The true cost of buying a house

When it comes to affording a new home, it’s not just about the property’s price tag. There are plenty of ‘hidden’ costs you’ll need to budget for too – and they can add up to thousands of pounds.

Anticipating these expenses will give you a better idea of how much you need to save, and what mortgage you can afford.

Here are the main costs (other than a deposit and mortgage payments) that come with purchasing a home – both before and after you’ve bought it.

Costs when you’re buying a new house

Here’s a quick summary of key expenses:

Mortgage arrangement fee

Companies may charge an arrangement fee (or ‘administration fee’) to set up your mortgage. Some will do this so they can offer more attractive mortgages rates without losing any money. So make sure you consider fees as well as rates when comparing mortgages.

You can pay the arrangement fee up front or add it to the mortgage. Pay up front and you may risk losing it if the purchase falls through (though it’s sometimes refundable), but add it to your mortgage and you’ll pay interest on it. A typical arrangement fee is around £1,000, but this can vary.

Mortgage booking fee

Some companies charge this when you apply for a mortgage. It’s usually non-refundable so you probably won’t get it back – even if you don’t end up taking the mortgage. It’s usually around £100-£250. This can sometimes be added to the overall cost of the mortgage (in which case you’d pay interest on it) or included in the arrangement fee.

CHAPS fee

Also known as a telegraphic transfer fee, this is what the mortgage lender charges you for sending the mortgage money to your solicitor so you can buy your home. The fee is usually due on the day of completion – it’s typically around £25-£50 and non-refundable.

Higher lending charge

This only tends to apply if your mortgage has a high loan-to-value (LTV), meaning you’re borrowing a large part of the property’s total value. This can include 95-100% mortgages.

Lenders add it to cover any increased risk they take on by giving you a mortgage. Usually due on the day of completion, you can pay this fee up front, or add it to your mortgage and pay interest on it. The size of the charge depends on how much you borrow and what your loan-to-value ratio is, but it tends to be around 1.5% of your mortgage.

Own building insurance fee

If you choose not to take buildings insurance with your mortgage company, they’ll need to check that the insurance you have covers them properly, should your house need to be rebuilt. You’ll usually be charged a fee of around £25 for this check.

Broker fee

If you use a mortgage broker to help you find and apply for a mortgage, you may have to pay a fee for their services. Mortgage brokers can charge in lots of different ways, such as an hourly rate, fixed charge, or a percentage of the mortgage you take. Others, such as our partner L&C, don’t charge you any fees but instead take a commission direct from the lender. You should always ask how much of the market your broker covers.

Stamp duty

If you’re buying a home that costs more than £125,000, you’ll usually have to pay Stamp Duty Land Tax (SDLT). How much you pay depends on the value of your home, with charges increasing in fixed bands with the price of the property. The Government’s stamp duty calculator can help you work out how much you’ll need to pay.

Mortgage valuation fee

Most lenders will hire a professional surveyor to check the property is worth what you’ve offered to pay for it. This is for their own security, so that if you default on your mortgage they can repossess and sell the house to cover their costs. A valuation can affect what the lender will agree to give you - for example, even if you have a mortgage in principle for £300,000, they may decide the property is only worth £250,000. In this case, you’d have to fund the rest yourself or negotiate the price down with the seller. Some mortgage lenders will charge you a fee for their valuation, while others will waive it.

Survey fee

It’s often a good idea to get your own surveyor to inspect the property for problems like damp or subsidence. This can help you be sure of what you’re getting, and that you’re agreeing to a fair price. Surveys usually costs between £150-£1,500.

Legal fees

Also called conveyancing fees, this is what your solicitor/conveyancer charges for the legal work that comes with buying a house. This covers everything from transferring ownership to checking environmental factors. You’ll usually have to pay costs as they come up. The total expense is generally between £850-£1,500.

Land registry and searches

The Land Registry takes care of transferring your new house into your name. This fee is due after completion, usually through your solicitor, and increases with the value of your property. It generally costs between £250-£300, but could be more.

Costs after you’ve bought your home

Removal costs

Sometimes all it takes to move your stuff is a rented van, a group of friends, and pizza to bribe them with. But if you’ve got a big family or houseful of heavy furniture, you may need to employ a proper removal company. Depending on the size of your home, expect to pay around £400-£1,200 for their services.

Ground rent and service charges

This applies to leaseholders rather than freeholders. If you’ve bought a leasehold property (e.g. a flat in a communal building) the freeholder will usually charge you for maintaining and insuring the common areas, such as the walls, roof and stairs. Fees can vary massively, and are usually payable quarterly, biannually or annually.

Buildings and contents insurance

It’s important to have cover for both your property and everything in it. You can tailor the level of cover you need to your circumstances, and some companies will offer a discount if you use them for both buildings and contents insurance. Premiums vary depending on the cover, and you can pay annually or monthly.

Switching utilities supplier

Switching to a new gas, electric, or internet company when you move? You may be charged an exit fee if you leave a fixed tariff before the end date. Switching itself is free, and a cheaper deal may be worth paying an exit fee, so it’s always worth comparing deals.

Decorating and furnishing

If you’ve bought a ‘fixer-upper’ or are moving from furnished accommodation, you may need to pay for furniture, decoration, and renovation to make your new house a home. If your budget doesn’t stretch that far, you might consider taking out a home improvement loan, 0% purchase credit card, or similar.

Redirecting your post

Changing your address with every single business, organisation, friend and family member is a huge task, so it’s worth getting your post redirected from your old address for a while. This can reduce your risk of identity fraud too, by keeping your personal documents out of strangers’ hands. Royal Mail charges from £5.60 a month

Long-term mortgage costs

Depending on the type of mortgage you have and how you manage it, you may come across additional costs in the future. For example:

Interest rate changes

If you have a variable rate or tracker mortgage, your monthly repayments can go up or down according to the economic climate and your lender’s decisions. If you have a fixed rate term, consider how much your payments will change once it ends.

Late payment fees

If you pay back your mortgage or remortgage before the current term ends, you may have to pay a fee – usually a percentage of your mortgage. You pay also have to pay back any incentives, such as legal fees or cashback.

Exit fee

Sometimes known as a redemption administration fee, you may be charged this – possibly on top of an early repayment charge – for closing your mortgage account. It’s typically between £75-£300.

Can I afford the costs?

After reading a long list of hidden costs, you may be feeling a little put off! But don’t panic, as not all these points may apply to you. Just make sure to budget carefully and be realistic about what you can afford – that way, you can enjoy your new place rather than fretting about your bank balance.

And remember, there may be ways to reduce the cost of buying – such as getting help from friends and family, using a Help to Buy scheme, or increasing your chances of getting a low mortgage rate.

It’s also worth comparing mortgages to find one that’s right for you. Comparing with Experian is completely free, and it won’t affect your credit score.

Information about the commission we receive from brokers for mortgages and secured loans and insurance can be found in our help section.