Kate's calculations to help you with your property project
What tenant fees will you have to pay before you can move in?
All agents and landlords MUST tell you in advance of any fees you have to pay to rent a property - if they don't, they are not allowed to charge you. For help renting a property, read our Tenant Guide
Tenant fees vary, but typically they include an applicant fee, a second or third fee for more than one tenant. Some may charge a 'couples fee'. If you have to have a guarantor that will incur another fee.
Other fees include referencing, contribution to the agreement and/or inventory, tenancy renewal fee.
If you have been accepted for a property you will have to pay 4-6 weeks rent in advance of moving in as a deposit and also pay the first month's rent in advance.
Examples of good agents who are upfront about their fees include: Belvoir Lincoln; Savills; Your Move; Reeds Rains.
Are you paying more dead money in rent than through a mortgage?
Typically if you are renting a property and you pay £500 per month, your annual rent is £500 x 12 = £6,000. If the value of the property you live in is around £120,000 and you only have a 5% deposit and would pay for a 95% mortgage at a 5% rate, then you would be paying as much 'dead money' in mortgage interest as you would be to the landlord.
Easy calculation is if your rent is 5% or less than the value of the property you rent, then the dead money to landlords and to the mortgage company in interest is the same.
Calculating whether buying is cheaper than renting
In the main if prices are falling or are static, then it may well be cheaper to rent than buy. The costs for each are as follows, this assumes things like utility bills, council tax, service charges etc would be the same, so highlights the different costs:-
Renting - one off tenant/reference fee, monthly your rent, annually your contents insurance and renewals.
Buying - one off fees for buying and the deposit, monthly your mortgage, annually maintenance and buildings & contents insurance. Annually you may add in the increased or take away the fall in the property's value.
Read our checklist to compare renting versus buying in your local area
Calculating the costs of buying a property
It can be very scary working out how much it will cost to buy a property and then when you have to pay the money to the lender, and legal company.
The biggest cost is likely to be your deposit which you pay at the time of exchange, so if you send a cheque to the legal company to exchange you will need to send it 5 working days BEFORE exchange.
Deposits are normally 5% or 10% at the time of exchange, then the balance eg 20 or 15% if you are depositing 25% is paid when you complete.
The second biggest cost is normally stamp duty - this is paid when you complete the purchase:-
Rates are 0% up to £125,000; 1% from £125,001 to £250,000; 3% from £250,001 to £500,000 and 4% from £500,001 to £1 million. After that, further rates apply, so visit HMRC.
Lenders and brokers do charge for mortgages and these costs can add up. However they should only really charge you when you have decided it's the mortgage YOU want. If you need help finding a good broker, do Contact us
Charges can be fixed and may be a few hundred pounds through to several thousand. They can also be charged as a percentage of the money you borrow, such as 1-3%. Make sure you know any fees you will be charged BEFORE you confirm you will go ahead with the mortgage.
When you exchange on a property you will need to have organised your buildings insurance, which will typically be a few hundred pounds. Read our Insurance Checklists to help organise the right cover for you.
Survey fees will range from £250 + VAT for a condition report to £400 + VAT for a Homebuyer Report to over £1,000 for a comprehensive building survey.
Legals will range from around £300 + VAT to over £1,000 + VAT for properties over £500,000. Extras you have to pay include legals for leasehold, shared ownership etc these are usually £100 +VAT.
Read our LEGAL COSTS to give you a full breakdown of costs to compare one from the other
Removal costs will be around £300 + VAT for a small move, through to £2,000 +VAT for moving a big house some distance. A great, cost effective service to always have is packing - it saves huge amounts of hassle!
For more help buying a property, visit our Buying a Home Checklists
Calculating the costs of selling a property
The key fees are the estate agent's fees which will be 1% to 2% of the value of your home. So if it sells for £200,000 x 1.5% = £3,000. BUT bear in mind thanks to the government, this will increase by 20% VAT so you pay the agent £3,600 but they only get £3,000.
On-line agents will advertise your property, but not much else, typically on-line agents are around £500.
Finance fees may be charged if you are penalised for paying off your mortgage - it's called a mortgage redemption fee. This could be £300 through to several thousand pounds.
Your legals will be around £300 + VAT upwards. Read our LEGAL COSTS to give you a full breakdown of costs to compare one from the other.
Removals fees range from £300 + VAT to over £2,000 + VAT (see above on buying)
For more help buying a property, visit our Selling a Home Checklists
Buy to let calculations
There are lots of ways of calculating buy to let numbers. Here's some 'rules of thumb'
Gross Yield is calculated by taking the price paid for the property and dividing this by the income received.
So if you paid £100,000 for a property and the annual rent is £5,500, your gross yield is £5,000/£100,000 = 5.5%
Rule of thumb #1
If a property has a 5.5% yield; your mortgage rate is 5% and you borrowed 75% mortgage, then your net income before tax will be zero.
Rule of thumb #2
If a property has a yield of 6% or less, usually you secure good capital growth over 10-15 years, but don't secure much income.
If a property has a yield of 7% or more, usually the income you receive is good, but capital growth is poor.
Download Kate's Property Price Performance Calculations here
For more help with buy to let numbers, read our How to analyse a buy to let property and for general help with buy to let finance, insurance, renting rooms etc, visit our Buy to let Checklists
Need a property calculation? Need a cost for a property service? Need to
know a good company to use? We are here to help, just Contact US