For first-time buyers a lot of emphasis is put on saving for a deposit to get onto the property ladder, however, there are several additional costs that will need to be accounted for and paid upfront.
Here at Enact conveyancing, we explain the typical upfront costs first-time buyers should be aware of.
Mortgage Associated Fees:
Most first-time buyers will buy a property with the assistance of a mortgage. Yet, while this does make homeownership more affordable there are a few costs that buyers will need to pay ahead of securing their mortgage, including:
- Mortgage arrangement (product) fee
- The “arrangement”, “reservation/booking”, or “product fee”, is the upfront cost associated with securing that mortgage product. Often a mortgage lender will either allow you to pay the fee upfront or add it to your overall mortgage. It’s worth weighing up the pros and cons when doing this as if you add it to your mortgage you will end up paying interest over the lifetime of your loan. On the other hand, if you paid the fee upfront but, for whatever reason, the property transaction fell through, you may not get that money back.
- Property valuation
- When buying a home with a mortgage your lender will insist a valuation of the property is carried out. Although this is organised by the lender, more often than not this is an additional cost to you. The reason for this is the lender needs to certify that the property is in fact worth the amount you’re paying for it. Should your home become repossessed they will want to ensure they haven’t lent you too much and can get their money back.
- Property survey
- As well as a valuation you should also consider whether you want a property survey to be carried out on the property. This is for the benefit of you, the buyer, as opposed to the valuation which is solely for the benefit of the lender. Again, this is an additional cost to be paid upfront with different types of surveys available depending on the level of detail you’re looking to acquire. Typically, the older the property the more likely you are to go for a more in-depth (and more expensive!) report to find out the condition of the property.
- Broker fee
- Some buyers will use a mortgage broker to help them find the best mortgage product available on the market. In this instance, you may be charged a fee for their services (a fixed fee or a percentage of the loan amount). Sometimes a broker gets their fee in the form of commission from a lender meaning they are free to use. You should be wary of paying a broker up-front in case you decide to not go ahead with their services as it may be non-refundable.
Conveyancing:
When buying a property, you will need to instruct a licensed conveyancer or solicitor to manage the legal transfer of ownership for a property from the seller to you, the buyer.
While the overall legal bill will be paid on completion of the property there are still a few upfront costs you should expect to pay when appointing your solicitor to cover third party costs relating to disbursements such as.
- ID checks
- Searches
This allows your conveyancer to get started with your transaction without the delay of requesting funds here and there to do their initial due diligence on your property purchase.
Removal companies:
If you’re moving from un-furnished rented accommodation or elsewhere you may consider using a removal company to assist you in your move. This is particularly helpful if you have a short turnaround to move from one property to another and have lots of big items to move.
You should expect to pay a deposit to your removal company up to a week before your scheduled moving date. Many removal companies will also not accept a booking until exchange of contracts has been made as up until this point the transaction could still fall through. Furthermore, you will not have set your completion date until exchange, therefore, if you were to book a firm too early you may lose your deposit or be charged a cancellation fee if the completion date changes.
It’s worth remembering that removal firms will charge more on their busiest days, such as Friday, which is typically one of the most popular days of the week to move home . If you can, booking on a quiet day may enable you to save money.
Here at Enact conveyancing, we have a team of experienced conveyancers to help you each step of the way during your journey to homeownership. Get a free instant conveyancing quote today.
