The following advice is provided by the Citizens Advice Bureau...
How much can you afford?
The first thing you need to do is decide how much you can afford. You will need to look at how much money you have available yourself and how much you can borrow. There are a number of different financial institutions which offer loans to people buying a property, for example, building societies and banks. You should find out if you are able to borrow money and if so, how much (for information on mortgages, see under heading Mortgages).
Some building societies now provide buyers with a certificate that states that a loan will be available provided the property is satisfactory. You may be able to get this certificate before you start looking for a property. Building societies state that this certificate may help you to have your offer accepted by the seller.
Before finally deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional costs. These include:-
- valuation fees
- Stamp Duty Land Tax. This is payable on properties costing more than £125,000 and is at least 1% of the purchase price (in a limited number of areas, designated as 'disadvantaged', it is only payable on properties costing £150 000 or more)
- land registry fee
- local authority search
- fees, if any, charged by the mortgage lender or someone who arranges the mortgage, for example, a mortgage broker
- the buyer's solicitor's costs
- VAT
- removal expenses
- any final bills, for example, gas and electricity, from your present home which will have to be paid when you move.
For more information about Stamp Duty Land Tax, go to the HM Revenue and Customs (HMRC) website at www.hmrc.gov.uk/so, or ring the HMRC Stamp Office enquiry line on: 0845 603 0135.
You should be aware that if you start the process of buying a property and then the sale falls through you may have already paid for a valuation and/or a survey. If the solicitor has started any legal work you may also have to pay for the work done.
You should also take into account the running expenses of the property you wish to buy. These may include:-
- community charge/council tax (in England and Wales)
- water rates (in England and Wales)
- ground rent, if the property is leasehold
- service charges, if the property is a leasehold flat
- insurance costs, including life insurance, buildings and contents insurance.
