How much does it cost to buy a home?

If you’re buying a home, it’s crucial to make sure you have budgeted for all the different costs involved. Here’s everything you need to know.

How much do I need to buy a house?

If you’re wondering how much a house costs, there is no quick and easy answer. For starters, house prices vary massively depending on which region you’re looking at, how the property market is doing and what kind of home you’re after.

One big cost factor is whether you buy a house or a flat. Other considerations include size, condition, whether there is a garden or garage and even the kerb appeal of the property.

Even with two houses at identical prices, the total cost could change by quite a bit depending on the mortgage deal you get and how much you pay in fees. Your credit rating and how much time you spend shopping around can have a significant impact here. 

To give you an idea, we’ve crunched the numbers to show how much it could cost to buy a £200,000 property, factoring in your deposit and all the fees:

Using the examples above, factoring in the fees, deposit and mortgage interest payments, buying a property worth £200,00 would cost you a total of £295,156. Of that, £23,885 is the deposit and additional fees, that are typically paid up front.

The mortgage itself can be paid off over 25 years, and you can add some of the fees to this to spread out the payments. However,  you’ll end up paying interest on top, costing you more overall.

The total amount you pay could also be higher if your mortgage interest rate rises or you need to pay for maintenance and renovations.

Deposit

When you buy a home, you need to pay a percentage of the price yourself. This is known as the deposit and is calculated as a percentage of the total home.

For example, if you’ve saved up £15,000 and want to buy a property worth £150,000, you have a 10% deposit. Your mortgage covers the remaining £135,000, which is 90% of the total price.

If you’re a first-time buyer, you typically need to fund the deposit from savings. If you already own a home and are moving, you can use the equity in your current house alongside any extra savings you’ve built up.

Most mortgage lenders require a deposit of at least 5% although it is possible to find 100% mortgages. The higher your deposit is, the better the rate of interest you’ll be offered. Lower loan-to-value mortgages often also come with lower fees.

How to save for a deposit 

Mortgage repayments and interest

Once you have bought a home, you have to start paying back your mortgage each month. This involves paying interest. On a repayment mortgage, you will pay off the full amount you borrowed by the end of the term plus the interest on the loan.

How much interest you pay will depend on whether your mortgage has a fixed or variable rate of interest, and the deal you got from the lender. Interest is charged as a percentage based on your outstanding balance, so the higher the rate, the more you pay.

There may be other fees depending on the type of mortgage deal you get. Important ones to consider include:

• Early repayment fees. Some mortgages charge you if you make an overpayment, pay your mortgage off before an initial interest period ends or switch to another deal.

• Exit fees. You may have to pay £75 or more on some mortgages when you finally pay them off – even if you wait until the end of the term.

• Missed repayment fees. These come into play if you fail to pay your mortgage on time.

You can get advice from a broker or independent financial adviser (IFA) when you take out a mortgage. This could help you find a suitable deal and even save money as they may be able to find a better mortgage than you.

On average, mortgage brokers cost around £500 if you choose the deal they recommend. Some brokers are paid commission instead of fees – meaning they are free of charge to use – but they may only offer mortgages from a limited range of lenders.

Here is everything you need to know about finding a mortgage broker

Mortgage fees

Securing a mortgage often comes with several other fees, which increase the total amount you pay overall. Lenders must include this information when they show the mortgage cost. 

The key figure is the Annual Percentage Rate of Charge (APRC), which shows the loan’s interest rate, including all fees you have to pay. This makes it easier to compare mortgages from different lenders.

There’s also the cost of various experts to consider, including surveyors and lawyers. 

The main costs you need to factor in are:

Booking fee

Some lenders make you pay a booking fee up front just to apply for one of their mortgages. This money is not usually refunded, even if you’re rejected. The typical cost is around £100.

Arrangement fee

An arrangement fee is also known as the product fee or completion fee. The money is due when you are accepted for the mortgage and can cost up to £2,000. You can either:

• Pay it straight away

• Add it to your mortgage balance – but remember if you do this that you will pay interest on top

Valuation fee

Lenders need to check how much a property is worth before offering you a mortgage. They usually charge around £200 to £700 to cover the costs of sending an expert out to value the house. This is to make sure that it’s worth the amount of money you want to borrow.

Transfer fee

This is your lender's charge for sending the money for your purchase. One of the more inexpensive home buying costs, it ranges between £25 and £50.

Survey fees

You can choose to pay for a qualified surveyor to check a property before you buy. This is often a wise investment as it could save you money down the line. They will look at the condition of the property and let you know if there are any issues that could cost you money later, such as damp or problems with a roof.

You pay more for a detailed survey, and the price often escalates depending on the value of the house. A basic survey could cost £250, but an extensive buildings survey on a £2 million home could cost as much as £2,000.

Solicitor’s fees

When you buy a home, you need a solicitor to:

• draw up contracts

• pay Stamp Duty tax

• transfer funds for the purchase

• run searches to check for planning or environmental issues

• register your property with the Land Registry

Solicitors may charge a set fee, an hourly rate or a percentage of the total purchase price. A standard bill is likely to be between £700 and £1,500 per property.

Other costs when buying a home

Stamp Duty

You have to pay Stamp Duty Land Tax (SDLT) when buying property in England or Northern Ireland. In Scotland, it's called Land and Buildings Transaction Tax, and in Wales, it's called Land Transaction Tax.

You can work out the Stamp Duty you need to pay using our stamp duty calculator.

Currently, in England and Northern Ireland, you pay 0% on the first £250,000 of a property, 5% on the next £675,000 up to £925,000, 10% on anything from £925,001 to £1.5 million and 12% on everything else.

If you’re buying your first home, you won’t have to pay Stamp Duty on the first £425,000 of a main residential property as long as the total price is less than £625,000.

The thresholds in Scotland and Wales are different to England and Northern Ireland, so use the calculator linked above to find out how much you need to pay wherever you live in the UK.

Moving costs

It can be cheaper to move your belongings to your new home yourself, especially if you have a big enough vehicle to move your largest items. However, costs may involve:

• engaging a removals firm

• hiring a van

• taking the day off work

Moving home usually costs between £300 and £600, but you could pay much more if you use a removals company and have lots of large possessions or move a long way. 

If you do use a removals company, you can keep costs down by booking in advance (where possible) and avoiding Fridays and Mondays. Mid-week is less popular for moving and is therefore cheaper. 

Costs of owning your home

Once you have bought a property, there will be regular costs you will need to pay. These include:

• Council tax, which is based on where you live and how much your property is worth. Here is how to make sure you are paying the right amount of council tax.

• Maintenance on your property. For instance, the cost of repairs, decorating, DIY and improving your home.

• Insurance for your building, which lenders will make sure you take out as a condition of your mortgage. You may also need contents insurance for your possessions or mortgage protection insurance to make sure you can still make repayments if you’re unwell or you lose your job.

• Utility bills like gas, electricity, water, internet, television, phone and broadband. These vary wildly, particularly if you stick with the same provider. So, it’s important to shop around and switch regularly.