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The buyer's costs

It is hoped that the preceeding pages have helped you to appreciate what the various parties do in a typical home conveyance.  You will have seen that the seller gets all the money you pay him or her but has to meet a few costs on the way that get reimbursed when your payment goes through.  However, for the buyer there are several other charges and costs to be covered and they can significantly enhance the total transaction costs.

If you make the recommended appointments of a chartered building surveyor and a competent legal adviser to handle the conveyance, you should budget for around 0.5% - 1.25% of the house price to cover the combined fees of these two advisers.   You also need to include Stamp Duty and you may have other charges to deal with such as removal vans, storage and ancilliary purchases.  Moving home or buying your first home is a very big commitment and it is hoped that this site has helped you to get a real feel for how to go about things in a way that keeps a lid on costs and gives you the best protection in the event of something going wrong.

Returning to the entirely fictional illustration of the house being sold for 349,995, you have seen how the seller's costs made up some of that value, and that in the end the seller recieves around 347,295. 

Assuming you are mortgaging your property for 80% of its value, then your loan will cover 279,996 and your deposit is 69,999.  If, however, you have arranged a mortgage at 90% of its value then your loan will cover 314,995.50 and your deposit is 34,999.50, but you will also be paying a High Value Loan fee which might be, say, a further 1% of the value of your loan.  So you will pay a further 3,496.00 to your lender.  Your lender's legal and survey fee also goes on the bill in any case, and this might be a further 1,000.  These additional charges are services so they attract VAT and at 20% it all soon adds up. Finally you will pay Stamp Duty to the Land Registry as part of the conveyance of title.which as at April 2012 for our example property comes in at a massive 3% of the purchase price. The table below illustrates the two purchase scenarios

 Purchase Price : 349,995  Purchase Price : 349,995
 Deposit 20% : 69,999  Deposit 10% : 34,999.50
 Lender's Legal and Survey Fees : 1,000  Lender's Legal and Survey Fees : 1,000
 Buyer's Surveyor Fees : 1,750  Lender's High Value Loan Fee : 3,496
 Buyer's Legal Fees : 1,000  Buyer's Surveyor Fees : 1,750
 VAT on Fees : 750  Buyer's Legal Fees : 1,000
 Stamp Duty : 10,499.85  VAT on Fees : 1,449.20
   Stamp Duty : 10,499.85
Total Payment at Time of Purchase : 84,998.85 Total Payment at Time of Purchase : 54,143.90
 Capital Sum to be repaid : 279,996.00  Capital Sum to be repaid : 314,995.50

The table helps to illustrate the wisdom of a larger deposit since in addition to a High Value Loan Fee, total VAT paid goes up as well.  Although the initial outlay is 30,854.95 less for a lower deposit, the capital sum is 34,999.50 higher, which attracts more interest charges over the same period of time.

For those looking for a lower priced starter home, the table is reworked below for a purchase price of 125,000, whicn makes it exempt from Stamp Duty (correct as at April 2012)

Purchase Price : 125,000 Purchase Price : 125,000
Deposit 20% : 25,000 Deposit 10% : 12,500
Lender's Legal and Survey Fees : 800 Lender's Legal and Survey Fees : 800
Buyer's Surveyor Fees : 938 Lender's High Value Loan Fee : 1,250
Buyer's Legal Fees : 800 Buyer's Surveyor Fees : 938
VAT on Fees : 507.60 Buyer's Legal Fees : 800
Stamp Duty : 0.00 VAT on Fees : 757.60
Stamp Duty : 0.00
Total Payment at Time of Purchase : 28,045.60 Total Payment at Time of Purchase : 17,045.60
Capital Sum to be repaid : 100,000.00 Capital Sum to be repaid : 112,500.00

The table again illustrates the overall savings made by a larger deposit since in addition to the High Value Loan Fee, total VAT paid goes up as well. Although the initial outlay is 11,000.00 less for a lower deposit, the capital sum is 12,500 higher, which attracts more interest charges over the same period of time.  However, this might be palatble for a first time buyer on a limited starting budget.

Given the above illustrations, which although fictitious are representative of the charges that are incurred, it is hopefully clearer to the buyer that getting quality professional help from a chartered building surveyor is a small addition to the total bill, representing between 2% and 3.2% in the 349,995 example and between 3.3% and 5.5% in the 125,000 example of all costs incurred by the buyer.

What will a Chartered Building Surveyor do?

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