5 Money-Saving Tips when Buying a Home
Any first time buyer is likely to find buying a home to be more expensive than they initially bargained for, however there are various things you can do to economise at key points in your conveyancing process to give yourself the best chance of keeping some of the costs under better control. Here’s 5 worthy – and legal! – money-saving tips:
- Stamp Duty
You pay stamp duty (Stamp Duty Land Tax/SDLT in England or Land Transaction Tax/LTT in Wales) as a property buyer and how much you pay depends on your property’s selling price.
Since November 2017, if you’re a first time buyer in England, you won’t have to pay any stamp duty as long as property’s selling price is £300,000 or less and you’ll pay a reduced stamp duty amount as long as your property’s price does not exceed £500,000.
Buying a shared ownership property? Consider a Market Value Election if you’re a first time buyer
With shared ownership, you can opt to pay stamp duty in stages or pay what you’d have to pay if you owned the entire property at the outset of your ownership.
Whereas the latter option- known as a Market Value Election – used always to be the most expensive option, if you are a first time buyer in England and you choose it, then you’re eligible for the same stamp duty relief described above.
If, however, you opt to pay your stamp duty in stages, you won’t get the first time buyer stamp duty relief. And to compound this, if you’re buying a new build shared ownership property, you’ll have an extra stamp duty portion to pay based on your rent.
Most often shared ownership buyers initially purchase a 25% share meaning they’ll pay rent on the remaining 75%; in this scenario the extra stamp duty you’ll have to pay on a new build based on rent is likely to be quite substantial.
So a fine judgement regarding property values might save you thousands on stamp duty when aligned with being eligible for first time buyer stamp duty relief.
Finally, always be aware that if you’re jointly buying with someone else (joint mortgage or both on the title), if that person isn’t a first time buyer then you won’t get the relief mentioned and if that person owns a property already, you may end up having to pay higher rate stamp duty.
- Mortgage Valuation
While you always have to pay for your lender’s valuation – and there’s no ‘wiggle room’ – you’ll most often have the choice of whether to pay for this ‘up front’ or to add it to the overall mortgage debt.
In the medium to longer term, we recommend that you pay for it at the time because although you’ll be more out of pocket initially, over time, as interest accumulates on your mortgage debt, you’ll end up paying perhaps 40% more for the survey, taking into account inflation.
So if you originally paid £600 for your survey up front, you’d have saved yourself around £240 compared to putting it on your mortgage debt – a not inconsiderable sum.
- Conveyancing Solicitor Fees
It’s reasonable to look to save money on conveyancing solicitor fees, but we advise that you should be very cautious about this: as with many things in life, ‘you get what you pay for’ can be observed in conveyancing fees.
Be cautious about any estimate which parades itself as a quote. The offer might read ‘conveyancing from £99’ but when you look more deeply into the terms, you’ll find that the initial estimate actually classes many items that you’ll always require during any conveyancing as ‘extras’ such that in virtually all cases you’ll end up paying substantially more when it comes to the final bill.
Ideally you should examine quotes which have the following:
- Fixed fees with all the legal work needed included in the quote such that you know exactly what you’ll have to pay from the outset
- No Sale No Fee guarantee: perhaps 1/3 of all conveyancing matters fail before completion so having a protection like this ensures that you won’t pay any extra should your attempted purchase fall through
Finally, if you are buying shared ownership, using Help to Buy or Right to Buy or any other specialised scheme, you should choose solicitors with experience in it.
Following these guidelines might end up saving you hundreds of pounds – and plenty of stress!
- Home Buyers Survey
By this we mean when you book a RICS surveyor to look over the property you’re thinking of buying particularly to check for any suspicions of property defects like subsidence and rising damp.
This is not the same as a mortgage valuation, which, although you have to pay for, is carried out for your lender’s benefit and is more about establishing the value of the property than looking for defects.
We’d always advise you to get your own survey because the average cost of fixing defects people discovered after buying a property when they didn’t get a survey has been estimated as being more than £3,000 on average.
Although you can expect the cost of any survey to increase the larger the house you’re buying, the fact is that surveyors vary their prices frequently.
You should always hire a RICS surveyor who is highly experienced in surveying properties in the area you are buying in and shop around for quotes – this might save you perhaps £200 or so by itself, not least because surveyors do alter their prices according to their own needs.
Before going on a well-earned holiday, a surveyor might have had a full diary and therefore have charged higher prices for work, however, when they come back, their diary might be far less full and so they could be happy to take work on for a discounted rate.
- Property Searches
If you’re buying with a mortgage, your lender will always expect you to get at least four property searches as standard, namely the Local Authority Search, the Environmental Search, the Water and Drainage Search and the Chancel Search.
These searches concern the land a property is built on and factors nearby which might affect it. Even if you’re not buying using a mortgage, you are still well advised to get these four searches at the very least because when you come to sell, if the person buying your property is using a mortgage, they will have to and if the searches uncover issues, this might hinder your property’s saleability.
Solicitors normally order these searches on your behalf but what they charge for them can vary, perhaps by up to £200.
You should check what you might be charged for searches when examining solicitors’ quotes and see if they are included in the overall cost. You should also check whether all the searches you’ll need are included in the quote or not.
Finally, be extremely wary of joining schemes which purport to mitigate your stamp duty; HMRC continues to close many such schemes and you might risk losing money you’ve invested in them. As always, there’s no substitute for taking appropriate professional advice.