The Initial Costs of Buying a Home

We often talk about the journey to home ownership, but what do you need to budget for to arrive at your own front door?

The truth is, there are several costs associated with buying a home, and the deposit is just the beginning. Understanding what they are can help you save accordingly and reach your goal sooner. This handy guide walks you through the initial costs, so you can take the next step with confidence.

What are the upfront costs of buying a home?

Reservation fee

Once you find your dream home, you can reserve it from £99 to £500 depending on the scheme whilst the sale progresses. For Shared Ownership purchases, the reservation fee is credited to your rent account and reduces your first payment to Hyde after completion.

Deposit

Most lenders require a minimum deposit between 5% and 20% of the property’s purchase price. A larger deposit typically unlocks better mortgage rates, so it’s worth putting down as much as your finances allow.

If you’re buying through Shared Ownership, your deposit is calculated on the value of the share you’re purchasing rather than the full market price. This can make the amount required significantly lower than buying outright. Whichever route you choose, our guide to saving for a home features practical tips to help you get there.

Legal fees

You’ll need to appoint a conveyancing solicitor to handle the legal process of transferring ownership of the property to you. First-time buyer solicitor fees typically range from £1,300 to £2,250, depending on the property and complexity of the transaction.

Hyde will provide details of its panel of solicitors who offer fixed fees and considerable experience with Shared Ownership. It’s worth getting a couple of comparable quotes before appointing a solicitor so you are aware of the likely costs for their work and disbursements.

Mortgage product fee

Also known as an arrangement or administration fee, this is a one-off charge, typically between £0 and £999, paid to your lender to secure a specific mortgage deal. You can pay it upfront or add it to your loan, though adding it means you’ll pay interest on it over the full mortgage term.

Mortgage broker fees

Using a mortgage broker is worthwhile, as they’ll assess your affordability, search the wider market and find the most suitable deal for your circumstances.

Some brokers offer a fee-free service, earning commission from lenders instead. Others charge a flat fee of around £500, or a small percentage of the loan amount. In some cases, they charge both a fee and receive commission. It’s recommended that you always confirm a broker’s payment structure upfront so there are no surprises.

Hyde regularly hosts financial workshops where specialist advisers are on hand to offer free advice and an initial financial qualification to help you find the right home at the right outgoings for your current circumstances.

Stamp Duty Land Tax (SDLT)

SDLT may be payable on residential property purchases in the UK.

When purchasing a property on the open market, you’re required to pay stamp duty on the total value of your new home. If you’re purchasing shares of a Shared Ownership home, however, you have a couple of options when it comes to stamp duty:

• You can choose to pay stamp duty on the full value of your home and effectively get this financial lump sum out of the way early. This option also means you won’t need to pay stamp duty later, even if you staircase to a larger share down the line.

Alternatively, you can pay stamp duty on the share you’ve purchased. If you’re buying a 10% share in a £250,000 home, this may mean you won’t pay any stamp duty at all at the time you buy your home, although you may have to pay stamp duty based on higher values if you opt to staircase or sell your home at any time.

First-time buyers may benefit from SDLT relief, depending on the purchase price:

• You’ll pay no SDLT on purchases up to £300,000.
• If the price is over £300,000, you’ll pay 5% SDLT on the portion between £300,001 and £500,000.
• If the price is over £500,000, the relief doesn’t apply.

You can find more information about SDLT rates and thresholds on the government’s website.

What are the additional costs of buying a home?

Moving costs

The cost of moving depends on your circumstances. A small move might only require a hired van and a free weekend, whereas if you’re relocating a family household’s worth of furniture and belongings, a professional removals company will likely be the most practical and stress-free solution.

Gather some quotes and compare prices to find the best deal, then factor the agreed cost into your savings goal.

Decorating and furnishing

One of the best parts of buying a home is making it your own. But decorating and furnishing costs can escalate quickly if you haven’t planned ahead.

Buying a new-build Hyde home works in your favour here. Our homes come with a high specification as standard, including quality flooring and contemporary kitchen units with integrated appliances, as well as built-in wardrobes to some homes, so you can move in without facing renovation costs. Instead, you can focus on settling in and personalising the space at your own pace when the time is right.

Home insurance

As a homeowner, having the right insurance in place gives you peace of mind should anything unexpected happen. There are two types to consider:

• Buildings insurance: This covers the structure of your home and is a condition of most mortgage agreements. For Shared Ownership homes with Hyde, buildings insurance is typically arranged by Hyde and covered through your service charge. Your sales consultant will be able to confirm the arrangements for your chosen home.
• Contents insurance: This isn’t compulsory, but it’s strongly recommended to protect your belongings.

Prices will vary depending on the property type, location and the level of cover you choose. Make sure you get a range of quotes to help you make the right choice.

Explore our available homes and find out more about our ways to buy.

We also understand the importance of being able to speak directly to our sales teams for tailored advice or practical guidance. Simply register your interest in your chosen development and one of our sales consultants will be in touch. Alternatively, complete the contact us form and we will be happy to help.