by Naren Shayc
Buying a home: why you need to budget for more than just the house price!
Finding your dream home is a wonderful feeling – and it can be tempting to stretch your budget to land the property you’ve fallen in love with. If you can truly afford to increase your budget without leaving yourself short then there’s certainly a case for pursuing the house you want but it’s important to be aware of the added costs you’ll need to take into account.
The price you agree when buying a home is one thing but there are additional fees that need to be factored in – so if you’re really stretching yourself just to meet the asking price, it’s worth taking a step back and ensuring that you will have enough left over to cover the other essentials.
First of all, you need to consider the solicitors’ fees you’ll need to pay during the purchase of the house. These fees can really stack up so it’s important to be aware of what you’ll need to pay for and how much it’s likely to cost you. Your best bet is to shop around a little at the outset as some solicitors will charge a percentage of the sale price, whereas others might ask for a flat fee. By comparing a few alternatives and weighing up the pros and cons you’ll be off to a good start.
It’s also likely that you’ll be paying stamp duty on your purchase. You’re only exempt if you’re a first-time buyer spending less than £250,000 or an existing property owner buying a house for less than £125,000. Stamp duty varies according to the cost of the property you’re buying, but you’ll have to plan for between 1% and 5% of the purchase price – so this is another significant cost to take into account.
Unless you’re in the position where you can buy your new homeoutright, you’ll also need to pay an arrangement fee when taking out a mortgage. Prices vary depending on the type of mortgage that you choose and the provider you go with, so again it’s a good idea to weigh up your options ahead of time.
Also look into the council tax valuation band that your new property falls under, as this is a significant ongoing annual cost that you’ll need to account for. The band your new home falls under will depend on its value, with higher bands holding higher associated costs. The exact cost will depend on the area of the country in which you’ll be living, as individual local councils set their own rates. There are also general ongoing costs to think about such as utility bills and home insurance, so make sure you’ve drawn up a moving house checklist and taken such things into account.
If you feel that you can still afford your dream home when taking the added costs into account then go for it – but make sure you think rationally about it before committing to anything. If totting everything together means that realistically you need to look for something a little smaller then it doesn’t necessarily have to be a negative thing; it’s better to realise the potential pitfalls before buying a home rather than going through with a purchase only to realise that you can’t afford the upkeep further down the line.