Budgeting to buy a new home
Whether you’re buying a first home or upgrading to a new one, the costs involved with the purchase and the running costs after moving in can come as a surprise. Understanding what you can afford and how much you need to save will help you to achieve your dream home.
The upfront buying costs
When buying a new home, there are several costs that are incurred before you even get the keys. Here are some of the major upfront costs you’ll need to consider and save for:
The average deposit that mortgage lenders require is 10-20% of the house value that you’re purchasing. The more deposit that you can save, the less you will need to borrow from your mortgage lenders, which can improve your chances of approval. It will also reduce your monthly payments, helping you to comfortably afford to live in your new home.
If you access the government’s Help to Buy scheme, which allows you to purchase your new home with as little as 5% deposit. Find out more about the Help to Buy: Equity Loan.
Stamp Duty Land Tax (SDLT) is payable on homes costing more than £125,000. However, if you’re a first time buyer you will be exempt from paying Stamp Duty on the first £300,000 of your new home’s value.
When buying a home from Strata, you’ll find that on certain homes we offer to pay your Stamp Duty for you. Learn more about Stamp Duty and how it impacts you.
Valuation and surveyor’s fees
As part of the buying process, you’ll need to have property valued and surveyed to ensure you’re paying the right amount for the home.
The mortgage lender will arrange the valuation for you, which could cost between £150-£1,500, based on the value of the home. This can often be offered free as an incentive depending on the mortgage product you choose.
It is also important to get the home surveyed to ensure you don’t discover any underlying issues after the purchase. This can cost anything from £250 for a basic home survey to £600 or more for a full structural assessment. Your solicitor will help you to arrange the survey.
Solicitors or conveyors play a crucial role in the purchase of your new home. They’ll handle all the legal work involved, including dealing with your mortgage lender, transferring the funds, arranging surveys and exchanging contracts. Legal fees usually range from £850-£2,000.
Like with Stamp Duty, you’ll find that when buying a home from Strata, we often offer to pay your legal fees for you. Learn more about the legal costs of buying your new home.
Estate agent’s fee
If you’re a current homeowner, you will need to take into account the cost of selling your existing home as well as buying your new one. The estate agent’s fee is typically 1-3% of the sale price for your current home, plus 20% VAT.
If you choose to go down the part exchange route, Strata will purchase your current home from you, removing the need for selling fees and finding a buyer, and freeing the cash up so you can move into your new home sooner.
The ongoing running costs
Once you’re in your new home, there are day to day running costs which need to be considered when budgeting on a monthly basis:
The main monthly payment for your new home will be the mortgage, which will depend on how much deposit you have paid and what term you have borrowed the money over. Use our mortgage calculator to see how much you can expect to pay.
You will need to take out buildings insurance as a minimum requirement of the mortgage lender. This covers your home against damage from flooding, fire, subsidence and more.
It’s also worth considering having contents insurance, as this protects all your belongings within the home and can often be purchased as a deal when combined with buildings insurance.
Life insurance is another good idea if you haven’t already taken out a policy, as this will cover your family should you die before the mortgage amount has been paid off.
Find out more about insurance for homeowners.
There are day to day costs involved with running a home, such as council tax, electricity, gas, water, as well as phone line, internet and TV packages.
When calculating how much your new home will cost, the Money Advice Service have a useful budget planner, which you can access here.
For advice on how much you should be able to borrow and what you need to be saving to purchase your dream home, talk to one of our recommended financial advisors.