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One in four homebuyers don’t budget for stamp duty

The full cost of buying a house is more than just the mortgage.

Once you’ve found your dream home (or even just somewhere you can afford) and got a mortgage, you might think you’ve got the money side sorted. But there are other costs which can have a big impact on your finances.

Stamp Duty is one of the largest additional costs you need to pay when buying a home. Research released by Post Office Money today reveals the average stamp duty in the UK is currently £3,653. That’s actually a lot lower than it could have been, thanks to new rules introduced last December. Under that system the average would be £8,192.

And it’s not just buyers of expensive homes hit by the tax. A report by Lloyds Bank, also out today, shows that over two thirds of first time buyers pay Stamp Duty, while 85% of movers also pay.

Despite this high cost and the number of buyers affected, the Post Office found a quarter of home buyers haven’t budgeted for it.

Who pays Stamp Duty

Anyone in England, Scotland, Wales and Northern Ireland who buys a home over £125,000 has to pay Stamp Duty Land Tax on the purchase. Scottish buyers instead pay a Land and Buildings Transaction Tax.

How much you pay is staggered depending on the price. You pay 0% for the first £125,000, 2% on the portion up to £250,000, 5% up to £925,000, 10% up to £1.5m and 12% on anything above that.

So a house worth £275,000 would cost nothing in Stamp Duty on the first £125,000, £2,500 on the next chunk, and another £1,250 on the amount that falls in the next bracket. That’s a total of £3,750.

The other costs of buying a home

Make sure you budget for all of these when working out if you can afford a new home.

Mortgage fees – these can have a few different names including valuation fee, completion fee, arrangement fee and booking fee.

Legal fees – these go to your solicitor or conveyor.

Surveyor fees – You should have your new home checked out by a surveyor before buying.

Ground rent or service charges – if you don’t have the freehold on the property, make sure you know the extra costs associated with a leasehold.

Insurance – you’ll be required by your mortgage lender to get building insurance.

Council Tax – it could be different to your current home, so check you can afford it.

Decorating, maintenance and repairs – even if you don’t buy a “fixer-upper”, you’ll probably find you need to sort out a few things in your new home.

Furniture – if you have to kit out a whole house, likely if you are a first-time buyer, these costs can quickly add up.

Bills – You might have some upfront costs of getting services installed such as broadband and TV.

What do you think?

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  • Laurie Hards / 11 August 2015

    I think that estate agents should give a breakdown of ancillary costs when handling sales and/or purchases of properties - Stamp Duty, their own Commission charges, VAT. Perhaps an estimate of Solicitors Fees and Surveyor's Fees, together with all the other minor items.

  • G. Forshaw / 10 August 2015

    Just another racket for the Government to squeeze more money from the public to fritter away on grandiose gestures.