Buying a Home: A Financial Check List
This guide runs through all the costs you might need to think about when buying a home, from the value of the property, to the fees required to complete the purchase, as well as your move-in and beyond. Where possible, we’ve provided estimates for the amounts you should budget for.
The good news is that buying a new home often means you save money on costs such as surveys and insurance. You’ll also be taken care of by our Sales Advisors and Customer Care team from start to finish, and will have access to our network of specialist brokers, advisors and solicitors to ensure a smooth homebuying journey.
Before You Buy
Save Your Deposit
First things first, the biggest cost involved in buying a home is your deposit. You’ll need between 5% - 20% of the property’s overall value, depending on the lender’s offer. Generally, a larger deposit will be rewarded with a lower mortgage interest rate which will benefit you in the long term.
To know how much you’ll need for a deposit, you’ll first need to work out a budget for the overall value of the property. As a rule of thumb, you’ll be able to borrow between 4x - 4.5x your household income. It’s worth using mortgage comparison websites to see what lenders could offer based on your income. The Money Advice Service also have a good online calculator for assessing your affordability in more detail.
If you’re saving for a deposit, we’ve written a helpful guide [link to deposit blog post] of savings tips to help you reach your goals, such as using the government’s Lifetime ISA savings scheme.
Work Out Your Monthly Payments
After working out how much you’ll need upfront, most lenders’ websites have tools for seeing what your monthly payments would be for a given property value. Again, as a rule, your monthly mortgage payments should be no more than 40% of your household income after tax. The online calculator can also help you determine how much you can afford per month.
Once you have a rough idea of your budget, our Sales Advisors can refer you to a financial advisor who can run the numbers in more detail.
Research The Shared Ownership Buying Scheme
Before finalising your budget, it’s worth considering how Shared Ownership could help you buy a new home.
With Shared Ownership, you buy a share of the property (25% - 75%) with a 5% deposit on a mortgage and pay an affordable rent on the remaining value. Over time, you have the opportunity to purchase additional shares of the property and eventually own it outright.
Laurus Homes have Shared Ownership properties available across the North West. You can use the link above to learn more about the scheme and visit our development web pages to search for available homes.
Purchasing Your Home
The first step of your home buying journey is choosing a home and making a reservation, which takes the property off the market. Laurus Homes’ standard reservation fees are £1,000 and £500 when purchasing with Help to Buy or Shared Ownership.
The next step is to find the right mortgage for you. Our Sales Advisors can refer you to a new homes mortgage specialist who might be able to secure you a deal you wouldn’t get on the high street. And unlike many brokers they won’t charge you a fee, which could save you hundreds of pounds.
When applying for the mortgage, you’ll usually be charged at least one fee by the lender, usually called the arrangement fee. You can expect to pay up to £2,500 for this fee.
Lenders also need a valuation of your property as security for the loan they are providing, should they need to repossess the property and have an accurate report of its value. You can expect to pay around £250 for a valuation report, although it’s worth asking if your lender will pay for it.
After reserving your home, you’ll also need to find a solicitor to help make your purchase. They’ll manage the transfer of ownership and ensure all paperwork is in order. Laurus Homes can also recommend solicitors who specialise in new homes and Shared Ownership.
You can expect to pay £500 - £2,000 on legal fees, depending on the value of the property and the work required. The legal work for a new build is often more straightforward because we’ve already run checks on the land your home is built on.
Unlike buying a second-hand property, with a new build you usually won’t need a survey. Once you’ve exchanged contracts and your home is built, it’s already been signed off by NHBC, which ensures its quality with no extra cost for you. If you were buying a second-hand property, you could end up spending as much as £800 on a survey.
Stamp duty is a tax paid on property sales which you’ll pay to HMRC via your solicitor. If you are a first-time buyer of a property under £500,000, you’re exempt from paying stamp duty on the first £300,000. All Shared Owners are also exempt in the same way, and don’t pay the duty on rent payments either.
But the government’s stamp duty holiday means you won’t pay a penny on any purchase up to £500,000 until 31 March 2020, meaning you’ll save £4,500 on average. You’ll need to complete on your home before the March 2021 deadline, and if you’re buying a new home it will have to be built by 28 February 2021.
Stamp duty varies depending on the value of your property, so it’s worth using an online calculator to check how much you’ll pay.
Land Registry Fees
You’ll need to pay the Land Registry to register the sale of your property on public records. This will cost £200 - £500, depending on the property’s value.
When the big day comes, if you can’t manage to stuff your belongings into the back of a car, you’ll need to appoint a removals company or hire your own van. This can cost from £100 for a small local move, to £1,000 for a long-distance family move.
A new home is something to be proud of, and there are several types of insurance that can help you protect it. Please ask your Sales Advisor if you’d like to be referred to a specialist advisor.
For protecting the ‘bricks and mortar’ of your home, your Laurus Homes property comes with an NHBC Buildmark warranty, which covers your home for the first 2 years after completion and insures the structure for 10 years.
You may save money on your regular home and contents insurance by buying a new build because our properties are fitted with more secure locks and doors than older properties.
It’s also worth considering income and life insurance to secure the future of your household’s finances and your mortgage.
Our developments include excellent communal areas such as play parks, family areas and open green spaces that make them great places to live. To cover the costs of maintaining these areas, we collect a small monthly service charge from all residents for things such as repairs, grass cutting, and insurance. Please ask your Sales Advisor what management fees apply to your property.
As with any property, you’ll need to pay council tax to contribute towards the running of local services. You can visit the website of your local council or contact them to find out what band your property will be in and how much your bill will be.
Don’t forget to factor in your water, energy and internet bills to the costs of buying your property. The good news is that because new builds are far more energy and water-efficient, you’ll usually save money on your monthly outgoings.
According to the NHBC research, the average new build could save you 50% on your energy bills compared to a similar renovated Victorian property. And modern bathroom fittings could save you 70 bathtubs of water a year compared to 1980s technology.