2020 found that decorating and furnishing a typical room costs £1,821, with the living room coming out at the most expensive at an average of £3,400.7 However, as this survey was carried out a few years ago, you could expect to spend more money doing this now due to inflation.
So, a good rule of thumb could be to budget around £2,000 for decorating and furnishing each room. It might sound like a lot, and you can certainly get items much cheaper, but when you factor in things like paint, carpets, sofas, kitchen appliances etc., it all adds up.
One thing to be careful of is buying furniture before your house sale is complete – speaking from experience, there’s nothing worse than being stuck with a 7foot dining table when you live in a small 2 bed flat. Fortunately, some retailers offer home buying schemes, that allow you to order their products and keep them on backorder until your move in date. This can be really helpful with both the storage and the moving of these items, but it’s worth checking their payment methods, as some may try to tie you into a finance deal.
Service set up
In this day and age, you do not want to be stuck in a house without internet, which means that this is something you’ll want to get sorted very quickly after you move in. Some providers don’t charge any installation fee, while others may add a considerably sized extra charge onto your first bill. So, be sure to shop around for a good deal and check the connection speed in your house before signing any contacts.
Do people still use normal TV instead of streaming services? If you do, make sure you’ve got your TV licence paid as well. You may also need to pay a separate set up charge to Sky/Virgin (or whatever else you choose) if they need to establish a new connection to your house.
While the deposit may be the most talked about thing when it comes to saving for a house, you need to make sure that you’ve got all your costs covered. Roughly speaking, buying a house could cost you thousands of pounds in fees and charges, so it’s worth making sure that your nest egg has enough to cover these expenses.
When working out your house purchase budget, it’s a good idea to check what the tax situation is on your purchase, as this is likely to be one of the largest costs to you.
If you’re still a few years away from buying your first home, then you may want to look at opening a Stocks and Shares ISA (such as the one we offer) to help give your savings even more potential. Unlike a traditional savings account, investments aren’t tied to a single metric of return, which could help your money to grow faster and bring your dream of owning your first home closer to reality. Find out more about our Stocks and Shares ISA
- This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £23,468. If markets perform better, your return could be £33,649. Values correct as of 31/05/2023.
With investing your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested. Wealthify does not offer advice, if you’re not sure whether investing is right for you, then please speak to a financial adviser.