Financial checklist before buying a property in the UK
by Arina Smith Real Estate 28 September 2021
When you’ve put money down for a deposit and have finally located a home that you believe you can afford, before going to the bank to apply for a mortgage, keep in mind the hidden costs that come with purchasing a home. You’ll need to ensure that you have enough funds to cover these costs, as well as the deposit and monthly installments. While buying a home in Barkingside get in touch with estate agents in Barkingside as they can give you a heads up on all financial planning you need to make.
A mortgage arrangement fee, which can be as much as 1% of the property’s value, is charged by some companies. Although most lenders have stopped charging mortgage indemnity costs, a handful still does if you have a high loan-to-value ratio — for example, if you only have a 10% deposit. This fee covers the expense of their insurance in the event that you default on your loan. Some mortgage brokers impose a fee, which can range from a few hundred pounds to 1% of the loan amount.
Before you sign on the dotted line, you should get a professional survey of the property you’re buying. The cost of a basic RICS Condition Report ranges from £250 to well over £600 for a full structural survey. If your property is in Ilford, then estate agents in Ilford can help you schedule a survey.
A valuation is similar to a survey, but it is much more straightforward. Your mortgage lender will offer this to verify that the property’s price isn’t artificially inflated, as it is also their investment. Some lenders will do it for free, but there may be a minor fee (typically under £150) associated with it. Also, seek the help of local estate agents; if you are buying a home in Romford then estate agents in Romford can help you arrange a property valuation for your home.
This is the legal component of the house sale, where the property is transferred from the previous owner to you, and it should be handled by a trained solicitor. Costs vary depending on the value of your home, but they often range from £800 to £1500.
Stamp Duty land tax
Stamp duty is a type of land tax that is levied on (SDLT) if the house costs £500,000 or more, you’ll have to pay stamp duty (a tax on the purchase of a property). For residences worth between £500,001 and £925,000, the rate is 5%. For residences worth between £925,001 and £1.5 million, the rate climbs to 10%.
Finally, stamp duty on homes worth more than £1.5 million is 12 percent. It’s calculated similarly to income tax, so you won’t have to pay anything on the first £500,000 of your home’s value, but you’ll have to pay 5% on everything above that. So, if the house you’re buying costs £650,000, you’ll have to pay 5% tax on £150,000, or £7,500.
It’s a good idea to combine your mortgage with a life insurance policy so that your partner or family can handle your mortgage obligation if you pass away. Many mortgage lenders provide it as part of the loan, but it’s best to get it from a specialized insurance company. Another requirement, which you may not have considered if you’ve been renting up until now, is home insurance coverage.
Cleaning, repairing and redecorating
Once you’ve moved in, you’ll need to spend some money to customize the property to your liking. Changing the locks is usually a good idea, and having the carpets and stoves professionally cleaned can help you start over. You’ll also want to set aside money for painting and decorating goods so you can personalize your new house.
Fittings and fixtures
You won’t have your own white goods or furnishings if you’ve relocated from a rented property or your parents’ house. You can haggle with the sellers to keep some of their stuff, but check online first to make sure they’re not asking too much. Otherwise, set aside some funds to purchase your own.
The expense of relocating
If you’re relocating locally, you may expect to pay around £50-60 per hour if you employ a removal company. You could do it yourself for the cost of a van rental or for the cost of gasoline in your car. Recruiting your pals to assist you with your relocation could be as inexpensive as a couple of pizzas.
Accidents do happen, even if you’ve contacted your bank, job, and magazine subscription organizations. Royal Mail charges £33.99 for three months or £68.99 for a year to set up a mail redirection service.