The costs of buying a house when it is a new build

What you pay, and when

Buying a new build spreads your costs across several months. That helps with cash flow, but it also means you need some money earlier than you might expect. Here is every cost in the order it usually falls due.

To see these costs on a real home, use the cash you need calculator. It works out the deposit, stamp duty and fees, less any builder-stated incentive, as an illustration, not advice.

The deposit

Your deposit is the share of the price you pay yourself rather than borrow. On a £300,000 home, a 5% deposit is £15,000 and a 10% deposit is £30,000.

With a new build you usually pay a deposit to the builder when you exchange contracts, which can be months before the home is finished. The builder's contract sets the amount. The rest of your own money, and your mortgage, are paid on completion.

A bigger deposit can bring better mortgage rates, and lenders can be stricter on new-build flats, so check the deposit you need before you reserve. The new-build mortgages guide explains why. If you are saving for a deposit, see the Lifetime ISA page and the full list of schemes.

If an exchanged contract is cancelled, the New Homes Quality Code says the builder must return a refundable deposit within 28 days.

The reservation fee

You pay a reservation fee to take a plot off the market while the legal work starts. The builder sets the fee. Check the reservation agreement for how it is treated at completion, which is normally as part payment of the price.

Under the New Homes Quality Code, which builders registered with the New Homes Quality Board must follow:

• Every reservation agreement must include a cooling-off period of at least 14 days.
• If you cancel during that period, for any reason, the builder must refund the full fee.
• If you cancel later, the fee is refunded within 14 days of your notice, less any deductions the agreement sets out, such as administration costs.

Read the deductions clause before you pay. Our guide to reservation to completion covers the agreement line by line.

Stamp duty, LBTT and LTT

Stamp duty is usually the largest cost after the deposit. In England and Northern Ireland, standard stamp duty is nil up to £125,000. First-time buyers pay nothing up to £300,000, but lose the relief entirely on homes above £500,000. If you will own another home after buying, a surcharge of 5% usually applies.

On a £350,000 home, a home mover pays £7,500 and a first-time buyer £2,500. Scotland charges LBTT and Wales charges LTT instead, with different bands.

You pay it on completion, not at reservation or exchange, and your solicitor usually pays it for you. The stamp duty guide has the full tables and worked examples, and the stamp duty calculator gives your figure.

Legal fees and searches

You need a solicitor or licensed conveyancer to handle the contract, the searches, your mortgage paperwork, the money and the registration of your ownership. Their bill usually includes:

• Their own fee for the legal work, plus VAT.
• Searches, such as local authority, drainage and environmental searches.
• The Land Registry fee for registering you as the owner, which HM Land Registry sets on a scale based on the price.
• Bank transfer and identity check charges.

New builds bring extra work: checking the plot against the site plan, the warranty, roads and drains that the council has not yet adopted, any estate management arrangements and, for flats, the lease. Ask for a fixed quote that covers new-build work.

You choose your solicitor

Builders often recommend a solicitor. The New Homes Quality Code says you must be free to choose your own legal and other advisers, and you do not have to use one the builder recommends. If the builder receives any fee or reward for introducing an adviser, it must tell you what the reward is and its expected amount, in writing, before you commit. Builders also cannot offer incentives when recommending an adviser.

Mortgage costs

If you borrow, expect some or all of these:

• An arrangement or product fee charged by the lender. Some lenders let you add it to the loan, which means paying interest on it.
• A valuation fee, though many mortgages include the valuation.
• A fee from your mortgage adviser, if they charge one.
• Fees if you need to extend a mortgage offer because the build runs late.

Compare the total cost over the deal period, not just the rate. A qualified, regulated mortgage adviser can do this for you. The how much you could borrow calculator shows the price your income and deposit could reach, as an illustration, not advice.

Surveys and snagging inspections

Your lender's valuation is for the lender, not for you. RICS, the surveyors' professional body, says a mortgage valuation is a limited check that the home is worth the loan, and costly problems can go unnoticed.

For a new build, the more useful check is usually a snagging inspection: an inspector checks the finished home for defects against the builder's and the warranty provider's standards. RICS describes its Level 1 survey as aimed at conventional properties and newer homes, but many buyers of a brand-new home choose a snagging inspection instead. The Code says any pre-completion inspection should take place before the completion date. See the snagging guide for when to book one and what it covers.

Moving and setting up

These costs are easy to forget because the home is new:

• Removals, or van hire.
• Buildings insurance from completion. Your lender will ask for it on a house. For a flat, the building is usually insured through the service charge, but you still need contents cover.
• Flooring, curtains and blinds, if they are not included.
• Appliances that are not part of the specification.
• Turf, fencing or garden finishing, if the garden is handed over as bare ground.
• Furniture for extra rooms.

Ask the sales office for the full specification in writing, so you know what is included and what you will need to buy.

Ongoing costs after you move in

Council tax

You pay council tax from the day you complete. In England and Wales, the Valuation Office Agency assesses newly built homes for a council tax band; if your home has no band yet, tell your council. See moving into a new build for what to expect in the first months.

Service charges and estate charges

Many new developments have a management company that looks after shared roads, green spaces, play areas or drainage that the council does not adopt. Freehold houses can pay an estate charge for this. Flats usually pay a service charge for the building as well.

Before you reserve, the New Homes Quality Code says the builder must give you:

• The estimated yearly cost of any management services.
• A description of the management services and who will provide them.
• How shared spaces, roads and amenities on the development will be managed.
• Any service charges that may increase or be charged in the future.

Ground rent

For most new long residential leases in England and Wales granted from 30 June 2022, ground rent is limited by law to a peppercorn, which means no money can be charged. If a lease has a ground rent, the builder must tell you the amount, the payment dates and how it is worked out. The tenure guide explains what to check.

A worked example

Here is an illustration for a £300,000 new build in England, bought with a 10% deposit. Fees for legal work, surveys and mortgages vary, so put in your own quotes.

The reservation fee is not an extra cost if the agreement treats it as part of the price, but you pay it first, so it comes out of your savings early.

How incentives change the cash you need

Builders often offer incentives, such as paying your stamp duty or legal fees, contributing to your deposit or paying for upgrades. These can reduce the cash you need, but they are not the same as a lower price, and your lender will be told about them. Value each offer as the builder states it, in writing, and compare it with a price reduction.

See new-build incentives explained, and the new-build incentives page for where builders are offering them now. Right now, 11,453 homes for sale on NewHomeSearch have a builder-stated incentive.

Your cost checklist

1. Get a mortgage agreement in principle and confirm the deposit your lender needs for this type of home.
2. Ask the builder for the reservation fee, the deductions clause and the deposit due at exchange.
3. Work out your stamp duty, LBTT or LTT on the final price.
4. Get fixed quotes from a solicitor and, if you want one, a snagging inspector.
5. Ask for the estimated yearly service and estate charges, and any ground rent.
6. Get the full specification, and list what you will need to buy.
7. Keep a buffer for delays: rent or bridging costs if completion slips.
8. Run the total through the cash you need calculator.

When you are ready, search new homes and compare the cash needed on real plots.