Buying a Property? 5 Costs to Look Out For

Property can be a fantastic investment, regardless of whether you’re purchasing a buy-to-let unit that you will let to tenants, or a residential home for your family. If you buy when the market is low and can hang on to the property until prices rise again, you could make a significant return on your investment.

However, purchasing property isn’t always a simple process and it can be more expensive than you assume. If you want to ensure that your budget will cover the necessary expenditure, take a look at these five investing costs to look out for when purchasing a property in the UK: 

1. Stamp Duty 

Stamp Duty Land Tax is due when you purchase a property or land that exceeds a certain amount. For residential properties, the threshold for stamp duty is usually £125,000, although it was increased significantly during the COVID-19 pandemic. By October 2021, however, stamp duty thresholds are expected to return to normal, which means the vast majority of house buyers will be subject to this tax.  

The amount of tax due depends on the type of property you’re buying but residential homes are usually taxed on a sliding scale, depending on their value. However, purchasing a family home at a value of £400,000 would usually incur stamp duty land tax of £9,500, based on the usual rates. Although you can claim relief in some circumstances, if you’re a first-time buyer, for example, it’s important to determine whether you’ll be liable to pay stamp duty when buying a property and, if so, how much you’ll owe.

2. Professional Surveys 

Before you buy a property, it’s advisable to have a professional survey undertaken. In fact, most mortgage companies will only lend on properties that have been subject to a survey. There are many different types of survey and prices will depend on the intricacies and detail of the assessment.  

In general, you can pay anywhere from £400 upwards for a property survey and it’s not unusual for extensive surveys to cost £1,000 or more. However, a good survey will give you peace of mind that you’re making a good investment.  

Conversely, a poor survey outcome can give you extra leverage when negotiating the price or allow you to walk away from the sale without making a bad investment.  

If the property is older and perhaps hasn’t been touched for a while, it’s worth investing in a more in-depth survey to avoid any surprises after the property is bought,” comments James Durr of UK-wide auction specialists Property Solvers.

3. House Insurance 

As soon as you take ownership of a property, you’ll want to get insured right away. Even if you’re not moving in straight away, taking out insurance means that your investment is protected. However, do notify your insurer if you won’t be living in the property as this could affect your cover.  

The cost of property insurance can vary quite dramatically, so you’ll want to compare home insurance quotes before you decide which company to use. When you compare home insurance, you can see the level of cover and prices of each company on the market, which makes finding the best deal simple and straightforward. When you’re ready to purchase a policy, you can do so over the phone or online, so it only takes minutes to ensure your new property has the cover it needs.  

4. Conveyancing Fees 

When you purchase a property, the title or ownership needs to be passed from one person to another. Before this can happen, searches should be carried out to ensure that the person claiming ownership really does have the right to sell the property.  

Typically, you’ll use a solicitor to carry out the conveyancing, but this comes with relatively high fees. You’ll pay legal fees for a solicitor’s work plus the cost of disbursements, such as the cost of a Land Registry search.  

Conveyancing fees often depend on the value of the property you’re buying but costs of £1,000 to £2,000, plus £250 to £450 for disbursements aren’t uncommon.

5. Mortgage Arrangement Costs 

Mortgage companies generally charge an arrangement fee when you take out a mortgage with them, although the exact cost will depend on how much you’re borrowing or how much the property is worth. Many companies charge 1% of the mortgage value, for example, which may not sound like a lot, but it can easily run to thousands of pounds.  

In addition to this, you’ll also need to pay a broker’s fee if you use a mortgage broker to place your home loan. Although this can be offset by the savings a broker is able to offer, it is another cost you’ll need to take into account.

Planning Your Property Purchase 

Now you’ve had a glimpse of some of the costs involved in purchasing a property, you’ll be well-placed to calculate your budget. While it’s tempting to go all out and buy a home that’s at the top end of the budget, you’ll need to ensure that you have enough to cover the extra costs that are involved. With the right planning and negotiation, however, purchasing a property could be one of the best investments you ever make.  

All of these costs will usually need to be paid in cash during the purchase process. In our guide on how to save for a house deposit, we explain that this means that house buyers actually need to save up a lot more cash than their deposit before they can actually afford to buy a property.

Learning more about buying property

How to invest in property is a diverse subject that is covered well by property investment books. Property investment courses can also distill the key takeaways into a one or two day seminar.