As with so many financial transactions these days, buying a home involves a number of hidden costs. Though property prices are lower now than they were in 2007, hundreds of first-time buyers are being priced out of the market, which is why many landlords and potential landlords compare buy to let mortgages at Moneysupermarket with the aim of trying to make a good return from rental properties.
Fees and Costs
Unfortunately, buying a new home involves a little more than calculating mortgage costs, working out income and expenditure details, finding somewhere pleasant in the suburbs and signing on the dotted line. Buying property means buying land and buying land means dealing with land law.
The legal systems of Great Britain have evolved over centuries. In England and Wales, land law is complex and fractured, causing headaches for solicitors. While property buyers are not required to learn land law to any great extent, they will indirectly encounter many of its consequences.
Estate agents manage the sale of properties, while solicitors and conveyancers deal with various legal issues. Buyers need to be aware that fees are often paid to all three.
Fees paid to estate agents can usually be negotiated, especially on the seller's side. A fee of around 2 per cent of the property price is typical in many areas of the country. Solicitors and conveyancers charge variable rates according to the amount of work they are required to complete. Most solicitors charge 0.5-1.5 per cent of the sale price, but administrative tasks should be capped at a certain level. Buyers can expect to pay solicitors at least £500 for a basic service.
Conveyancers and solicitors often perform many of the same tasks, so savings can be made by comparing services and deciding which would be the cheaper. Land registry notices and searches are likely to increase the amount paid to solicitors or conveyancers by around £300, while more detailed historical analyses of a home, including searches for restricted covenants and easements, could easily send fees above £1,000. Legal professionals charge by the hour, so their fees will depend on the size and difficulty of each job.
A surveyor's fee must also be factored into the cost of buying a home. The role of a surveyor is of critical importance, so this is one service that cannot be overlooked. A full survey of a property will reveal any electrical, structural or damp-related issues, so investing in an independent surveyor could even help to reduce the overall cost of a home if problems result in a renegotiation of the sale price.
Buyers must also consider removal costs. Unless dealing with the task themselves, they can expect to pay around £500 for a basic removal service. This cost may be higher in large cities and where storage or international transit of possessions is involved.
Finally, buyers must brace themselves for hidden mortgage fees, such as transfer or early redemption charges. These apply to both ordinary mortgages that people buying a home take out and buy-to-let mortgages used by investors.
Buy-to-let mortgages work by providing people with the money to buy a property. The property, however, is not intended to be lived in by the buyer. Instead, it is rented out to tenants, thereby generating a return on investment for the buyer. As with all other aspects of buying a home, this type of mortgage is not without its own hidden costs. Buildings, contents and landlord insurance are essential when investing in rental properties.