How To Save Money When Buying A House

How To Save Money When Buying A House

Buying a home costs money and it most cases, lots of it.

The average cost of a property in the UK, according to Land Registry data, stood at just under £250,000 in January 2021 – an increase of 7.5% on the previous year. And once you factor in all the other costs associated with buying, like solicitor fees, mortgage fees, stamp duty and removals, purchasing a home can get very expensive indeed.

However, there are steps you can take to save money when buying a home – we’ve outlined seven of the best here, which could save you thousands of pounds…


1. Take advantage of the stamp duty holiday

The stamp duty ‘holiday’, introduced in July 2020, has now been extended until June 2021 and will then be phased out until September 2021.

The current stamp duty rules, in place until June 30, mean buyers in England and Northern Ireland pay no stamp duty on the first £500,000 of a property’s purchase price. In Wales, meanwhile, the Land Transaction Tax (LTT) exemption was increased to £250,000 and this is also in place until June 30.

The Land and Buildings Transaction Tax (LBTT) rates under the ‘holiday’ in Scotland, however, have now ended and buyers north of the border pay no LBTT on the first £145,000 of a property’s purchase price.


What you could save through the stamp duty holiday

In England and Northern Ireland, if you can complete your property purchase before June 30, 2021, you’ll save the following in stamp duty*:


Purchase price

Stamp duty cost

Saving

£200,000

£0

£1,500

£300,000

£0

£5,000

£400,000

£0

£10,000

£500,000

£0

£15,000


All properties costing more than £500,000 will save buyers £15,000 in stamp duty as long as the purchase is completed before June 30.

Between July 1 and September 30, 2021, the £500,000 exemption will drop to £250,000, before reverting to £125,000 from October 1.

Between July 1 and September 30, those not classed as first-time buyers could save*:


Purchase price

Stamp duty cost

Saving

£200,000

£0

£1,500

£300,000

£2,500

£2,500

£400,000

£7,500

£2,500

£500,000

£12,500

£2,500


Further reading

How the stamp duty ‘holiday’ could affect the property market

*Compared with previous stamp duty rates prior to July 8, 2020 and rates from October 1, 2021


2. Use your negotiation skills

Negotiating a purchase price with a seller is often something that strikes fear into less confident buyers. But ‘haggling’ on a property’s price is all part of the buying and selling process – and you don’t need to be a natural negotiator to secure some big savings.


How to negotiate a house price

Of course, all property sales are different, with sellers in varying situations, so negotiation doesn’t always guarantee a discounted purchase price.

Demand is also continuing to outstrip supply in the current market, which has led to the strongest seller’s market in 10 years.

But by putting yourself in the best position you can, it’s possible to buy at a price that works for you:


Get a mortgage agreement in principle (AIP)

A mortgage agreement in principle (AIP) shows that you can afford the property you want to buy – and this means sellers and their estate agents will take you more seriously compared with buyers who don’t have an AIP.

This puts you in a strong position and a seller might be prepared to accept a lower offer from you compared with other buyers as you are more ‘proceedable’.


Research sold prices in the area

By looking at what other properties in the area or road have sold for, you can compare the asking price of the property you’re looking to buy.

If the asking price is higher than similar properties that have sold recently, you may be able to negotiate a lower purchase price.

A great place to start when researching sold prices is Nethouseprices.


Promote your position

As well as a good sale price, sellers are also often attracted to buyers who can move quickly – so if you’re in that position, make sure they know.

Let the seller’s estate agent know if you have nothing to sell as the appeal of not being in a long chain can sometimes mean your seller will consider accepting a lower offer in order to get moving quickly.


3. Buy a fixer upper

Taking on a property project is not for everyone ¬– but there’s no doubt that savings are available for those buyers keen to take on a fixer upper.

A property in a state of disrepair will always cost less than a similar property that is in great condition.

But, of course, factoring in what you’d need to spend is key before committing to a project property.


Things to consider before buying a doer upper

Buying the wrong property to renovate can be hugely costly, so make sure you:

• Do you research on the property and the area – is there a ceiling price in the road?

• Have a full structural survey carried out – properties in bad condition often have other costly issues that you can’t see with the naked eye

• Get projected renovation costs before you offer – and make sure you speak to several builders, as these costs can vary

• Set yourself a maximum purchase price based on your maximum ‘purchase plus renovation’ spend

• Understand why you’re buying a fixer upper – are you going to live there long term, or will you sell it when it’s finished? This can affect what you offer and spend on the property


4. Buy a property at auction

Buying at auction can be a great way to save money and secure your next property quickly.

While there’s no guarantee that you’ll secure a bargain at auction, properties that come under the hammer can sometimes be secured for a lower price than on the open market.

Buying at auction can also be faster than purchasing a home on the open market, with strict completion deadlines of between 28 and 56 days in place, depending on whether you buy at an auction house or via an online sale.


Things to consider when buying at auction

Research and clear budget setting are key before buying at auction. You should also:

• Always view a property at least once before it comes up for auction

• Go through the property’s legal pack in detail with your solicitor

• Always have a full structural survey done

• Arrange buildings insurance in advance

• Set your maximum bid for a property in advance – and don’t get carried away during the bidding


5. Buy in a less established area

Property prices are hugely influenced by the areas in which they sit.

Indeed, the difference in price between two similar properties can be down to which road they’re on or which postcode they come under.

For example, property prices in South Kensington, SW7, average £2m according to Rightmove.

However, neighbouring postcode SW5 has an average price of £1.4m – £600,000 less, despite being only a short walk from the popular SW7.

So, buying in a less ‘popular’ or established area can often mean you’ll pay less, or be able to negotiate more of an asking price discount.


Things to consider when buying in a less established area

Buying in a less popular or established area often means you’ll pay less for a property than you would when buying in a high-demand location. However, you should:

• Consider what will happen to property prices – are they likely to increase or decrease over time?

• Find out about plans for regeneration or improved transport links – both can add value to property and increase demand

• Look at schools in the area – do they have poor Ofsted ratings which are affecting property prices in the area?


6. Use Help to Buy

The Help to Buy scheme can be a great way for those buyers with smaller deposits to get a foot on the property ladder.

Help to Buy is made up of the equity loan scheme and Shared Ownership.

While the equity loan scheme won’t necessarily save you money on the asking price of the home you’re buying, it can be cost-effective over a longer term as the loan is interest free for five years in England.

And with Shared Ownership, there is potential to make further savings on stamp duty, depending on the size of the share you’re buying.


Help to Buy key facts

Here are some key things you’ll need to know before considering the Help to Buy scheme:

• Equity loans are only available for first-time buyers

• Buyers using an equity loan can only buy a new-build home

• Equity loans increase or decrease over time depending on the value of your property

• Under Shared Ownership, you pay rent on the share of the property you don’t own

• You can buy more ‘shares’ in your property under Shared Ownership, eventually owning 100% of your home


Further reading

Everything you need to know about Shared Ownership


7. Spend time shopping around for services

While the biggest savings you can make will come from the reduced stamp duty rates and negotiating on your purchase price, you can also make savings by shopping around for services like:

• Surveyors

• Solicitors

• Removals

When it comes to solicitor fees and removals, seek recommendations from family and friends and explore the internet to find a handful of conveyancers who can quote for what you need.


The average cost of moving house

According to Compare My Move, the average cost of moving in 2021 is just under £9,000.

That figure, for someone selling a property and buying a new one, includes costs like:

• Stamp duty

• Survey fees

• Valuation fees

• Conveyancing

• Estate agent fees

• Removals


How can a first-time home buyer save money?

For first-time buyers, saving a deposit for that first property purchase can be tough.

It’s estimated that the average first-time buyer deposit in the UK is now a massive £59,000.

But there are things you can do to save money faster and buy your first home, including:

• Cut down on your spending

• Move to reduce your rent

• Switch to other brands

• Shop around for deals

• Keep your savings out of reach


How much money should you save before buying a house?

As well as your property’s purchase price, you’ll also need to factor in:

• Your deposit

• Stamp duty

• Solicitor fees

• Valuation fee

• Survey fee

• Removals costs

So, if you were buying a property for £300,000, you might be looking at the following costs:

• 5% to 15% deposit – £15,000 to £45,000

• Stamp duty – up to £5,000*

• Solicitor fees – £1,040**

• Valuation fee – £227**

• Survey fee – £500**

Total: £21,767 to £51,767


*Stamp duty cost will vary depending on current rates and whether or not you’re a first-time buyer, or buying a rental property / second home

**Fees vary. These are average fees according to comparemymove.com