Costs involved in buying a house in Northern Ireland

Are you planning on moving to a new house or hoping to get your foot on the property ladder? Are you wondering about the different costs involved in buying a house?

There are a number of costs involved in buying a house that needs to be considered and factored into your budget.

This Propertynews.com guide will explain what these fees are, what you can expect to pay during the buying process, how much deposit you will need and the help that is offered to you throughout this process.

What are the costs involved in buying a house?

Mortgage Fees

  • Arrangement fee
  • Booking fee
  • Mortgage valuation fee

Major Upfront Costs

  • Deposit
  • Stamp duty
  • Surveyor fee
  • Conveyancing fees
  • Electronic transfer fee
  • Land registry fee

Ongoing Costs

  • Insurance
  • Rates
  • Mortgage repayments
  • Utilities

Costs of moving home

  • House removal costs
  • Storage costs
  • Mail redirection costs

Mortgage Fees

There are different types of mortgage fees that will need to be paid at different stages of the buying process. These range from smaller admin fees to the larger costs which cover essential services.

A mortgage is a loan that is paid over many years and so it is important to understand these fees and the monthly amount you will be expected to pay. It is vital that you keep your monthly repayments in mind when planning your budget as these are one of the major costs involved in buying a house.

What are the different types of mortgage fees?

  • Arrangement Fee

An arrangement fee is what you will pay your lender to set up the mortgage. There are two options when paying the arrangement fee: pay upfront or add to your mortgage. However, it is worth noting that you will ultimately end up paying more when adding this cost to your mortgage as you will pay interest on it. It is important not to overlook the arrangement fee when comparing mortgages as it can have a considerable impact on the total cost of the mortgage. When comparing mortgages, check to see whether the arrangement fee is charged as a percentage of the loan, or a flat fee.

This arrangement fee can vary. Some lenders can charge up to £2,000.

Expect to pay at least £1,000 to secure an attractive rate.

  • Booking Fee

A booking fee is also known as an ‘application’ or ‘reservation’ fee and is charged upfront to your lender. Some lenders charge this fee when you complete your mortgage application to ‘book’ or ‘reserve’ your funds. This booking fee is non-refundable. Therefore, if the property sale falls through you will not get the money back.

Booking fees can vary between £99 – £250.

  • Valuation Fee

A valuation fee is charged by the lender for commissioning a mortgage valuation. This valuation is a basic inspection of the property. It advises the lender of the value of the property and highlights any defects which may affect its value as security for the proposed loan. This is not to be confused with the valuation survey that is done for your benefit later in the buying process.

Some lenders may pay this valuation fee for you. However, you should expect to pay around £250 upfront when you make your application.

Major upfront costs

There are various upfront costs involved in buying a house that needs to be considered. These range from the house deposit to legal fees. Factoring these costs into your deposit will let you see how much you have to spend on each section. Having this budget will help to make this process less overwhelming.

Major upfront costs include:

  • Deposit

A deposit is a percentage of the total cost of the property that you wish to buy. You will pay this deposit and your bank or lender will give you a mortgage to pay the remainder of the costs.

The more money you save for a deposit, the less money you will repay in the mortgage.

A deposit is likely to be one of the largest upfront costs involved in buying a house.

  • Surveyor Fees

A home buyer survey is an assessment of a property to uncover any issues or problems.

If a problem is discovered, the buyer can ask the seller to fix these issues before proceeding with the purchase. The buyer may also wish to renegotiate the final sale price to cover the cost of fixing these issues. Depending on the severity of uncovered problems, the buyer may also opt to pull out of the sale entirely.

The cost of home surveys varies and can range from £250 to £600.

Although an optional step, it is advised to carry out a home buyer survey as it could save money on repairs in the future.

  • Conveyancing Fees

Conveyancing fees is the amount of money that you will pay to cover the legal side of buying a house. These fees can be split into two parts; the legal fees (what the solicitor charges for doing the work) and the disbursements (charges from third parties for services such as searches and anti-money laundering checks.)

Solicitors charge in different ways:

  • A fixed fee
  • An hourly rate
  • A percentage of the property price

When comparing different solicitors and conveyancers, it is important to establish how they charge and ask for a breakdown of the different costs in writing.

Costs may include:

  • Bank transfer
  • Land Registry fees
  • Searches
  • Stamp Duty
  • Disbursements

Read more about the role of the solicitor and the conveyancing process here

  • Electronic transfer fee

This fee covers the cost of transferring the mortgage money from the lender to the solicitor.

Usually costs between £40 – £50.

  • Stamp duty

Stamp duty land tax (SDLT) is a lump-sum tax that anyone buying a property over a certain price must pay. How much you pay will depend on the price of the property, whether you are a first-time buyer or if you own a second home. Stamp Duty is charged at different rates with these rates rising from lower to higher bands.

First time buyers will not have to pay stamp duty for properties up to £300,000.

From April 2016, there is a 3% increase on top of the current rates if you purchase a second home above £40,000. This also includes a buy-to-let property.

Tax BandNormal RateAdditional Property
less than £125k0%3%
£125k to £250k2%5%
£250k to £925k5%8%
£925k to £1.5m10%13%
over £1.5m12%15%
  • Land registry fee

These fees are paid to the land registry and is a fee that is usually paid via your solicitor. This is a fee that your solicitor will call a disbursement and they will ask for this money when you complete the property purchase.

The cost of this fee is dependent on how much your property is worth.

Ongoing costs

There are also a number of ongoing costs involved in buying a house that you will have to pay once you have found your dream house. These costs can be influenced by the area in which you live, the mortgage you have chosen and the size of your house.

Ongoing costs include:

  • Rates

Rates are a property tax paid by households in Northern Ireland. The income from this tax contributes to local services such as bin collections and road maintenance, and government services such as schools and health centres.

Rates are paid annually and how much you pay is dependent on the cost of your property and the council area that you live in.

It may be worth asking the vendor how much these rates cost so that you can factor these into your ongoing costs.

  • Home Insurance

There are two different types of home insurance: buildings insurance and contents insurance.

Most lenders insist that you have buildings insurance before they let you take out a mortgage.

Building insurance covers the cost of repairing your home if damaged.

You should be able to claim if your house is damaged by:

  • Vandalism
  • Falling trees
  • Fire and smoke
  • Vehicle collisions
  • Water damage
  • Oil leaking from your heating system
  • Natural events such as storms and floods.

Contents insurance is designed to protect your belongings within your house. A contents insurance policy will protect belongings against theft or damage from smoke or fire.

Belongings could include:

  • Furniture
  • Electricals
  • Kitchenware
  • Entertainment
  • Soft furnishings
  • Toys
  • Antiques and Ornaments
  • Clothes and jewellery
  • Mortgage Repayments

Keeping up with your monthly mortgage repayments are vital. These repayments are one of the major ongoing costs involved in buying a house. Your home may be repossessed if you do not keep up with these repayments. There are three different ways to repay your mortgage:

  • Repayment
  • Interest only
  • A combination of the two

A repayment mortgage allows you to pay back the capital and interest together.

An interest only mortgage means that you will initially pay back the interest on a monthly basis and repay the capital at the end of your mortgage term.

  • Utilities

Utilities are an essential part of life and must be taken into account when budgeting for your new home. These utility bills include:

  • Electricity
  • Gas
  • Television licence
  • Internet and television service providers.
  • Electricity and gas

You may receive some of these bills every month, every quarter or you may even use a pay-as-you-go meter. You can usually arrange to pay these bills monthly. It may even be cheaper to pay online or by direct debit.

There are an array of electricity and gas providers across Northern Ireland who offer different deals and prices. Before deciding, it is best to shop around and compare deals to see which is best for you. You can also ask the vendor of the property which provider they use and what their monthly average cost would be.

  • Television licence

If you are watching television or recording programmes as they’re being shown live, you will need to buy a television licence. You will also need to purchase a television licence if you download or watch BBC programmes online.

There are multiple ways to pay for a television licence.

  • A one off payment each year costing £154.50.
  • A monthly payment from £12.87.
  • A quarterly charge from £39.87.
  • Internet and television service providers

Many service providers offer television and internet packages at a monthly charge. There are a number of service providers on the market with various deals and prices. It is important to research the different deals to see what is included and which is best for you.

You can also ask friends and family for recommendations on the providers that they use and what is included in their monthly package.

Costs of moving home

Once you have found your dream home, it is time to pack and move. Moving house can be an exciting and stressful process. However, there are a number of services that you can use to make the moving process smooth and stress-free.

Make sure to check out our moving house checklist to guide you through the moving process.

  • House removal costs

There are an array of factors which will determine how much it will cost to move to a new house.

What affects the house removal cost?

  • Distance
  • Time duration
  • Property size
  • How many workers it takes to complete move
  • Additional services such as packing
  • Type of vehicle required
  • Insuring your valuables during the move
  • Storage costs

While moving home can be a very stressful point in life, placing household items into storage during the move can be helpful and make the move a little easier.

There are many reasons why you may need to put your household items into storage, such as: if you need to declutter your space, find yourself between houses or want to spruce up your old house before moving.

There are several factors that will affect storage costs such as the number of containers you need, the size of the furniture and how long they will be in storage for.

It is best to shop around and compare prices with different companies.

  • Mail Redirection Costs

It is important that you redirect your post to your new address when moving home. This will ensure that you do not miss important documents and protects yourself against potential identity fraud.

How much deposit do I need to buy a house?

A deposit is likely to be one of the largest upfront costs involved in buying a property.

Most lenders will ask for 10% of the property value as a deposit. However, the minimum deposit that lenders will accept is 5%.

Only needing 5% of the property price could get you on the property ladder sooner. However, traditionally, 95% mortgages have had higher interest rates than other mortgages. This is due to the added risk lenders take when offering you a high percentage of the value. A 95% mortgage may also take longer to pay off.

Saving over 5% will give you access to a wider range of cheaper deals.

While saving for a deposit may feel daunting, there are a number of schemes available that will help you to buy your home.

What help is there to buy a home?

Help to Buy: ISA

If you are a first-time buyer hoping to get your foot on the property ladder, a Help to Buy ISA will help you save for a mortgage deposit.

To qualify for a Help to Buy ISA you need to be a first-time buyer, aged 16 and over, and not own a property anywhere in the world.

Like any ISA product, the savings within your Help to Buy account are tax free. However, an advantage of the Help to Buy ISA is the government contributions that you will receive. This bonus will help towards the house deposit, one of the major upfront costs involved in buying a house.

To qualify for the government bonus, you will need to have saved a minimum of £1,600. The government will boost your savings by 25%. Therefore, if you have saved £1,600 you will receive a £400 bonus.

The maximum government bonus you can receive is £3,000. In order to receive this, you will need to save £12,000.  

To begin your Help to Buy ISA, you can deposit up to £1,200 within the first month. After this initial month, you can only deposit up to £200.

To qualify for the Help to Buy ISA, you must:

  • Be 16 or over
  • Be a UK resident
  • Have a valid National Insurance number
  • Be a first-time buyer
  • Not have another active cash ISA in the same tax year. If you have opened a cash ISA in this tax year it will take additional steps to open a Help to Buy ISA.

When to apply for your government bonus?

Once your offer has been accepted, you should instruct your solicitor or conveyancer to apply for your government bonus. This bonus will then be added to the money that you are already putting towards your new house.

To qualify for the government bonus, the property must:

  • Be in the UK
  • Have a purchase price up of to £250,000
  • Be purchased with a mortgage
  • Be the only home that you will own

The property that you are purchasing with your Help to Buy ISA also needs to be where you will live.

When does the Help to Buy ISA end?

In order to secure your Help to Buy ISA, you will need to have opened an account before 30th November 2019. Help to Buy ISAs will not be available to new savers after this date.

If you have opened your Help to Buy ISA before this date, you can continue to save into your account until 30 November 2029.

You must claim your bonus by 1st December 2030.

Lifetime ISA

A Lifetime ISA (also known as a LISA) is a dual-purpose ISA which helps people save for their first home or retirement. You can open a Lifetime ISA if you’re aged between 18-39.

A Lifetime ISA allows you to deposit a maximum of £4,000 each tax year. The government will make a contribution of 25%. The maximum bonus you can receive in a tax year is £1,000.

To be eligible for this bonus, you must have opened your Lifetime ISA at least 12 months previously.

You must be a first-time buyer in order to put the Lifetime ISA towards your first home. A first-time buyer is someone who does not own a property anywhere in the world.

There are conditions that you must adhere to when using a Lifetime ISA to buy your first home.

The home you buy must:

  • be in the UK
  • have a price of £450,000 or less
  • be the only home you will own
  • be where you intend to live
  • be purchased with a mortgage

When to apply for your government bonus?

The Lifetime ISA funds, including the bonus, can be used towards an exchange deposit provided that the house purchase is finished within 90 days of your conveyancer or solicitor receiving the withdrawn funds from your ISA account.

If the process is longer than 90 days, your conveyancer or solicitor can write to HMRC for an extension.

Shared Ownership

What is Shared Ownership?

Shared ownership schemes are a mix between buying and renting a property. Entering into a shared ownership scheme means that you own a share of the property while renting the part that you do not own at a discount rate.

Co-Ownership Northern Ireland

Co-ownership Housing is a scheme for those who want to buy a home but cannot afford to purchase 100% of a property.

You buy the share that you can afford, with a minimum of 50% and a maximum of 90% share. Co-Own then buy the remaining share. You must then pay rent to NICHA (Northern Ireland Co.Ownership Housing Association) for the portion of the property that they own. You have the option to increase your share until you own it all.

In order to take part in this shared ownership scheme, there are some conditions that need to be met:

  • You are over 18
  • You live in the UK
  • You do not currently own any property or land (exception for Co-Ownership Portability cases)
  • You will live in the property as your only residence
  • You will not use the property for business purposes
  • You have an adequate right to live in Northern Ireland
  • You have had no Payday Loans or Home Credit within the last year
  • Any Debt Relief Orders, bankruptcies or Individual Voluntary Arrangements must have been completed at least 6 years before applying
  • You have no outstanding adverse credit at the time of making a Co-Own application

Fairshare Northern Ireland

Fairshare is another shared ownership scheme in Northern Ireland. It allows a registered housing association to help suitable homebuyers get their foot on the property ladder through shared ownership.

These housing associations are registered and approved by the Department for Communities.

This scheme allows those who are unable to obtain a mortgage or are struggling to save for a deposit purchase a starter share of a property – between 50% and 90%. There is also the option to purchase more shares of the property at any time.

Again, similar to Co-ownership, there are criteria that you must meet in order to join this scheme:

  • You do not currently own a home, or a share in a home / property, in the UK or abroad.
  • You must be unable to afford to buy a 100% share of a home that is suited to your needs, or rent accommodation within a reasonable distance of your work.
  • You can afford to purchase a minimum 50% share in a property. You must also be able to pay rent on the remaining share.
  • You are an individual applicant with a gross income which is four times greater than the amount of the mortgage being sought
  • Are joint applicants with a collective gross income which is 3.5 times greater than the mortgage you are after.

Meet a mortgage adviser

What is a mortgage adviser?

A mortgage adviser / broker is a specialist adviser who will search and review the best mortgage deals for you based on your personal and financial situation.

There are three different types of mortgage advisers:

  • Advisers that are tied to a specific lender.
  • Advisers that look at mortgage deals from a limited list of lenders.
  • Advisers that search the whole market for a wider range of mortgage deals. These are known as whole-of-market advisers.

If a mortgage adviser is tied to a specific lender they may not be able to tell you about some deals, even if one of these is the cheapest option for you.

However, there may be some deals that whole-of-market advisers are unable to recommend. These are offered by banks and building societies directly to their customers. These deals are known as ‘direct only’ deals.

Therefore, when hiring a mortgage adviser, it is important to know if they can access ‘whole of market’ deals or if they work alongside a certain lender.

Why use a mortgage adviser?

With numerous mortgage deals from various lenders on the market, finding the best deal can feel overwhelming. An independent mortgage adviser will have the ability to filter through an array of contacts, lenders and deals to find the best possible offer for their client. By analysing your financial and personal situation, a mortgage adviser can offer you support and discover the mortgages that you are most likely to be approved for.

If you have received advice from a mortgage adviser and the chosen mortgage is unsuitable, you have the right to complain and request legal help.

If you choose not to seek advice from a mortgage adviser, this means that you must take responsibility for your mortgage including repayments that you cannot afford to pay.

What are the advantages and disadvantages of using a mortgage adviser?

Advantages:

  • Mortgage advisers research mortgage deals on the market

Mortgage advisers will be able to access a range of mortgage deals currently on the market. However, the deals they have access to will depend on whether they are tied to a certain lender or if they are whole-of-market advisers.

Those tied to a lender will only be able to advise on those deals offered by this lender.

A whole-of-market adviser will be able to advise on an array of deals from different lenders. However, these advisers will be unable to advise on ‘direct only’ deals. These are mortgage deals that banks and building societies offer to their customers.

  • Mortgage advisers are licenced professionals

Mortgage advisers are licenced professionals and experts within this industry. They are able to guide you through the mortgage process and help with any problems that may arise.

  • Advisers help you to understand the small print and take the guesswork out of a mortgage

The mortgage application can be a complex and confusing one. An adviser will explain the requirements and conditions of a mortgage in terms that is easy to understand. It is the mortgage advisers job to find the best deal for you and so by analysing your financial situation, they will be able to recommend mortgages that you are likely to be accepted for.

Disadvantages:

  • You may owe a broker fee

This will be a fee that you may have to pay alongside the other expenses of buying a house (legal expenses, mortgage fees etc.)

  • You may not be getting the best deal

Not all advisers have access to all deals on the market. It may be worth shopping around before settling on a mortgage adviser to see if they are offering you the best deals.

  • Not all banks and lenders work with a mortgage adviser

Some banks and lenders do not work with mortgage advisers. By working with an adviser, you may not have access to these lenders. These lenders may be able to offer a better mortgage deal than those the adviser is offering.

Ready to begin the search for your dream home?

There are a number of costs involved in buying a house that can be determined by an array of factors. While searching for your dream home, it is a good idea to create a budget to determine how much you can afford to spend on each section.

Read the second chapter in our ultimate guide to buying a home: A guide to understanding mortgages.