Budgeting for other costs of buying your first home

28 March 2023

Buying your first home is a big financial commitment and one of the most important investments you can make in your life.

While mortgage payments are the major cost associated with purchasing a home, there are other expenses that need to be considered when budgeting.

We spoke to Gair Couston, Head of Conveyancing at Shiells to highlight some of these.

Knowing what to budget for will help you determine how much you can afford to pay for a property. It will also ensure that your home purchase is not derailed by discovering unexpected expenses halfway through the process.

Mortgage arrangement fees

Mortgage arrangement fees are charged by the lender to cover the costs associated with setting up and managing the mortgage.

These fees can vary depending on the type of loan and the amount borrowed, alongside other factors. Your mortgage adviser or lender will advise you of these costs at the outset of the application process.

It’s important for first time buyers to understand these fees before committing to a mortgage agreement. Knowing what to expect in terms of arrangement fees can help you make an informed decision when it comes to choosing a mortgage lender and loan product.

Land and Buildings Transaction Tax

Land and Buildings Transaction Tax (LBTT) is a tax that is charged on certain property transactions in Scotland. The amount of LBTT payable will be calculated according to the value of the transaction, with higher rates applicable for more expensive properties.

A relief for first time buyers is available, which increases the residential nil rate band of LBTT to £175,000.

You can find out how much tax you will pay on your property purchase here.

Your solicitor will collect this money from you in advance of your settlement date.

Solicitor or conveyancer fees

Solicitor or conveyancer fees are paid to make sure the legal side of a house purchase is handled correctly and professionally.

The amount you pay will vary depending on factors such as the price, location, type of property, and if you’re using a government initiative to help fund the full price.

Your solicitor will provide you with an initial estimate of the likely costs involved in your purchase at the start of the process.

In addition to their fees, your solicitor will collect from you in advance of completing your purchase the charges made by the Land Registers of Scotland to register your title and any mortgage deed. These charges are made on a sliding scale based on the value of the property.

Buildings insurance

Buildings insurance is an important part of protecting your home and its contents. It covers the cost of damage or destruction to your property, as well as any associated legal costs.

Buildings insurance can also provide protection against theft, fire, flood, storm, and other natural disasters. With the right buildings insurance policy in place, you can rest assured that you’ll be able to recover from any losses quickly and easily.

Removal and moving in costs

There are many costs associated with removal and moving into a new home, from hiring a removal company to paying for packing materials.

It's important to consider all these costs when planning your move so that you don't end up overspending.

Initial furnishing and decorating costs

Furnishing and decorating a home can be expensive, especially if you're starting from scratch. From furniture to paint and accessories, the cost can quickly add up.

A fresh coat of paint is one of the best ways to give a new look. You can choose to get the professionals in to give that perfect finish or have a go at DIY to save some money.

Gair Couston from Shiells comments:

“Owning a home costs more than you might expect.

“If you’re thinking of buying a property, it’s really important to make sure you have saved enough money to cover all the upfront costs. Remember not to only think about the purchase price but all the other associated costs as outlined above.

“Be sure to compare quotes for the services you need and avoid paying unnecessary fees wherever possible."

Find a TSPC solicitor estate agent today to start your property journey!