Costs of buying a house

You may be forgiven for thinking that buying a house is as simple as matching the purchase price. However, excessive bureaucracy means that the property price is not the only thing to factor in. A multitude of extra costs means the price can far exceed the property purchase price.

Of course, if a person manages to buy the house outright by matching the property price it can help simplify the process. However, most people will need the help of a mortgage lender to make a property purchase. This means someone will also have to pay interest on mortgage payments. The interest rate on a mortgage can fluctuate from person to person and can depend on things like credit scores.

This article will explore the different costs of buying a house. This includes mortgage fees, legal fees, stamp duty, valuation fees, surveyors fees, and other associated costs.

First time buyer discounts

A number of benefits, schemes and discounts are available to help first time buyers step onto the property ladder. For example, the government has a First Homes scheme available to first-time buyers. This gives at least a 30% market value discount on properties that meet the criteria.

The criteria state that:

  • It is classed as affordable housing – Price no higher than £250,000, (or £420,000 in Greater London.
  • Buyers meet First Homes eligibility criteria.
  • Restrictions are placed on the property meaning property price discounts are passed onto other first-time buyers at the point of sale.

As of 9 April 2021, a deposit scheme was launched for first-time buyers. This means buyers only need to pay upfront costs of 5%. The deposit is therefore only 5% of the property value. However, the house must not cost more than £600,000.

Also, a first-time buyer may be eligible for stamp duty and land transaction tax discounts.

Stamp duty, land tax, costs, and discounts

Taxes on property are further complication in the United Kingdom, as rates are divided by country.

Stamp duty land tax (England and Northern Ireland)

These two countries share taxation rates for property purchases. A buyer will have to pay this tax on a number of different property and purchase types. This includes:

  • Freehold properties.
  • Purchasing leasehold property.
  • Shared ownership.
  • Land or property transfers in exchange for payments (Mortgages or shares in buildings).

Stamp duty costs are waived if the purchase costs less than the SDLT threshold. For example, residential properties have a threshold of £125,000. Non-residential properties and land have a threshold of £150,000.

A first-time buyer will also be able to claim an exemption when buying a house under certain circumstances. For example, the property must cost less than £500,000, and if it is a shared purchase everyone must be a first-time buyer.

How much you pay on stamp duty is based on a number of factors including:

  • Whether or not it is the first buy.
  • If it is an additional property purchase (multiple dwellings).
  • UK residential status.

The most efficient way to work out your stamp duty tax is to use the Stamp Duty Land Tax calculator by HMRC.

Land and Buildings Transaction Tax (Scotland)

LBTT is applied to residential and non-residential land or property purchases in Scotland. It also includes non-residential leases. Residential LBTT rates are shown below.

Purchase priceLBTT rate
Up to £145,0000%
£145,001 to £250,0002%
£250,001 to £325,0005%
£325,001 to £750,00010%
Over £750,00012%

Non-residential Conveyance rates.

Purchase priceLBTT Rate
Up to £150,0000%
£150,001 to £250,0001%
Over £250,0005%

Scottish LBTT non-residential lease rates.

NPV of rent payableLBTT Rate
Up to £150,000%
£150,001 to £2 million1%
Over £2 million2%

Again the most efficient way to see how much tax is due is to use an online tax calculator.

Land transaction tax (Wales)

Wales follows an LTT system which has its own tax brackets. For example, residential properties up to the value of £180,000 are exempt. This is also true of non-residential properties and land costing £225,000 or less.

Unlike the other systems in the UK, LTT does not provide any relief to people buying for the first time. However relief can be given to:

  • Properties bought by charities
  • Multiple dwellings
  • Moving property around a group structure

Residential tax rates Wales

Price thresholdLTT rate
The portion up to and including £180,0000%
The portion over £180,000 up to and including £250,0003.5%
The portion over £250,000 up to and including £400,0005%
The portion over £400,000 up to and including £750,0007,5%
The portion over £750,000 up to and including £1,500,00010%
The portion over £1,500,00012%

There is also a handy tax calculator to work out how much LTT may be due.

Valuation Fee

When taking out a mortgage a mortgage lender will charge a mortgage valuation fee. This is so the lender can accurately assess the value of the building and calculate how much they are willing to lend. In some cases, a lender may provide the valuation free of charge. However, if not, the cost can be anywhere between £500 and £1500.

Surveyor’s fees

For peace of mind many will pay for a building survey before committing to a purchase. A survey will help identify any problems with the building including:

  • Asbestos.
  • Damp.
  • Electrical problems.
  • Damaged drainpipes.
  • Insulation issues.
  • Invasive plants (Japanese knotweed).
  • Roofing problems.
  • Structural damage and subsidence.
  • Infestations such as woodworm.

Along with discovering any worrisome problems, that may prevent someone from buying, it also gives buyers the chance to re-negotiate the price.

Building surveys are broken down into three categories. Which have provided estimated survey costs for each category of surveyor’s fees:

Level of report£100,000-£249,000 (property price)£250,000-£349,000 (property price)£350,000-£499,000 (property price)£500,000-£1m (property price)
Rics Home Survey – Level 1£500£600£700£950
Rics Home Survey – Level 2/RPSA Home Condition Survey£500-600£600-700£700-800£1,000
Rics Home Survey – Level 3/RPSA Building Survey£700-750£800-900£900-£1,100£1,500

It is of course a personal decision whether to do a home survey or not. However, it may be a small price to pay for peace of mind. It may save you money in the long term by preventing a sale that is not a good investment (Structural damage etc). Or, it may provide instant savings if the house price can be negotiated.

Legal fees when buying property

Legal fees also have to be factored in when buying a property. A professional property lawyer needs to ensure property ownership is legally transferred. This is also known as conveyancing.

Conveyancing Calculator has provided a list of average conveyancing fees which are shown below:

Purchase Price (£)Legal Fee
£100,000460.00
£150,000490.00
£200,000525.00
£250,000550.00
£300,000570.00
£350,000595.00
£400,000635.00
£500,000650.00
£600,000700.00
£750,000800.00
£900,000850.00
£1,000,000900.00

Land registration fee

The land registry registers a property under the owner’s name. When buying a new property the fee is essential to change the registration of ownership.

Scale 1 fees via Gov.uk

Value or amountApply by postApply using the portal or Business Gateway, for transfers or surrenders which affect the whole of a registered titleApply using the portal or Business Gateway, for registration of all leases and transfers or surrenders which affect part of a registered titleVoluntary first registration (reduced fee)
0 to £80,000£45£20£45£30
£80,001 to £100,000£95£40£95£70
£100,001 to £200,000£230£100£230£170
£200,001 to £500,000£330£150£330£250
£500,001 to £1,000,000£655£295£655£495
£1,000,001 and over£1,105£500£1,105£830

Scale 2 fees

Value or amountApply by postApply using the portal or Business Gateway, for transfers of whole, charges of whole, transfers of charges and other applications of whole of registered titlesApply using the portal or Business Gateway for registration of transfers of part, and all other Scale 2 applications that do not affect the whole of a registered title
0 to £100,000£45£20£45
£100,001 to £200,000£70£30£70
£200,001 to £500,000£100£45£100
£500,001 to £1,000,000£145£65£145
£1,000,001 and over£305£140£305

Other property costs

Electronic transfer fee. A lender may charge an electronic transfer fee to cover the cost of transferring mortgage money from lender to solicitor. The fee typically costs around £40-£50.

Broker fees. If a buyer chooses to use a mortgage broker as an intermediary between lenders they may be charged a broker fee. Brokers combine all mortgage offers advising on the best mortgage to take. This saves time for the customer as they do not need to visit each provider separately.

Removal costs. It is also important to factor removal costs into a budget when buying a house. This ensures that after buying a house, the customer still has enough money to transfer their essential household items to the property. Typically this can cost around £50-£60 per hour.

Cost of buying a house: Summary

Calculating all the costs of buying a house can be a complex affair. A number of extra costs can greatly increase the cost of buying. The costs can certainly mount up, especially for those looking for a mortgage deal. However, there is help available to help a first-time buyer with mortgage costs.

For example, the government’s first home scheme can provide at least a 30% discount on mortgage costs. Also, so long as the property does not cost £600,000 or more, they are eligible for a 5% mortgage deposit. In England, Northern Ireland, and Scotland they are also eligible for stamp duty/land tax reductions and exemptions under certain criteria.

In England and Northern Ireland, house buyers are charged a stamp duty if they go above the threshold. This is £125,000 for a residential home and £150,000 for a non-residential home. Scotland uses a Land and Buildings Transaction Tax. The starting rate of 2% starts after the threshold of £145,000 for a residential home. For non-residentials it is £150,000. Wales has a higher threshold at £180,000 for residential homes and £225,000 for non-residential homes.

Further fees to add to the cost of buying include:

  • Valuation fees – The price for a lender to evaluate the property (£500 and £1500).
  • Survey costs – The price a surveyor will charge to check the building for any problems including structural damage, (£500-£1500).
  • Conveyancing fees – This is the price to hire a property lawyer to legally transfer ownership, (£460.00 – £900).
  • Land registration fee – The price to have the property registered under the new owner’s name.
  • Electronic transfer fee – This is how much a lender will charge to transfer the mortgage money to a solicitor (£40-£50).
  • Broker fees – A mortgage broker may charge a fee to introduce a buyer to mortgage lenders.
  • Removal costs – It is also wise to factor in removal costs into a budget. This ensures a buyer can move their goods (especially essential items like white goods) to a new property. Typically this costs around £50-£60 per hour.

As you can see upfront costs and mortgage fees are not the only things to consider. Failure to account for these extras may stretch a person beyond their budget. It is always wise to have a thoroughly detailed plan before taking any action.