Ways and means to curb rocketing costs of moving
With stamp duty holiday about to end, buyers more than ever need to save every penny. Chiara Cavaglieri reports
Sunday 19 February 2012
Moving home is touted as one of the most stressful times in our lives, and it can often be the most expensive too. From securing a mortgage right through to moving day, you can expect to be digging deep – but there are ways to cut costs.
First of all, you need to work out where the bulk of your money will go. Overall you can expect to pay around £8,922, up by 69 per cent in ten years according to a recent Lloyds survey. The big three are estate agency fees, stamp duty and mortgage fees, together accounting for almost three quarters of the total cost.
Unfortunately, stamp duty is a compulsory tax but if you are a first-time buyer (FTB) and willing to move very quickly, there is just enough time to make the most of the temporary stamp duty holiday. This ends in March, so as long as you are buying property worth up to £250,000, you can avoid paying the tax up until that date. Nine in ten FTBs have benefitted over the past two years according to new HSBC analysis and in December, Council of Mortgage Lenders (CML) figures show an uplift in FTB activity as more new homeowners rushed through purchases to beat the deadline.
"Some FTBs will be keeping their eye firmly on the deadline date of 24 March to benefit from the concession. They will need to make sure that everything keeps ticking along so as not to hit delays, either from the mortgage lender or the conveyancing," says David Hollingworth from mortgage broker London & Country.
Of all the costs you fork out for, estate agent fees sting the most, with estimated costs up by 64 per cent according to Lloyds, rising from £2,059 in 2001 to £3,377 in 2011. These fees account for a whopping 38 per cent of total expenses.
To curb costs, investigate online estate agents which should be able to offer you a better deal because they aren't paying as many overheads. Some (such as Hatched.co.uk) charge as little as 0.5 per cent of the property's sale price – a fraction of the typical 1-2 per cent that a traditional agent might charge. Or you could pay a flat fee; Housenetwork.co.uk, for example, charges from £425 (plus VAT) to market your home for 12 months.
Do make sure you know exactly what you are getting for this money, however, as some of the cheaper agents may scrimp when it comes to advertising and marketing your property. It may also take longer to sell your home, particularly in such a stagnant market, so think carefully about whether a more hands-on estate agent is worth paying extra for. If you do go with an estate agent, remember you can negotiate these fees and perhaps put in a clause so that you get a discount if they don't manage to sell your home for a particular amount.
Alternatively, you can always go it alone and advertise your property online using websites such as TheLittleHouseCompany.co.uk, Privatehousemove.co.uk, Thehousesale.co.uk and Houseweb.co.uk, although you will have to organise the viewings and price negotiations yourself.
Similarly, when you're on the hunt for your new home there are a fair few online tools to help you such as the add-on PropertyBee, which is compatible with portals such as Rightmove.co.uk and Primelocation.com and provides details such as when the property was put on the market and price changes since the property was listed. Websites such as Upmystreet.co.uk, Nethouseprices.com and the local planning pages of the local council are a big help.
"Have finances in place before starting to search for a property. These buyers can move fast and have more chance of securing a property, thus avoiding a potential bidding war," says David Pollock, managing director of sales and lettings agent Greene & Co.
If you have to borrow money to buy your dream home, Lloyds say that mortgage arrangement fees have rocketed in the last 10 years from an average £306 to £1,076 – a 252 per cent increase – so it is important to factor this in. Don't be drawn in by a headline low rate without doing a calculation to work out the overall cost. For example, HSBC's two-year fix at 2.24 per cent (up to 60 per cent loan-to-value) has a £1,999 fee, whilst the Post Office's two-year fix is 3.09 per cent with no fee. On a £150,000 repayment mortgage over 25 years the total cost would be £17,681.80 with HSBC and £17,240.64 with the Post Office, so despite the lower rate the total cost of the monthly payments and fee are undercut by the Post Office's no fee option. You should also keep an eye out for any deals offering help with valuation costs and even cashback offers to help with legal costs and other expenses.
"Arrangement fees can be significant, often around £1,000 but with some in the region of £2,000, it makes sense to look at the overall value of a deal," says Mr Hollingworth.
Once the big day arrives, you can also save money moving all your belongings. If you don't want to pay for a removal firm, a man and a van could be much cheaper for the larger items and you may be able to move the smaller stuff yourself (with a little help from your friends!). If they are charging extra for the insurance, check with your household contents insurer for accidental damage cover for your belongings during removal, or ask them to add the extra cover for a dew days. Sheila's Wheels, for example, will automatically pay for accidental loss or damage to the contents during the removal by professional contractors – you simply need to call them and give them your new address. You may also cut costs if you can move on a weekday and avoid bank holiday weekends.
There are some costs you should no't avoid, however. When you take out a home loan you will need to pay for a mortgage valuation, but remember this survey is for the lender and covers the basics only, i.e. how much the property is worth and whether it is mortgageable.
"There is a misconception about what that report is and how detailed it is. Ask for your own private survey instead – usually the Homebuyer's report – which goes into detail about construction and defects. If you don't, when you move in you could find that you have repairs which you haven't budgeted for and our research tells us that's about £1,800 on average," says Richard Sexton, director or chartered surveyors e.surv.
Get at least three quotes and make sure they are a member of the Royal Institute of Chartered Surveyors (RICS). You may able to secure a discount if you pay for the survey and mortgage valuation together. If the survey brings up any issues, you will easily recoup the cost of a survey as you can make a lower offer. You may even decide to pull out of the purchase if the repairs prove too costly.
Richard Sexton, e.surv
Always think about the trade-off between saving money and having some protection in place. Unless you are very confident and technically aware, be wary of doing the conveyancing yourself. Remember professionals will also have insurance if they get something wrong. Don't automatically go with a recommendation from your estate agent – you won't always get the cheapest deal.
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
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