What are the initial costs of buying a house?

There are a number of costs and fees over and above the actual cost of a property. Most of these will need to be paid before you even move in, and they are as follows:

Deposit
Most people try to pay a deposit of at least 5% - 10% the value of the property. You can avoid paying a deposit with a 100% mortgage.

Valuation / Surveys
The mortgage lender will inspect the property to ensure it’s an acceptable security for a loan of the proposed amount. Some mortgage providers will waive the fee or include it in the mortgage loan - but if not it will usually cost around £200 for an average house.

Legal Costs / Conveyancing
A solicitor or licensed conveyancer will sort out the legal aspects of reassigning the ownership of a property on your behalf. Get an estimate from a few solicitors before making your decision, as the fee can be quite high.

Stamp Duty
Stamp duty is a government tax that you must pay when you buy a property. It is based on the purchase price and is calculated as follows:

up to £120,000 - 0%
£120,001 - £250,000 - 1%
£250,001 - £500,000 - 3%
£500,001+ - 4%

Arrangement Fee
The mortgage provider will charge you a fee for administering a mortgage, some lenders will include this fee within the mortgage loan. The cost depends the lender and the mortgage offer. Sometimes the cost is linked to the size of the mortgage.

Mortgage Indemnity Guarantee
If you are borrowing a high percentage of the cost of the property, your mortgage lender will require you to pay for a Mortgage Indemnity Guarantee. The Mortgage Indemnity Guarantee protects the lender from costs incurred if the property needs to repossessed because of arrears, and is often compulsory if your loan has a high LTV ratio (i.e. you have not paid much deposit).

Insurance
It's essential that you take out Buildings Insurance - this covers your property against damage due to unexpected events. It will be a requirement of your mortgage that you take out this type of insurance. You will also need contents insurance to cover theft, fire, damage etc, but your mortgage doesn't depend on this. You should also consider taking out mortgage payment protection insurance - this protects your monthly mortgage payments in case you are unable to work due to unemployment, sickness or redundancy.

Life Insurance
Most mortgage providers insist that you take out some form of Life Insurance so that your mortgage will be paid off in the event of your death.