Moving house can be a costly business. For renters and buyers alike, the costs of switching properties can be significant, burdensome and, in some parts, unexpected. If you’re planning on moving house soon, what are the main upfront costs you should be prepared for?
Probably the biggest stumbling block for those trying to get their first footing on the property ladder, upfront deposits present a significant financial challenge relative to those both buying and renting.
For buyers, deposits traditionally sit between 5% to 20% of the purchase price. While the government’s help to buy scheme has helped many young buyers to save this sort of capital, it still presents a long-term project for most. Renters will have to cough up five weeks’ worth of rent on top of their normal monthly sum which, for those living pay-cheque-to-pay-cheque, is quite an ask.
Considering that half of twenty-somethings have no savings to speak of, the deposit on a new property can often come as quite a financial shock. If a house move is on the horizon, make sure you’re carefully managing your finances well in advance to meet the necessary costs.
Depending on the value of your projected home, stamp duty can amount to a hefty figure when you’re moving house. Stamp duty is a government tax paid on properties costing above £125,000, although first-time buyers will avoid any tax on the first £300,000 of a property valued up to £500,000.
If you’re buying a high value property, be ready for a large chunk of money to disappear on stamp duty. Thresholds on higher-value brackets go as high as 12%, which, at those levels, represent quite a sum of money.
Estate/letting agent fees
The people helping you to move house will want their share, with estate agent’s services being charged to the seller, typically at 1% to 3% of the sale price, plus 20% VAT.
For renters, up until recently, letting agents made their money on managing transactions through rather creative administration costs. However, official changes as of the start of June 2019 have meant a removal of these types of agency fees. The Tenant Fees Act means letting agents will likely have to refocus on rent commissions, although you’ll still be liable for tenancy adjustment charges, though these are capped at £50.
Legal, valuation and surveyor fees
Three rather unwanted, but necessary, fees that come with the buying and selling of homes are the legal, valuation and surveyor costs.
Most buy and sell property transactions will require a solicitor to see all the paperwork through safely, which will cost in the region of £850-£1,500. Mortgage lenders will need to assess your property’s value to establish how much they wish to lend you – this is sometimes free but can cost between £150-£1,500. Finally, before buying a property, you’ll need it checked by a surveyor, which will cost anywhere from £250-£600.
All in all, that’s a few extra thousand pounds you need to account for once everything has been factored in.
As with all major purchases in life, financial preparation is the key when approaching a property move. Do your research in good time, make sure you have the relevant funds to carry out what you wish to do, and ensure you have some level of backup plan established just in case. This should help to ease the financial strain of what can be a very stressful process.
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