What Are The Costs Involved In Buying A Property?

When you’re looking to buy a property one of the first things that you will want to do is to plan out your budget so that you know exactly what you can afford. If you are new to the property market, or if it’s been a while since you bought a home, it's easy to overlook some costs. Here’s a look at the things that you should plan for to make sure you know exactly where you stand from the outset.

Deposit & Mortgage Repayments
The largest expense you are likely to incur is the deposit for your new property. Most lenders will require at least a 5% deposit, and the more that you are able to put down as a deposit the lower the associated mortgage repayments will be.

It is well worth speaking to a mortgage broker to help you with this. Not only will they be able to help you to find the best mortgage deal, they will also be able to look at your regular incomings and outgoings to make sure that the repayments will be affordable to you.

Bidding Over Home Report Valuation
In Scotland, second-hand residential properties are marketed with a Home Report which includes the surveyor’s assessment of the property’s value. In the overwhelming majority of cases lenders will only lend up to this valuation figure. This means that if you want to bid more than the valuation, you will need to have this extra money available upfront in addition to your deposit.

Using a simple example, if a property has a valuation of £100,000 and you wish to bid £105,000, you will need to have this extra £5,000 on hand, plus your deposit.

In a seller’s market where the majority of properties are selling for more than their valuation it’s vital that you budget for this to avoid being disappointed.

Solicitor’s Fees & Outlays
You will need to make an allowance to cover the your solicitor's fee for carrying out the legal work on your purchase as well as the outgoings incurred during this process. These outlays include registration dues – the cost of registering the title deeds for your purchase with the register of Scotland – and the cost of the advance notice for your purchase.

You’ll also need to account for Land & Buildings Transaction Tax, which is essentially the Scottish equivalent of Stamp Duty. Most solicitors will include an estimate of this based on your assumed purchase price when providing you with a quote for buying a home. Depending on your circumstances you may be liable to pay the Additional Dwelling Supplement as well, so make sure to discuss this with your solicitor.

Most of these figures will vary according to the price of the property that you are buying. Your solicitor will be able to give you a quote based on your circumstances.

Thankfully, most solicitors will not charge you for noting interest or for unsuccessful offers. This means that they will be able to provide you with a clear breakdown of all of the above costs from the outset, and that you will only have to pay any of these until after you have an offer accepted.

Moving Costs & Furnishings
It may seem minor in the grand scheme of things but you will need to budget for moving costs and for any new furniture or other items you may require for your new property. It may be worthwhile negotiating with the seller of your new home to see if they would be willing to leave some items behind in the property. Some sellers may even prefer to leave items like curtains or sofas behind if they won’t be suitable for the home that they’re moving to.

Short-term accommodation
If you are selling as well as buying, it may be that the sale of your existing property completes before you are able to secure your new home. Depending on your circumstances that might mean moving into rented accommodation for a period of time.

By having a look on a website like Citylets you can make sure you know roughly what you will have to pay each month to rent a property that will fit your needs during this period.

Expecting The Unexpected
Inevitably when you move home you will often find that unexpected costs crop up either during the moving process itself or after you move in. You can mitigate against this by planning ahead and appointing a good solicitor and a good financial adviser from the outset, but it’s almost impossible to cover off every eventuality.

With that in mind the best advice is not to overstretch yourself when bidding for a property and to leave a reasonable safety net. If something unexpected arises then you will be able to fall back on this safety net and, if not, you can keep the money for a rainy day, put it towards a holiday or anything else you wish to do.

If you’re thinking of buying or selling a property or if you have any other questions about the property market, contact Warners today on 0131 667 0232 or by email at property@warnersllp.com and one of our team will be delighted to help.