The biggest single cost you face when buying a property is a cash deposit. The deposit needs to be at least the difference between the purchase price and the size of mortgage your lender is prepared to grant you. Most lenders will not lend more than 95% of the valuation of the property, so the minimum deposit you will need is 5%, although 100% mortgages are becoming more popular. If you plan to buy at auction, you will need a deposit of at least 10% of your maximum bid price.
Your income also affects how big the mortgage you can get. If you are buying on your own, the most you can borrow is typically 3 - 3 1/2 times your annual income, although some lenders will lend up to four or even five times your income. So if you earn £20,000 a year, you could get a mortgage of between £60,000 and £80,000. Assuming you could borrow 95% of the value, this would buy you a property costing between £63,150 and £84,200, for which you would need a deposit of between £3150 and £4200. You also need a budget for:
- Stamp duty, which you will have to pay if the property costs more than £120,000. The rates are: 1% on property is worth £120,001 to £250,000; 3% from £250,001 to £500,000; and 4% on £500,001 or more.
- Land Registry fee, which is a flat fee of: £40 if the purchase price is up to £50,000; £60 from £50,001 to £80,000; £100 from £80,001 to £100,000; £150 from £100,001 to £200,000; £220 from £200,001 to £500,000; £420 from £500,001 to £1 million; and £700 on property costing more than £1 million.
- Search fees, which cost an average of £126 and pay for general checks - such as whether or not the property is in the part of the planned road development.
- Legal fees, of around £400 to £1000, depending on the value of the property. However, your lender may cover this expense.
- Upfront mortgage costs, which can vary according to the size of the mortgage and the type of deal you choose.
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