No matter how good a deal you strike over the cost of a new house, there is no getting away from the fact that moving is an expensive business. But how can you make the most of your budget? We quizzed MoneySavingExpert’s money and insurance editor Johanna Gornitzki (pictured below)…
If an Army family is considering buying a house, what additional costs do they need to budget for?
There are a raft of fees, charges and taxes you’ll have to pay before – and after – you can get your hands on the keys to your new home.
After paying your deposit, the biggest expense is likely to be your stamp duty bill – the tax you pay to the Government when you buy a property.
There’s no charge on properties of £125,000 or less, but above that you are charged a percentage of the cost and the rate payable leaps up at a set of thresholds. You’ll only pay the rate for the proportion of the property that’s at that rate. For example, if you’re buying a property worth £300,000, you pay nothing below £125,000; two per cent on £125,000-£250,000; and five per cent on the value of the property above £250,000. So in total this means you’ll pay £5,000.
Once you’ve put money aside for your deposit and stamp duty bill, estimate another couple of thousand pounds for other costs. This will pay for things such as the fee you may have to pay when you take out a mortgage, the fee your lender will charge to check how much the property you’re buying’s worth and solicitor fees, which can cost up to £1,500.
This should also cover optional – but often essential – costs such as a survey to check for things like damp, structural problems or plumbing issues. If you don’t get a survey and something later turns out to be wrong, you’ll have limited options.
Lastly, don’t forget to factor in removals (if not covered by the MOD) and the cost of new furniture or white goods.
How can families get the best deals and avoid common pitfalls?
Getting the right deal for you could save you hundreds of pounds a month. The best way to make sure that happens is to speak to a mortgage broker, who will scour the market to find you a good deal. By using one, you swiftly cover a huge slew of lenders, and get added clout with them to ease your acceptance as well as an extra layer of protection if things go wrong.
One of the things to watch out for when taking out a mortgage is high mortgage fees. Cunning lenders often use high fees to make their interest rates look more attractive, so they rise up the best buy tables.
Some charge fees in excess of £2,000 – this could work out much more expensive than a higher rate with a lower fee so always do your sums.
What are the most important things to consider financially when looking at buying a house?
Getting a mortgage is one of the biggest financial commitments you’re ever likely to make. Before you begin the search for your dream home ask yourself whether you can really afford the repayments. The best way to answer that question is to work out your budget. Go to www.budgetbrain.com to look at what you can realistically afford each month. Then roughly see how much your mortgage is going to cost you, and consider if you can afford it if rates went up. The mortgage needs to be in your financial “comfort zone” – if not, it could end in disaster.
Can Army families get any help in moving onto the housing ladder?
Help to Buy
The Government Help to Buy scheme was introduced to support those who had sufficient incomes to repay a mortgage but were struggling to get a deposit together.
It provides an insurance policy for mortgage lenders, so if you put up five per cent on a home worth less than £600,000, the Government will insure the next 15 per cent for the lender in case of problems.
As lenders are taking the same risk as if you had a 20 per cent deposit, they can offer more mortgages for people with a deposit of just five per cent.
That’s the big impact – it’s not so much that they’re far cheaper, just that they’re more readily available.
There’s also another type of Help to Buy scheme, but it’s only for those buying a new build and the scheme works slightly differently depending on where you are in the country. In England, it’s only for those buying a new build worth under £600,000 – it’s £300,000 in Wales.
Here, provided you’ve a deposit of 5 per cent and you pass the criteria, the Government will give you an interest-free (for the first five years) loan of 20 per cent of the purchase price and you raise a mortgage of 75 per cent for the rest.
Forces Help to Buy
This scheme offers an interest-free loan from the Government to contribute towards the deposit and other costs.
It differs from the other Help to Buy schemes in that it’s a simple, interest-free loan that you repay over 10 years. The scheme allows you to borrow up to 50 per cent of your salary up to a maximum loan of £25,000.
To apply, your soldier needs to have completed a minimum of two years service, have more than six months left to serve when applying and meet the right medical categories.
Shared Ownership
You may also be eligible for one of the many shared ownership schemes available across the country.
As the name suggests, you’re not buying the whole property outright – just a cut of it.
Usually run by housing associations, borrowers buy a share of a property worth between 25-75 per cent and pay rent on the rest.
Later on, if you can afford it, you’ve a right to increase your share of the property.
How can families get the best deals and avoid common pitfalls?
How much you will have to pay for things like removal fees depends on your personal circumstances. Unless you can pile your belongings into the back of a car, factor in the cost of a removal van. These start at £100 for small local moves, but can easily cost £1,000 or more for shifting a family’s worldly goods long distances.
