When we think of buying our first home, we often think about saving for the deposit. But really, how much money do you need to buy a house?
The deposit on a property is a big chunk of it, but there are other fees that you have to fork out for when buying a house. It’s common not to be aware of these extra charges until you are starting to look for your dream house. It may be disheartening to find out that you need to save even more money to buy your first house. So it’s better to educate yourself now so you know what costs are involved. This means you can start saving extra money to cover these costs.
How much money do you need to buy a house?
How much you need to buy a house can vary based on a lot of factors, such as how much deposit you have, the cost of the house and how much work needs doing on it. But let’s look at some typical figures.
The deposit
The average property price in the UK as of April 2021 is £251,000. That’s right. A quarter of a million pounds! You’re looking at saving £25,000 for the deposit alone. And that’s only for a 10% mortgage.
If you do opt for a 10% deposit mortgage, you will be faced with less choice of mortgage lender and higher interest rates compared with if you were to get a 15% or 20% deposit. Ouch. When we were buying our current house, the mortgage advisor did ask if we had enough money for a 15% as it gave us lots of better rates, but sadly we couldn’t pay a 15% deposit AND the rest of the fees.
You can get mortgages with only a 5% deposit, but again, you will be faced with a higher interest rate and higher monthly repayments compared with a higher deposit.
I recommend you use a mortgage calculator like this one to check what your monthly repayments would be depending on your deposit, interest rate and the terms of your mortgage.
You might find that you are very close to saving enough for a 10% or 15% deposit, and this can help you visualise how much cheaper this may be in the long run for you. It may be worth waiting a few months until you’ve saved a bit more money for a larger deposit and to bag a better mortgage rate.
You can always talk to a local mortgage adviser to help figure out your affordability.
Stamp Duty Land Tax
Stamp duty is a lump-sum tax that is owed when purchasing a property or land that is valued over a certain amount.
There has been a freeze on stamp duty on houses under £500,000, but these are coming to an end from 1 October onwards. Full stamp duty rates will be reinstated (which apply to all homes over £125,000). However, first-time buyers will still only be required to pay the tax on homes over £300,000.
Check the government’s website for updated information about stamp duty relief.
Mortgage booking fee
This can cost up to £2000 and can vary from lender to lender. Some mortgage companies will not have this fee – but have a higher mortgage rate instead. You can usually add this fee onto your mortgage, but then you face paying interest on it – so it would be better to pay it upfront.
Mortgage account fee
This can cost between £100 – £300. It’s the cost of setting up, maintaining and closing down your account.
Transfer fee
This is about £50 and is the cost of transferring the mortgage money to the seller’s solicitor.
Valuation fee
The valuation fee is the cost of commissioning someone to inspect the new property to ensure it is worth the mortgage amount. This can cost anywhere between £150 and £1,500 depending on the price of the property.
Higher lending charge
Your mortgage company may charge you around 1.5% of your property if you are taking out a mortgage that covers more than 80% of the property. Some companies use this charge to take out insurance to protect themselves against losses by buying a Mortgage Indemnity Guarantee, whereas others use it to increase their profit margin.
Conveyancing and solicitor’s fees
Conveyancing is the legal transfer of ownership of a property from the seller to the buyer. You will need to pay a solicitor or conveyancer (a specialist in conveyancing) to handle it.
Conveyancing usually costs somewhere between £800 and £2,000 but this can vary depending on the cost of the property and the amount of additional legal work required.
Insurance
Lenders will require that you take out property insurance to cover your home in the event of it being damaged or destroyed. This can cost £100 – £250 a year. It’s a good idea to take out contents insurance too, to cover your possessions in the event of a fire, a flood or theft.
Shop around for the best deals on insurance and do check out any cashback deals on TopCashback or Quidco. These will offer some great deals on either using their services to compare quotes or taking out a quote with a certain provider.
It’s always worth shopping around each year and using cashback sites again, as you will often find a cheaper insurance deal with someone else than staying with your current provider.
Moving costs
You can expect to pay around £50 – £500, but this will vary depending on how much you have to move, how far you are moving if you are just going to rent a van or pay for movers to do it for you. Consider if you need to use professional removal services and also what your budget is. We rented a van for around £70 when we moved house, but we had the help of family.
Furnishings
Again, this figure does depend on what you have already. If you are moving from an unfurnished rental or a different home that you own, you might not need new furnishings. We owned a much smaller home before this one, but we needed a dining table as we didn’t have room for one in the old house. We also bought new sofas and needed things such as sideboards for the living room and kitchen. We spent around £3,000 on these things over the first few months.
Here are some things you may need:
- washing machine
- fridge
- dining table
- sofas
- beds
- wardrobes
- drawers
- sideboards
- bedding
Decorating and home improvements:
The amount you spend on this will depend on what property you are buying. Some may need more work than others, but it is always smart to have some money to one side as you may find some things need fixing. For example, when we moved into our first home, all the taps were broken in some way so we had to replace them all, and the doors did not shut properly so we also needed to get those fixed. There was also a leak in the bath, but the tap to the bath was in the middle of the bath against the door, so we had to put a hole in the wall behind it to fix the leak.
If some of the home improvements are just cosmetic, you may wish to wait and decorate at a later date rather than do everything now. This will give you time to save money.
If you want to save some extra money for your house, then check out some of my side hustle income reports to help you make an extra few hundred pounds each month.
So, if you’ve found yourself asking ‘how much money do I need to buy a house?‘, I hope this has answered your question.
Did you realise how much money you need to buy a house in the UK?
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Great post! This is so interesting, and I love that you’ve given tips to someone like me who is currently saving money and thinking about the possibility of buying- it will take a few years to be in that position but posts like this are so helpful x
Wow there really are so many more costs involved than just the 10% deposit. We found this out when we sat down with a mortgage broker a few years back. On top of the deposit it would cost a further £2000! Ouch! Very informative, thanks for sharing 🙂
There is a lot of costs to consider and you’ve done a great job highlighting those! Housing prices in my area of Greater Vancouver Canada have gone through the roof too with the average cost of close to $1,000,000. As a result, most couples cannot afford to buy their own detached home even with a double income. Thanks for sharing.
This is really helpful x