MSE’s Academy of Money
MSE’s Academy of Money

Start this free course now. Just create an account and sign in. Enrol and complete the course for a free statement of participation or digital badge if available.

5 The other costs of buying a property

It’s not just about getting the mortgage and being able to pay it. There are a number of costs that you will additionally incur as you take ownership of your new home.

This is a montage of five cartoon characters: Mr Cash (the Lender), Mr Stamp (the Taxman), Mrs Lands (the Registrar), Ms Deeds (the Solicitor) and Mr Scales (the Valuer).
Figure 7 Meet the people involved in your property purchase

To show you how these costs may add up, let’s suppose you’re buying a property for £220,000 in England – which is close to the average cost of a property in the UK.

What costs do you incur if you are not a first-time buyer and the property is to be your home (your ‘prime residence’)?

  • Mortgage arrangement fee (common with discount and fixed-rate mortgages and some other products): say, £500.
  • Legal costs including local searches and Land Registry fee: £800.
  • Survey and valuation: £350.
  • Stamp Duty Land Tax (SDLT): £1,900.
  • Removal costs: say, £700.
  • GRAND TOTAL: £4,250.

There may also be a fee to the mortgage broker if you’ve used one to help choose and organise the mortgage. Some costs arising from getting a mortgage – specifically the arrangement fee – can, subject to the lender’s approval, be added to the mortgage. The other costs will, though, have to be met up front.

Other transaction costs involved in property transactions are the fees payable to an estate agent (if one is used) and the charge for an Energy Performance Certificate in respect of the property. These costs are, though, met by the property seller rather than the buyer.

Box 1 explains Stamp Duty Land Tax in a little more detail.

Box 1 Stamp Duty Land Tax (SDLT)

The marginal rates of Stamp Duty Land Tax on residential property purchase in England and Northern Ireland in 2022/23 were:

  • up to £125,000, 0%
  • £125,001 to £250,000, 2%
  • £250,001 to £925,000, 5%
  • £925,001 to £1.5 million, 10%
  • above £1.5 million, 12%.

Note that first-time buyers are exempt from SDLT for properties up to £300,000 and at a reduced rate of 5% for the amount in excess of £300,000 up to a maximum of £500,000. Purchases above £500,000 do not qualify for any SDLT relief. Also note that a surcharge of 3% applies if the property is not acquired as a ‘prime residence’.

In Scotland the equivalent tax to SDLT is Land and Buildings Transactions Tax (LBTT) and in Wales it is Land Transaction Tax (LTT). The Scottish Parliament and Welsh Parliament have the power to – and do – apply their own rates for these equivalents of SDLT.

The next section reviews the range of risks and challenges that come with a mortgage. It will look at how coping with the costs of a mortgage needs to be embedded into wider household financial management.

Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has 50 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to University-level study, we offer two introductory routes to our qualifications. You could either choose to start with an Access module, or a module which allows you to count your previous learning towards an Open University qualification. Read our guide on Where to take your learning next for more information.

Not ready for formal University study? Then browse over 1000 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus371