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Top 5 Budgeting Tips For First Time Buyers

Buying your first home is one of the most monumental decisions you will ever make. It is a time of excitement, but it can also be nerve-wracking. Buying a house is an expensive process, and it’s not just about finding a deposit, which is hard enough these days. You’ll also need to budget for agency fees, conveyancing fees, surveys and more.
While we can’t help you find the money, we can tell you how much these other expenses cost and show you how to keep them to an absolute minimum.

Here are five factors to take into consideration when budgeting as a first-time buyer.

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Finding A Deposit

If you’re looking for your first home, you probably already have a pretty good idea how much you can borrow and how much deposit you need. As a rough guide, first time buyers will need to find at least 5% of the purchase price. According to Zoopla, the average price for a home in Cumbria is £199,938, so first-time buyers will need to find a deposit of at least £9,996.

That is no small sum, but help is available in the form of Help to Buy ISAs. These provide a bonus of 25% up to a maximum of £3,000 for savers looking to get on the property ladder. You can open a Help to Buy ISA at a range of banks, building societies and credit unions.

Stamp Duty

Stamp duty is essentially a tax levied by the government on all homes costing more than £125,001. As of January 2018, the stamp duty rate is 2% on properties costing between £125,001 – £250,000 and 5% on properties costing £250,001 – £925,000. As a first-time buyer, you don’t have to pay stamp duty on the first £300,000, so long as the property is worth no more than £500,000. Our advice is, therefore, to look for a property with a value under £300,000 to avoid paying stamp duty.

Survey And Valuation Fees

So, you’ve found the perfect home and saved up a deposit. Now you’ll need to get the home surveyed and valued. The valuation fee is for your mortgage provider to assess the value of the property, so they can establish the exact amount they are prepared to lend you. The cost will depend on the property’s value, but you should budget between £150 and £1,500 for this.

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The survey is to assess the condition of the property and will need to be carried out by a professional surveyor. The cost will depend on the type of survey to be carried out and the size of the property, but the price will generally range from £150 for a basic home condition survey to £600 for a full structural survey. It is important that you choose the right kind of survey for the property you intend to buy. For example, an older home will always require a full structural survey.

Mortgage Fees

You’ll also need to think about mortgage fees. Your mortgage provider may charge a booking fee, which can range from £99 – £250. Then, there will be an arrangement fee of up £2,000, and you’ll need a mortgage valuation fee of about £150.

Most buyers don’t even think about these until they are faced with paying them, opting to add them to the price of the mortgage instead. We advise always paying them upfront if you can, or else you will pay interest on them for the life of the mortgage.

Legal Fees

Finally, you will need to engage a solicitor or conveyancer, who will carry out all the legal work for you. Licensed conveyancers tend to be cheaper than solicitors, so we recommend going down this route. Legal fees will range from £750 to £1,500, depending on the size of the home and its location. Local searches will also need to be carried out to ensure there are no planning concerns that may affect the property’s value. These typically cost £300.

As you can see, there are a number costs you need to budget for before you get the keys to your new home. For an average sized house in Cumbria, you will need to budget anywhere from £3,500 to £5,500 on top of your deposit, and that’s assuming you don’t have to pay stamp duty. But, don’t despair. With a little hard work and dedication, it can be done.

If you’re ready to find the home of your dreams, check out the latest houses for sale in Cumbria and the surrounding area today.

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