Big on Budgeting – The Cost of Buying a House

Big on Budgeting – The Cost of Buying a House

Owning your own home or your own office can often be a great investment.  Paying a mortgage can be cheaper than paying rent, and providing you keep up to date with your mortgage payments, and you can keep the property for a reasonable period of time, it should go up in value and so be worth more.

Big on Budgeting - The Cost of Buying a House Express ConveyancingWe’re not here to give you mortgage or financial advice (although we can introduce you to people who will give you that advice if you need it!) but there are some things we’d like you to know about before you start the process.  That way, you’ll be better prepared financially and the transaction is likely to go more smoothly for you.

So, here is a summary of the financial aspects of property purchase that you need to think about

Firstly, and probably most obviously, you are going to have to pay for the property you are buying.  Most people will use a mortgage to do this, but you’ll almost certainly have to put some of your own money in.  Most lenders will want you to put in at least 10% of the purchase price.  The more you put in, the better deals you might be able to get on the terms of the mortgage.  A mortgage company will look at your criteria, specifically how much you are borrowing, how much you earn, how good your credit rating is, how much money you have in the bank and what you are buying to decide how much they will lend on and on what terms.

In addition to borrowing the purchase money, you may also have to pay a fee to the mortgage company, called an arrangement fee.  This covers their expenses, such as having the survey carried out, doing checks on you and dealing with their paperwork.  This is something that can often be added on to the mortgage, but you need to make sure it’s within your budget.   This is something that your mortgage broker can help you with.

Sometimes we are asked about the mortgage for the people that are selling the property to you.  How can we be certain it will be paid?  Don’t worry – this is all part of what we do.  We will know in advance who their mortgage(s) are with, as it will show up on the land registry search.  It is a part of the transaction that the Vendor agrees that they will remove all charges before we complete.  Between exchange and completion, the vendors conveyancing solicitors will give us an undertaking (a Solicitor’s promise) that they will use the purchase money to pay off the mortgage and remove any charges.  It is their responsibility to make sure this happens, and to make sure they have sufficient funds to do this.  So if there is negative equity (where the house is worth less than the mortgage) they have to obtain surplus funds from their client in advance.

In addition, if there are any service charges payable on the property (typically flats and leasehold shops and offices) you will have to pay the balance of that quarter’s service charge account on completion.  Service charges are almost always payable on 25th December, 31st March, 30th June and 29th September.  If you complete part way through a quarter, you will have to pay your share of the remainder of that quarter, pro rata.  This isn’t something we can calculate until exchange, as we won’t know what the completion date is and so we won’t know exactly what your share will be, but we will know in advance how much a whole quarter is, so you can do a rough calculation for yourselves.

Big on Budgeting - The Cost of Buying a House Express ConveyancingNext thing is searches.  If you are buying with a mortgage, the mortgage company will insist on searching being done on the property, such as seeing if it’s in a flood risk area and checking with the local authority as to whether there is anything we need to know.  For example, we’d be looking to make sure that any relevant works done at the property were done in accordance with any necessary planning permission and that building regulations had been complied with and signed off on.  Without this, the Council may have the right to tell you to undo or redo the works, even if they were done by a previous owner.   Even if you are buying with cash, we will often advise you to have the searches done anyway, so you know about any possible problems or defects.  What searches you do and how much they will cost will depend from area to area and from time to time, but this is something you need to add to your budget.

Obviously there are our fees too.  At the outset we will tell you what are fees are going to be, and an indication of what expenses we might incur on your behalf such as search fees and land registry charges.  Some solicitors will charge you a proportion of their fees if the transaction is called off half way through.  If that is something we are going to do, we’ll let you know at the start.

Although the vendor will pay the estate agents commission, if you have used an agent to find the property for you, they may have fees that need to be paid on completion.  If this is something that you may have incurred, please let us know and we can help you check if you do have to pay and if so, when.

There may be other, non legal, fees that you might incur but it’s a good idea to start thinking about all of these things now, so you are prepared.  Here are a few examples.

  1. Removal costs. Will you need help moving your furniture and belongings into the property? When we get a bit nearer the time, you should start getting quotes and find out on their availability.  When we are ready to exchange contracts, we will need to agree on a completion date and you might not want to agree to a date for completion only to find there are no removal companies near you that can do that date.
  2. Post redirect. Particularly if you are a business, you might want to arrange for all of your post to be automatically redirected to your new premises.  Not only should you add this in to your budget, but this is something that should be set up in advance as it can take a few weeks for the post office to process it.
  3. Speaking of things that need a lead in time, if you are setting up or moving any telecommunications services, such as satellite TV, telephone lines or internet, you may need to set this up in advance and add it to your budget.

Buying a property can be expensive, but with careful planning and budgeting, hopefully it will be worth it in the end.

Disclaimer – our articles are designed to give you guidance and information.  There is no substitute for proper direct advice, particularly as everyone’s circumstances are different.  If anything in this article may affect you, please contact us for advice that is specific to your circumstances.

 

What our clients say

Great value for money. Everything went smoothly and I was very pleased with the service provided
Rachel Whitfield
Rachel Whitfield
20:59 12 Oct 18
Excellent! Very responsive, and really helped to push the purchase. There were unexpected delays during the process, but Anthony really helped to reassure me that he was doing everything he could to progress the sale. Ultimately, it all worked out in the end, and I would highly recommend! I would also recommend for auction purposes.
Sean Stevens
Sean Stevens
09:14 21 May 18
Very happy customer. Understanding of our needs and recommended a really fantastic solicitor.
Jack Hearne
Jack Hearne
17:49 12 Oct 18
I have just completed the purchase of my flat with them. They were recommend by the estates agents Phillip Arnold and they were fantastic. My case was handled by Milena who was really helpful and always available on the phone. The online system is also really easy to use. If I buy or sell a property I will definitely be using them again.
Sharon Kelly
Sharon Kelly
18:27 20 Dec 17
I used this service following a recommendation. The online case tracker worked really well. I would recommend this service as it's vital in the coordination between Estate Agencies and between Solicitors. The service proved invaluable in helping progress the conveyancing work efficiently and effectively. Completed the transaction just before Christmas having instructed the Solicitors on the 4th.
Shelly Harrill
Shelly Harrill
16:30 19 Dec 17
Excellent Service. Final Price same as quoted.
A Google User
A Google User
14:26 19 Dec 18
Have used them twice. Both times completion happened in less than 4 weeks, even over Xmas! Totally amazing. They take the stress out of the whole process.
Daniel West
Daniel West
13:04 21 Dec 18
Excellent Service. Final Price same as quoted
Parsa Khamooshi
Parsa Khamooshi
15:54 21 Dec 18
Being a first time buyer they guided me smoothly through the whole process of moving into my first home. Very professional and economical.
Uday Seth
Uday Seth
12:31 24 Dec 18
Express Conveyancing have been excellent in the handling of my recent house sale and purchase. Would highly recommend
James Ellis
James Ellis
11:43 30 Apr 19
Express Conveyancing have been excellent in the handling of my recent house sale and purchase. Would highly recommend
Michelle Preston
Michelle Preston
12:20 30 Apr 19

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