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Understanding the buying costs

Strata - Understanding The Buying Costs
Finance
When buying a new home, there are many costs that need to be factored in to the purchase price and into your monthly budgets. Here's an explaination of some of the key costs:

M O R T G A G E  I N T E R E S T  R A T E S

There are two main types of mortgage interest rate to choose from:

Fixed rate

PROS
- Consistent mortgage payments
- Easier for budgeting and future planning

CONS
- Sometimes rates are higher than variable depending on the market
- To get a good rate ytou will need to tie yourself into a long period e.g. 5 years

Variable rates

PROS
- Rates can be lower than fixed depending on the market

CONS
- The price can fluctuate and means payments are consistent
- You could end up paying the higher rates over the life of the mortgage

When shopping around for a mortgage, it is important to consider the rate of interest you will have to pay back. You can calculate this on a daily, monthly, quarterly or annual basis. The amount of interest you will pay is based on your outstanting balance. If you pay off more than your set mortgage amount each month, this will ultimately benefit you in the long run by bringing down the balance and reducing the interest you pay over the life of the mortgage. You can find out more in our article, Understanding interest rates.

S T A M P  D U T Y

Stamp Duty Land Tax (SDLT) is charged by the government when you buy a property in England, Wales or Northern Ireland that costs more than £125,000. 

How stamp duty is calculated:

0% is paid on the first £125,000 of the house price
2% is paid on £125,001 up to £250,000
5% is paid on anythbing after the first £250,000

So, if your new home was on the market for £350,000, you would pay a total of £7,500 in stamp duty. 

More information about stamp duty can be found in our article, How to: Understand stamp duty

H O M E  I N S U R A N C E

Average annual insurance premiyums for UK households in 2017 accoursing to ABI:

Building and contents = £297

Contents only = £138

Buildings only = £265

Buildings insurance cover is usually compulsory when buying with a mortgage, and for just a little extra a year your contents cover typically covers damagers or loss of items such a mobile phones, tablets, etc, as well as larger items. 

A D D I T I O N A L  C O S T S

Valuation fee - £200 - £1000
This is usually paid to the mortgage len der and the amount will depend on the value of the property.

Reservation fee - £500
When buying a new build home, this is paid to the home builder to secure your chosen plot. 

Legal fees - £800 - £1500
These are paid to your solicitor to manage the legal aspects of your new home purchase.

Estate agents fees - 1-3% of the price you sell your existing home for
When using Strata's part exchange scheme, they will cover this cost for you. 

Other costs to consider include the monthly running costs of the property. Budgeting for household bills including council tax, water and energy helps you to determine a mortgage payment that you can comfortably afford.

Use our mortgage calculator to work out how much your monthly payments would be.