The Cost of Buying a New Build House
16th Feb, 2016
There’s nothing quite like moving into a new build house. With a completely blank canvas, you have ultimate freedom to make your new house a home. The best part is, you don’t need to worry about renovating a thing. Buying a new build house means everything is already in its best condition, saving yourself a fortune.
Of course, buying a brand new home comes with its own costs. There are upfront costs, such as the deposit and legal fees, which should form the basis of your budget. But, what about hidden costs that can take you by surprise? We’ve put together a list of guaranteed expenses when buying a new build house, so you can relax and look forward to moving into your new home.
Upfront Costs of Buying a New Build Home
You must have a solicitor or conveyancer when buying or selling a new property in order to carry out all the legal work. Their job is to make your life easier and will conduct local searches for you to identify any issues, at an additional cost. Standard legal fees can be anywhere between £500 and £1,500, including VAT at 20%. A good solicitor will keep you in the know with regular updates and support you during this exciting, but often stressful time.
This is the amount you need to put towards the cost of your new house when you purchase it, in order to secure it as your own. Usually, the deposit needs to be between 5-20% of the purchase price. Government schemes like Help to Buy only require a minimum of 5% deposit, which is ideal for first-time buyers. Although, the larger the deposit, the more likely it is you will be given a mortgage with a low interest rate.
This is a government tax you must pay on properties over £125,000, except in Scotland where you pay Lands and Buildings Transaction Tax instead. Stamp Duty rates fluctuate depending on the price of your house, for example you must pay 2% of properties up to £250,000 and 5% on properties up to £925,000. Usually, your solicitor will handle the payment of Stamp Duty, but you must ensure it is submitted on time. Work out how much you’ll have to pay with our handy Stamp Duty calculator.
Your mortgage lender will conduct a Mortgage Valuation Survey to assess the value of your property. They must check whether the house is actually worth the price you’re paying, before approving your mortgage. The valuation fee depends entirely on the size of the property and the company you choose to lend from, as some offer mortgages with free valuation surveys. This means you could pay anything from £150 to £1,500.
Before you decide to purchase a new build home, you should have a surveyor check it. This is absolutely essential for identifying any issues with the house before you commit to buying it. Most homebuyers only have a Mortgage Valuation Survey completed, but this will not pinpoint any problems or repairs needed. There are several types of survey to choose from, including a Home Condition Survey for around £500 and a New-Build Snagging Survey starting from £300.
Hidden Costs of Buying a New Build Home
Mortgage Booking Fee
This is usually charged simply for making an application and is non-refundable, even if your mortgage falls through, so be cautious of where you apply. These vary from lender to lender, but you can expect to pay around £100.
Mortgage Arrangement Fee
This is the fee your mortgage lender will charge you just for setting up the mortgage. These also vary significantly and can go up to £2,000, although it’s usually about £1,000. You have the option of paying this upfront or adding it to your mortgage, but this will consequently increase your interest and monthly repayments.
Mortgage Telegraphic Transfer Fee
This is often known as Clearing House Automated Payment System (CHAPS) and refers to the payment of your mortgage lender to transfer the money to your solicitor. Like the booking fee, this is non-refundable even if your deal falls through.
Mortgage Account Fee
This covers all the administration costs incurred by your mortgage, including setting up, maintaining and closing it. If you’ve paid this, it’s unlikely you will have to pay an exit fee, although you may still be charged an early repayment fee. If you have paid this upfront, it will usually be refunded, but it’s worth bearing in mind when applying for your mortgage.
Estate Agent’s Fee
This only applies to sellers, not buyers, but if you’re leaving your home to move into a new build, it’s worth remembering. This fee covers the estate agent’s services and is negotiated when they put your house up for sale. It is usually 1-3% of the asking price, plus 20% VAT.