The hidden costs when purchasing a house
Buying a house is probably the most expensive purchase we will make in our life. For some, purchasing a house is a symbol of entering the exclusive club of adulthood. For most though, a house serve as the home and shelter for their loved ones. There are also a few who view houses as a status symbol. But there is one common thread linking all three – each one of them will buy the most expensive house they can afford. Since a house is considered as a stable long-term investment, many are not hesitant about splashing all their savings on it.
However, this is a mistake because there are many other hidden expenses when buying a house that will rear their head when you least expect it. Some of the most costly expenses include:
• Stamp Duty
Paying a stamp duty is a legal necessity in all property purchases. It is a common law tradition that has been in existence for several centuries. Unless payment for the tax is made, the government will not issue a Certificate of Land Ownership to formalise the purchase.
While many are aware of the requirement, most are not prepared at the amount that needs to be paid for all purchases valued at above £125,000 (exemption for first time buyers). The standard rate is on a sliding scale ranging between 2% and 15%, depending on the value of the transaction. Basically, house buyers should expect to pay a minimum of £2,500, which is a huge amount for people who have just emptied their savings account.
• Surveyor’s Fee
Several banks in the UK require a professional valuation done by a chartered surveyor with every mortgage application. While the standard cost is just a little over a couple of hundred pounds, the rate can go much higher if the bank request for a detailed survey (usually for older buildings or flats).
• Solicitor’s Fee
Your solicitor’s conveyancing fees rarely go beyond a thousand pounds – unless the transaction hit a snag owing to some unforeseen circumstances, such as finding a lien on a deed or a third-party contest of ownership. In such situations, the solicitor’s cost could escalate very quickly. It pays to have a small nest egg when facing such an event.
• Repairs and renovation
There is always something that needs to be repaired or renovated when moving into a new home. Loose pipes, broken window panes and cracked tiles are just some of the common and cheaper issues. Imagine the issues extend to a leaking cistern, electrical wiring problems or a leaking roof – you could be looking at quite a hefty repair bill. And we haven’t even talked about the renovation!
The fact is, a fast house sale will always unearth something that we didn’t notice before signing the sales contract. So rather than scrambling around hunting for a new credit card to cover the cost, be smart and set aside some funds for any eventualities.