Stepping up the property ladder: The forgotten costs

The struggles of first-time buyers are often featured in the news. However, it can sometimes be just as difficult (and even more costly) to take that second or third step up the property ladder.

When you’re looking for your next home, you’ve probably focused on the current value of your own home and the size of the mortgage a lender is willing to offer when it comes to money. However, failing to factor in other costs could leave you struggling financially. The cost associated with moving home go beyond simply property prices.

Among the areas to consider when calculating the cost:

1. Mortgage valuation

Once you’ve found a home, you will need to have a mortgage valuation completed on the property. This is a requirement to access a mortgage from lenders. It’s designed to ensure the amount you’ve offered for the home accurately reflects the property.

There is a range of different ways the cost of a mortgage valuation is calculated; some providers even offer a free valuation as an incentive to choose them. Alternatively, some providers will offer a valuation for a fixed fee, while some may have a fee structure dependent on the value of your home. Overall, if you need to pay for a mortgage valuation, you should budget between £150-£500 depending on the property prices range you’re looking in.

2. Property survey

Building on the mortgage valuation, a property survey takes a closer look at the condition of your potential new home. Surveys should highlight any potential issues with the property, including structural problems or areas where attention will be needed in the future. It will also provide you with further details of your home that may come in useful in the future, for example, the type of walls it has.

Unlike a mortgage valuation, a property survey is optional. However, it’s often advisable and could help flag up potential issues that you may have missed or give you peace of mind. The cost of a property survey can vary hugely and there are several different options to choose from. A condition report will give you a basic overview, for instance, while a full structural survey is far more detailed.  Property surveys start at around £250 but can rise to more than £600.

3. Conveyancing fees

A solicitor is essential when you’re buying and selling your home. As a result, the conveyancing fee should be factored into the cost of moving home.

The cost of using a solicitor or licensed conveyancer will usually be a fixed sum depending on the value of the home you’re purchasing. They will handle all the legal work on your behalf. Typically, conveyancing feeds will cost between £700 and £1,500.

They may also conduct additional local searches, which will look for potential issues in the surrounding area which could affect your property, such as, future developments and renovation grants. You can expect local searches to cost around £250.

4. Stamp Duty

When you purchase land or property over £125,000 and are not a first-time buyer, you will need to pay Stamp Duty Land Tax. Your solicitor will handle the Stamp Duty payment to HMRC, however, it’s a bill that can run into the thousands. There are five tax bands for Stamp Duty:

  • Property valued at up to £125,000 has a 0% Stamp Duty rate
  • The next £125,000 (the portion from £125,001 to £250,000) has a Stamp Duty rate of 2%
  • The next £675,000 (the portion from £250,001 to £925,000) has a Stamp Duty rate of 5%
  • The next £575,000 (the portion from £925,001 to £1.5 million) has a Stamp Duty rate of 10%
  • The remaining amount (the portion above £1.5 million) has a Stamp Duty rate of 12%

The different bands can mean it’s difficult to calculate Stamp Duty but it’s an important step to take to avoid unexpected costs. Buying a house worth £275,000 would lead to a Stamp Duty bill of £3,750, for example.

5. Estate agent fees

As you’re taking a step up the property ladder, you’ll also have some seller fees to add to your list too. In return for listing your home and attracting buyers, you’ll usually pay a percentage of the final sale price. This often ranges from 1% to 4%. There are now a high number of online estate agents that can offer the cheapest deals, with some charging a fixed price rather than a percentage of the sale price.

6. Home removals

With everything else to consider, it’s easy to forget about the cost of actually moving home. Will you need to hire a removal firm? Depending on how much furniture you have and how far you’re moving, it could be a bill that costs over £1,000. Luckily, there are lots of different options out there for you to choose from, allowing you to pick an option that suits your budget.

If you’re looking to move home, please contact us. We’ll help you understand which lenders can offer you the best deals and guidance on how to move forward, saving you money and time.