The hidden costs of buying your first home

You've saved the deposit. You've worked out what you can borrow. You've found a home you can afford.

Then the bills start arriving.

One of the biggest surprises for first-time buyers is that the deposit is only part of the money you need to buy a home. Solicitors, surveys, mortgage fees, searches, insurance and moving costs can add thousands of pounds before you have even unpacked a box.

Then, after completion, you discover the boiler needs servicing, the previous owners have taken the washing machine and your first Council Tax bill is due.

None of these costs should stop you buying your first home. But knowing about them before you make an offer can prevent a very exciting purchase becoming a financial squeeze.

Here are the costs first-time buyers should budget for.

1. Your deposit

This is the obvious one.

Most first-time buyers will need to contribute some of the purchase price themselves, with the remainder provided by their mortgage lender.

For example, on a £300,000 property:

But there is an important mistake to avoid.

If you have saved £30,000, that does not necessarily mean you have a £30,000 deposit available.

You may need several thousand pounds of that cash for everything else involved in the purchase.

So your real calculation should be:

Savings minus buying costs = deposit actually available

That can change the price of home you can comfortably afford.

2. Stamp Duty

Many first-time buyers assume they do not pay Stamp Duty.

That is only true up to certain limits.

For purchases in England and Northern Ireland, qualifying first-time buyers currently pay:

• 0% on the first £300,000
• 5% on the portion between £300,001 and £500,000

If the property costs more than £500,000, First-Time Buyers' Relief is not available and normal Stamp Duty Land Tax rates apply.

So if you buy your first home for £400,000, your Stamp Duty would currently be:

• £300,000 at 0% = £0
• £100,000 at 5% = £5,000

Total: £5,000

At £500,000, it would be £10,000.

That is a significant amount of money to discover late in the process.

What about Wales and Scotland?

Different property taxes apply.

In Wales it is Land Transaction Tax, while Scotland uses Land and Buildings Transaction Tax. The rules and reliefs are different, so do not use an English Stamp Duty calculator for a property in Wales or Scotland.

3. Your solicitor or conveyancer

You will normally need a solicitor or licensed conveyancer to deal with the legal side of your purchase.

Their work can include:

• checking the title
• reviewing the contract
• carrying out searches
• raising enquiries
• dealing with your mortgage lender
• arranging exchange
• transferring the purchase funds
• dealing with Stamp Duty
• registering you as the new owner

When comparing conveyancing quotes, check what is actually included.

The headline legal fee is not necessarily the final bill.

There can also be separate charges or disbursements for searches, Land Registry applications, bank transfers and other parts of the transaction.

4. Property searches

Your conveyancer will normally carry out searches before you buy.

These may include:

• local authority search
• drainage and water search
• environmental search
• flood information
• mining searches in relevant areas
• other location-specific searches

These are important because viewing a house tells you very little about some of the risks surrounding it.

A beautiful home can still be affected by a proposed road scheme, drainage issue or planning matter.

Search costs are normally paid during the conveyancing process rather than at completion, so you need cash available before you get the keys.

5. Your survey

Your mortgage lender's valuation is not the same thing as a survey for you.

This catches a lot of first-time buyers out.

The lender wants to know whether the property provides adequate security for its mortgage.

You want to know whether you're buying a house with a failing roof, damp problem or £20,000 of work hiding behind the fresh paint.

Those are different questions.

Depending on the property, you might choose a:

• RICS Home Survey Level 2
• RICS Home Survey Level 3
• specialist building survey
• additional damp, structural, electrical or roof inspection

The older, more altered or more unusual the property is, the more valuable a detailed survey can become.

6. Mortgage arrangement fees

The mortgage with the lowest interest rate is not necessarily the cheapest mortgage.

Lenders can charge fees to set up the loan.

MoneyHelper says buyers may encounter costs including booking fees of around £100 to £200, arrangement or product fees of around £1,000 to £2,000 or more, and mortgage account fees of around £100 to £300.

This is why mortgages should be compared using the combination of:

interest rate + fees + incentives

rather than simply choosing the lowest advertised rate.

7. Adding a mortgage fee to the loan still costs you money

Some lenders allow you to add their arrangement fee to the mortgage.

That can be useful if cash is tight.

But the fee has not disappeared.

If you add a £1,500 fee to a 25 or 30-year mortgage, you can also pay interest on that £1,500 for as long as it remains part of your loan. MoneyHelper specifically warns buyers to consider this when deciding whether to pay mortgage fees upfront.

8. Mortgage broker fees

You may choose to use a mortgage adviser or broker to find and arrange your mortgage.

Some brokers charge the buyer.

Others are paid commission by the mortgage lender.

Some may do both.

The fee could be fixed, hourly or based on the amount borrowed, so establish how your adviser is paid before proceeding.

A broker can still be valuable, particularly if your circumstances are not straightforward, but include the fee in your buying budget.

9. The mortgage valuation

Your lender normally needs a valuation before agreeing to lend against the property.

Some mortgage products include this free.

Others charge for it.

Again, remember that the valuation is primarily for the lender's benefit, not yours.

You may still want your own survey even if the lender has valued the property.

10. Buildings insurance

You might assume insurance starts when you move in.

It can be earlier than that.

Your lender will generally require the property to be adequately insured, and your conveyancer may advise you that responsibility for insurance needs to begin from exchange of contracts depending on the transaction.

That means you may need to arrange buildings insurance before completion day.

For leasehold flats, buildings insurance may instead be arranged through the freeholder or management company and paid for through your service charge.

11. Moving costs

Moving can cost almost nothing if you have a small flat, a borrowed van and several enthusiastic friends.

Or it can cost considerably more.

Think about:

• removal company
• van hire
• boxes and packing materials
• storage
• packing service
• furniture disassembly
• time off work
• cleaning
• childcare or pet care

If completion dates change, storage or rearranged removal bookings can create additional costs.

12. The things the seller isn't leaving behind

Never assume something comes with the property simply because it was there when you viewed it.

The seller's fixtures and fittings information should make clear what is included.

Potential surprises include:

• refrigerator
• washing machine
• tumble dryer
• freestanding cooker
• garden furniture
• sheds
• curtains
• blinds
• light fittings
• television brackets

A first-time buyer moving from a furnished rental can suddenly need to buy far more than expected.

13. Furniture

This is probably the most underestimated post-purchase cost.

You may suddenly need:

• bed
• mattress
• sofa
• dining table
• chairs
• wardrobes
• curtains
• lamps
• television
• garden furniture

You don't need to furnish the entire house immediately.

In fact, trying to make every room perfect in the first month can be one of the fastest ways to burn through your emergency savings.

Buy what you actually need first.

The spare-bedroom bedside tables can wait.

14. Appliances

The same applies to appliances.

Depending on what is included with the property, you could need:

• fridge-freezer
• washing machine
• dryer
• dishwasher
• microwave
• kettle
• vacuum cleaner
• lawn mower

Individually, these purchases can seem manageable.

Together, they can easily become another four-figure expense.

15. Immediate repairs

Your survey might identify problems before you buy.

Some problems only become obvious once you live there.

Common first-year expenses include:

• boiler repairs
• plumbing problems
• blocked drains
• roof repairs
• electrical work
• leaking showers
• broken appliances
• locks
• gutters
• fencing
• damp treatment

This is why spending every penny of your savings on the deposit can be risky.

Your house will eventually break something.

It is considerate enough not to tell you what or when.

16. Changing the locks

This is relatively inexpensive but easy to forget.

When you buy an existing home, you do not necessarily know how many sets of keys exist.

Previous owners may have given keys to:

• relatives
• neighbours
• cleaners
• builders
• dog walkers
• tenants

Changing or rekeying external locks shortly after moving in can therefore be sensible.

17. Council Tax

Renting does not always prepare first-time buyers for the full cost of running the particular home they purchase.

Check the property's Council Tax band before making an offer.

Two similar homes can have noticeably different annual costs.

Also check whether you qualify for any discount or reduction.

18. Gas, electricity and water

You will take responsibility for utilities when you complete.

Take meter readings as soon as you get the keys.

Your costs may be substantially different from those in your previous property, particularly if you are moving from:

• a flat to a house
• a new property to an older one
• a small rental to a larger home
• a well-insulated property to a poorly insulated one

This is one reason the property's Energy Performance Certificate is worth reading before you buy.

Don't just look at the letter.

Look at what it says about insulation, heating and possible improvements.

19. Broadband installation

Broadband is another small cost that can become surprisingly annoying.

Check:

• which providers serve the property
• what speeds are actually available
• whether fibre reaches the property
• installation charges
• whether new equipment is required
• how quickly the service can be activated

This is particularly important if you work from home.

Don't assume the broadband you have at your current address is available at the new one.

20. Service charges if you're buying a flat

This is a big one.

If you are buying a leasehold flat, you may have regular service charges covering things such as:

• buildings insurance
• communal cleaning
• gardening
• lifts
• lighting
• building maintenance
• management
• concierge services

You need to know not only the current service charge but also whether there are large future costs coming.

Ask about:

• previous years' service charges
• the current budget
• reserve or sinking funds
• planned major works
• recent increases
• outstanding disputes

A £300,000 flat with a £4,000 annual service charge has very different ongoing costs from a £300,000 freehold house.

21. Major works on leasehold properties

This deserves its own warning.

The fact that the communal areas look tired doesn't necessarily mean somebody else will eventually pay to refurbish them.

Leaseholders can sometimes face substantial contributions towards work to the building.

Examples include:

• roof replacement
• external decoration
• windows
• lifts
• balconies
• structural repairs
• fire safety work

Before buying a leasehold property, your conveyancer should investigate the management information and any known major works.

This is exactly the sort of hidden future cost you want to discover before exchange, not after completion.

22. Estate or management charges on some freehold homes

Don't assume service charges only apply to flats.

Some newer freehold developments have estate management arrangements covering communal landscaping, private roads, drainage, play areas or other shared facilities.

There may therefore be an annual estate charge even though you own the house freehold.

Ask before buying.

23. Parking permits and charges

That attractive city-centre flat might come with a parking space.

Or it might not.

Check:

• whether parking is included in the title
• whether a permit is required
• annual permit costs
• visitor parking
• allocated versus unallocated spaces
• EV charging costs
• whether there are restrictions on commercial vehicles

Never assume that parking outside the property means you have the legal right to park there.

24. Commuting costs

The property can be affordable while your new lifestyle isn't.

Moving further away to buy a larger home might create:

• higher train fares
• more fuel
• parking charges
• tolls
• additional vehicle wear
• longer childcare requirements

Work out the monthly cost of living in the property, not just the monthly mortgage payment.

25. Decorating

You may walk around your first home viewing saying:

“It only needs a coat of paint.”

Every homeowner eventually discovers that “a coat of paint” is an extraordinarily expandable concept.

Paint leads to:

• brushes
• rollers
• filler
• masking tape
• ladders
• new flooring
• curtains
• light fittings
• skirting boards
• “while we're doing this...”

A house can consume whatever renovation budget you offer it.

Set one deliberately.

26. Renovations that looked cheaper during the viewing

A tired kitchen can look like a simple future project when you're standing in the property for 20 minutes.

After completion you may discover it also needs:

• new electrics
• plastering
• flooring
• plumbing
• decorating
• appliances

The same applies to bathrooms, extensions and loft conversions.

If major work forms part of your buying decision, get realistic estimates before exchange where possible.

27. Costs you can lose if the purchase falls through

This is particularly painful.

In England and Wales, a buyer can generally withdraw before exchange.

But that doesn't mean you get back everything you have already spent.

By then you may have paid for:

• surveys
• searches
• mortgage fees
• valuation fees
• legal work
• specialist inspections

MoneyHelper notes that buyers who withdraw before exchange can lose money already spent on parts of the transaction such as legal fees.

You may therefore want to investigate whether home buyers' protection insurance is appropriate for your situation.

So how much extra should a first-time buyer budget?

There isn't a single figure that works for every purchase.

A buyer purchasing a £220,000 freehold house with no Stamp Duty, a fee-free mortgage and a simple move could face relatively modest additional costs.

Someone buying a £495,000 leasehold flat could need considerably more.

The safest approach is to create a separate buying-cost budget before deciding how much deposit you can afford.

For example:

That final number is much more useful than simply knowing the size of your deposit.

Don't use every pound you have to complete the purchase

Imagine you have £35,000 saved and need a £30,000 deposit.

It can be tempting to think:

Great, I have £5,000 spare.

But once legal fees, surveys, mortgage costs and moving expenses are deducted, there might be very little left.

Then the boiler stops working three weeks after you move in.

Where possible, try to reach completion with an emergency reserve still available.

Owning a home means there is no landlord to call when something breaks.

That's liberating right up until something breaks.

The real cost of a home isn't just the asking price

First-time buyers understandably focus on two numbers:

How much deposit do I need?

and:

What will my mortgage payment be?

But a better question is:

How much cash do I need to buy this particular home, and what will it cost me to own it?

That means looking beyond the listing.

Check the EPC.

Understand the tenure.

Read the lease if there is one.

Find out about service charges.

Look at the property's history.

Get a proper survey.

Understand planned works.

Check what is included with the sale.

The more you know before exchange, the fewer financial surprises you are likely to inherit afterwards.

Know more about the home before you commit to buying it

Buying your first home is exciting.

It is also probably the largest financial commitment you have made so far.

Tepilo helps you understand more about a property before you buy, bringing together useful property information and helping you identify the things worth investigating before they become your problem.

Because the cheapest surprise when buying a home is the one you discover before exchange.

Research your next home with Tepilo before you commit.