So the housing sector has reopened after seven weeks of lockdown and maybe the time spent in close proximity to your family has exposed the shortcomings in your current home. Or perhaps you’d been drawing up plans to move to somewhere new before the coronavirus struck and the gentle easing of the restrictions has prompted you to revisit those thoughts and breathe new life into your moving project. Now is the time to think about how you’re going to finance the move and, in common with many people, your starting point may well have been to find an online mortgage calculator and work through different borrowing scenarios to see what you can afford (maybe you even used ours!) For lots of people, this can be as far as their thinking about cost goes: how much can I borrow and, given that and taking into account the net equity in my current property (property value minus outstanding mortgage balance) what can I afford to buy?
So it can come as a surprise to people when they discover their sums are flawed – in some cases by many thousands of pounds.
And the reason for that is that there are a great many additional costs involved in moving that people often simply overlook – or, in some cases, don’t even know about.
So what is the true cost of moving? Here’s our guide to the common things you also need to consider when you’re setting a budget for your next or dream home:
Broadly speaking, unless you or a person you’re buying the property jointly with is a first-time buyer, you’ll pay Stamp Duty – or Stamp Duty Land Tax (SDLT), to give it its full name – on all but the first £125,000 of the purchase price.
At the time of writing, the Stamp Duty rates are 2% on the property value between £125,001 and £250,000, 5% between £250,001 and £925,000, 10% between £925,001 and £1.5m, and 12% on everything above £1.5m.
So, if you were to buy at an agreed price of £580,000, your Stamp Duty bill will be £19,000:
You pay £0 on the first £125,000, £2,500 (2%) on the portion of value between £125,001 and £250,000, and £16,500 (5%) on the remaining £330,000.
Although it is possible to do your own conveyancing, unless you’ve got professional experience in this area it’s generally advisable not to – getting it wrong can be expensive and complicated.
In most cases you will likely choose between using the services of a conveyancing solicitor or a professional conveyancing firm.
Conveyancing is the process by which you establish, among other things, that the seller has the legal right to sell the property to you, that there are no potentially problematic surprises in the property deeds or in the local authority plan (you don’t want to move in and suddenly discover your neighbour has a legal right over part of your property or that a 40-home estate is going up on the other side of your garden fence next year) and the process of drawing up and signing contracts.
Your solicitor or conveyancer will also oversee the transfer of funds for your part of the transaction (your sale and your purchase) on the day of completion.
Typically, the average cost of conveyancing in the UK at the time of writing this article is between £800 and £1,500 inclusive of VAT. And on top of that, you’ll also have to pay the cost of the land searches that are involved, which vary from local authority to local authority but, as a guide, can be up to around £300.
Valuation and Survey
Depending on the product you’ve agreed, your lender may charge you a fee for valuing the property on which you are taking out your mortgage (some products do not attract a valuation fee), and most lenders will insist on a survey of that property to ensure it is in a sound condition.
The valuation fee is often dependent on the property value and can range from £150 to £1500, while a survey can set you back anything from £250 to £600 or more, depending on whether you go for a full structural survey or not.
Estate agents’ fee
If you’ve sold your house through an estate agent, you’ll have agreed a percentage or flat fee for their services. A percentage fee can be anything from 0.75% to 3%, but typically will be around 1% at the bottom end and 1.5% at the higher end of the average. If you’re selling at, say, £300,000, that will set you back between £3,000 and £4,500, exclusive of VAT.
These can vary a lot, but depending on the size of the home you’re leaving and the amount of stuff that needs to be moved, be prepared to spend a minimum of £300+ for the contents of a small property and anything up to £2,000 or more if you’ve got a large property and/or you want the removals firm to pack it for you.
If you can, it’s obviously cheaper – though harder work – to rent a van and do it yourself.
On top of all that you’re likely to pay a moderate amount in administrative costs for things like the electronic transfer of your mortgage funds, a mortgage arrangement fee (although if your lender charges this, it is sometimes added to your borrowing), the cost of packing boxes and tape if they aren’t included in your removals contract, etc.
It’s wise to put aside a few hundred pounds for this – and use anything left over to buy a bottle of fizz to celebrate on moving day.
So all in all, moving from a £300,000 property to a £580,000 property, as in this example, and using the averages in the fee ranges above, you could face costs of around £25,000 before you even begin.
Although most of these fees may well be paid at the time the chain completes (including the estate agent fee and the Stamp Duty, which is usually paid by your solicitor or conveyancer on your behalf), you do need to reflect these costs in your budget.
So if you have £125,000 outstanding on your current mortgage, you’re selling your current home at £300,000 and you’re buying at £580,000 – and assuming you’re using your equity as your deposit and you have no other funds to contribute to the purchase – your mortgage calculation would be:
Selling Price (£300,000) less Outstanding Mortgage Balance (£125,000) = Equity (£175,000)
Equity (£175,000) less Cost of Moving (£25,000) = Deposit (£150,000)
Purchase Price (£580,000) less Deposit (£150,000) = Mortgage Requirement (£430,000)
To get a calculation based on you personal circumstances please use our mortgage calculator.
If you choose to work with a professional mortgage adviser – who will also charge a fee for their service – you will add a little bit extra to your moving costs.
However, this should be offset by having the peace of mind that comes from knowing your mortgage application has been properly prepared and, as long as you have declared all of the required financial information truthfully, your application has a good chance of being approved.
Additionally, you may save all, part or more than that fee over time because your adviser may have access to cheaper mortgage products than you will find yourself
If you’d like to know more about the cost of moving and how we can help you into your dream home, get in touch for an informal and confidential chat with a member of our friendly team.
Please note: all information contained within this article was accurate at the time of publication.
Oportfolio Limited is an appointed representative of Primis Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority
Your property may be repossessed if you do not keep up repayments on your mortgage.
Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.