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Dealing with home insurance as a first time buyer

 

You’ve secured the mortgage, paid the fees, and you have chosen your dream first home, but the work isn’t over once you move in. After the challenging experience of first time buying, insurance can often take a back seat. Here’s some helpful guidance on choosing home insurance and how it will protect your new investment.

What is home insurance?

Home insurance is often split into two parts – building and contents insurance. Put simply, building cover insures damage to your physical property (the bricks

house floodand mortar) from unfortunate and unforeseen events such as fire, flooding and weather damage. In places which have high risk of weather damage, such as flooding, your choice of insurance providers may be limited and premiums may be more expensive.

Contents insurance covers all of your belongings, from your laptop to your fridge, and protects them from potential theft, loss or damage.

Do I have to have it?

While you pay off your mortgage your home is technically still “borrowed” from your mortgage lender, therefore they will most probably require you to take out building insurance to protect their investment. However, you don’t need to use your mortgage lender to obtain your insurance. Shop around to compare coverage, there are plenty of price comparison sites such as Confused.com that can help guide you.

How much is my home worth?

It’s highly important to get the right type of cover for your home, so giving your insurance company truthful and accurate answers, when they ask you questions, is essential. Your insurance company will most likely ask you the rebuild cost of your home, which means how much it would cost in total to build your home from scratch again. Many people get a surveyor to help calculate this amount; however you can get an accurate estimate by using the Buildings Cost Information Service’s free online calculator.

Contents insurance is slightly easier; you just need to estimate the worth of all of your valuable property. Money Supermarket has a great online calculator to help you calculate the value of your property.

Do I need to update my insurance?

Planning on a fancy extension? Or dreaming of a spectacular loft conversion? You’ll need to have a chat with your insurer as any changes to your home may affect the rebuild cost. If you don’t change your policy to match any changes and you become underinsured, you may be left to pay the extra if anything was to happen to your home.

Are you a recent first time buyer and have any helpful advice on home insurance? Pop your tips in the comments below.

 

Image Credits: Wikimedia

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Understanding Stamp Duty

You hardly need reminding that it’s tough to to be a first time buyer. But one problem – and it just happens to be Britain’s oldest tax – has become easier.house

This is of course Stamp duty, originating in the 17th century and imposed to cover the cost of registering a change in ownership at a government office called the Land Registry.

This process requires a stamped certificate from Her Majesty’s Revenue and Customs – the tax man to you and me – but HMRC will provide this only when the duty is paid.

So how is it easier?

Well, stamp duty used to be charged on a ‘slab’ basis. So buying a home for £250,000 meant you paid the old charge of one per cent duty on the full price, making it £2,500.

But if you bought, say, a £260,000 home you would have been in the old three per cent category applied across the whole price – so the duty would become a whopping £7,800.

This slab system was considered unfair and a disincentive for buyers. Therefore stamp duty in England, Wales and Northern Ireland is today levied like income tax.

Up to £125,000 it’s zero, and over £125,000 to £250,000 it’s two per cent. Then from over £250,000 to £925,000 it is five per cent.

On that £260,000 home you therefore today pay no duty up to £125,000, then two per cent above £125,000 to £250,000, and then five per cent above £250,000 to £260,000.

It adds up to just £3,000 and in this example saves you £4,800.

There are a few exceptions to stamp duty – but don’t raise your hopes.

There’s no duty at all on zero-carbon homes (but these are rare) while some Right To Buy properties, where tenants purchase their council home, have reduced duty. In Scotland, stamp duty doesn’t exist but there is Land and Building Transaction Tax which is roughly similar and means that north of the border, our £260,000 home would cost £2,600 in LBTT.

Across the rest of Britain buyers of almost all homes sold for above £125,000 have no choice but to pay stamp duty within 30 days of moving in.

In reality, it happens quicker because it’s handled by your conveyancer – that’s the expert you will have instructed to handle legal elements of the purchase.

Sometimes a mortgage lender may offer to add the stamp duty to the loan for the house. It sounds tempting but try to resist: saving for stamp duty may be tough but it will cost less than adding it to a mortgage on which you repay not just the loan itself but interest as well.

One final thing – it’s always buyers who pay stamp duty. That’s not really unfair because as you move up the ladder and sell up, so someone will pay duty to buy from you.

 As the saying goes ‘What goes around, comes around.’

Image Credit: Geograph

graham norwood

Author Bio

This article was provided exclusively to First Home News by Graham Norwood, a successful journalist who specialises in writing about residential property. Read Graham’s blog at Property News Hound or follow him on Twitter.

 

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How to make yourself more attractive to lenders

How to make yourself more attractive to lenders

Getting your first mortgage is an exciting yet daunting journey; many people discover that the road to home ownership is more like climbing a mountain than taking a gentle stroll. With obstacles such as large deposits and rising house prices (to name but a few), we’ve compiled some handy advice on how to make yourself, and your situation, more attractive to lenders.

Check your credit
Your credit report is your financial history; the better your score, the more likely your lender will be to give you a mortgage. Improve your chances by checking your credit rating before you apply. Have you missed any payments in the past? Have you gone into your overdraft recently?

Another issue you need to be aware of is your partner’s or ex-partner’s credit score as this can greatly impact your mortgage application.

You can discuss your credit score with your bank or you can use popular websites such as Credit Expert, which will give you a free credit report if you sign up for a trial.

Register to vote
If you’re not already on the electoral role, get on it! Lenders often check it to ensure that you are being truthful about where you currently live and their decisions can be greatly impacted if you have yet to register. To sign on to the electoral role, or for more information, simply go to Gov UK.

How is your income?
How much you earn is extremely crucial to lenders as they use multiples of your total income (and joint income) to decide on the maximum that they will lend. It isn’t just about having a higher salary; you also need to ensure that you keep all important documents such as benefits letters or payslips (lenders usually ask for at least three to six months’ worth), as these will be analysed during the decision making process. Self-employed? You will need to provide three years’ worth of accounts instead. Have a lower income? There are plenty of schemes that may help you get on the ladder such as the new Help to Buy ISAs.

Stick with your work
Have you had several jobs for the past few years, or are you dreaming or a new career? While going through the mortgage process it’s best to put those plans on hold and stick with your current job (even if you hate it!). Not only do lenders need a regular amount of payslips, it is important for them to see that you are consistent with your income.

Clear your debts
Essentially, with a mortgage, you are about to commit to one of the largest debts of your life. Therefore, it is sensible to try and lose any outstanding debts that you may have. Lenders use any current debts, along with income and outgoings, to provide you with the maximum total that they can offer you. Although this might mean your dream of home ownership has to be pushed back a year or two, it will definitely benefit you in the long term.

 

Have you found that you have struggled to be accepted for a mortgage?  Let us know any other tips you found were useful for making the process a lot easier.

Image CreditWikimedia

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Top tips for a house buying novice
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Top tips for a house buying novice

We all know the expense of buying your first home, and now more than ever it’s publicised just how much of a struggle it can be to take that first step on the house buying ladder. Whilst saving for a deposit and taking out a mortgage will be the main money worry you associate with the process, there are a number of other costs that you’ll be required to fork out for. If you’re unaware when it comes to some of the ‘hidden costs’, check out our guide below.

Mortgage arrangement and valuation fees

When arranging and applying for a mortgage, there are some additional fees that will be applied on top of your mortgage amount. Arrangement and valuation fees can vary in cost, in most cases being anything from £0 to £2,000. Whilst is can be added onto the overall amount of your mortgage, it will add to the overall amount you owe, whilst also potentially impacting on your interest payments.

Stamp Duty

Whilst Stamp duty has been altered of late, it will still be a major outgoing that you’ll need to budget for when house hunting. Put simply, stamp duty is a lump-sum payment that anyone buying a property or land costing more than a set amount is required to pay. The total amount that you’ll pay varies based on the value and type of property

Survey cost

Upon acceptance of your offer on any home, you’ll now need to have a survey carried out. Costing anything between £400 and £700, a survey can prove to be a costly expenditure, however they are crucial to find out about the condition of the building and, if there are problems, give you leverage for negotiating the buying price down or pulling out of the deal altogether.

Removal costs

Just because you’re moving into your very first home, doesn’t mean that you haven’t got a short lifetime of possessions that you’ll need to transport to your new place. Transporting items on your big day can prove to be a real headache, so if you want to keep fuss to a minimum, hiring a professional, quality removals provider can be one avenue open to you. Shop around, and pick a service well suited to your situational and budgetary needs.

Initial furnishing and decorating costs

Moving into your home should be a fun and exciting time, but one of the most enjoyable aspects of the move comes when you get to put your personal stamp on your new place. Decorating might not be the first thing you choose to do upon arriving, however over the coming months, you’ll need to get your house kitted out and to your liking, meaning you ought to begin budgeting for new furniture and accessories plenty in advance.

Home insurance

You might think that home insurance is something to look into once you’ve arrived at your new property, however it’s crucial that buyers always search out home insurance quotes prior to securing a property. It’s an important step to take early in the process, as it could potentially flag up issues with the property, such as a suspect neighbourhood, or the property being in an area at high risk of flooding. As is often the case when it comes to insurance, make sure that you shop around to make sure that you not only find the most relevant cover for your new property, but also the best price.

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An easy breakdown of the home buying process
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An easy breakdown of the home buying process

The house buying process can be a complicated and hugely time consuming process. If you’re juggling it with your full time jobs and family commitments, it’s not hard to see why people begin to feel the stress. Whilst we can’t lighten the workload for you, we can give you a helping hand when it comes to understanding the whole process. If the strain of starting the home moving process is starting to feel like a burden, here is our simplification of the home buying process.

Get prepared

House buying is a big life decision, so it’s important that you don’t head into the process without doing a reasonable amount of research. Getting an understanding and background knowledge will be a big aid, and make the process of home buying much more straight forward. As with most things, having a greater understanding will allow you to make a more informed decision further down the line.

Find your mortgage

A crucial factor when buying a home is to ensure you get a mortgage that is well suited to your financial situation. Again, this will involve copious amounts of research and homework. If you’re unsure what types of mortgage are out there, it’s worth looking into, and getting the facts straight in your head before going out into the market.

Place your offer

Once you’ve got your mortgage lined up, viewed homes and are now ready to proceed, it’s time to put in an offer on what you want to be your new home. If you’re a first time buyer, you’ll have less constraints, as you won’t have an existing home up for sale slowing you down. Usually, you’ll put your offer in through your estate agent, as they will help your deal go through as smoothly as possible.

Source your solicitor

Now for the legal aspects, you’ll need to get yourself sorted with a solicitor, in order to handle the paperwork surrounding your impending move. It’s important that the finer details of your move are scrutinised ahead of signing your papers, so having a trusted solicitor on your side is an important addition.

Get it surveyed

Another crucial step is to ensure that you arrange for a survey of your new property to be carried out, to make sure that your new home has been thoroughly checked over and is valued at the price you’re paying. There are a number of different surveys and reports which can be carried out, from the cheaper condition report to the most comprehensive option of a structural survey.

Exchange contracts

Once your solicitor and surveyor are happy, it’s time to sign the contract and move ahead with the purchase. It’s at this point you’ll have to start the expenditure, as you’ll usually have to lay down 10% of the total price as a deposit. It’s important to know that once you put down the deposit, you’re committed to the sale, meaning that if circumstances change any you need to pull out of the deal, you’ll likely lose your deposit.

Finalise it

Upon completion, the property finally becomes yours. It’s time for you to get your keys and the deed to your first home. The completion of your purchase means you’ll now have bills to pay; the 90% of your home which you’re yet to pay for is transferred from your mortgage lender to your legal representative, and then on to the seller’s representative.

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Money tips for beginners
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Money tips for beginners

If you’re taking the first steps in the home buying process, finance is one area in which you’ll be needing some guidance. When it comes to money management, we’re no experts – that’s what your bank or financial advisor is for; however what we are capable of doing is pointing you in the right direction – we know just how confusing it can be to get reliable facts and figures. As a first time home buyer, there’s probably no current aspect of your life as important as money. We know that the home buying process is a costly one, and even once you finally secure your dream place, you’re likely to still have jobs to do that will place you under further financial strain. If you’re struggling to wrap your head around finances and just want some tips on keeping your money safe, we’ve got you covered with some basic advice.

Online banking

In the modern day, we all live a hectic life. Gone are the days when you’d need to take a trip to your local branch to check your balance. Nowadays, for the most part, customers like to be able to control their finances at the touch of a button. Most banks now offer services online, however some are easier to navigate than others. Before you jump into your decision, check out the online banking services offered by banks, along with their smartphone apps – as that’s likely to be the quickest way you’ll have of keeping on top of finances.

If you prefer to conduct your banking over the counter at your local branch, then you need to make sure you have regular access. It’s all well and good selecting a bank and opening a current account online, but if you encounter problems and need to speak to someone face to face, you need to make sure you aren’t required to trek miles out of your way.

Check out your bank account features

If you’re just after a standard current account with no frills, then you’ve got hundreds of options to chose from; however many accounts offer at the very least, bonuses and perks to assist your financial situation. It could be something as simple as an interest free overdraft (which not all accounts have) to something more lucrative, like cash back on supermarket and petrol station purchases. If you’re coming off the back of a big house purchase, money won’t be flowing as freely as you’d hope, so an interest free overdraft, just to be utilised whilst money is tight could be a godsend. Shop around and view the overdrafts on offer at different banks and see which best suits your needs

Get the best deal

In an age where there are more different account options than ever before, many banks are now looking to lure you in with deals. Make sure you check out what offers0 you can get before opening an account. Things like cashback accounts now offer to pay you money back on purchases such as groceries and petrol, and other banks even offer you cash to switch to one of their accounts. Make sure you shop around, and take advantage of the deals on offer.

Graduate benefits

If you’re still a student, or are a recent graduate, then there are special accounts still available for you which offer things like overdrafts and freebies. The Young Persons Railcard has always been a popular sweetener for banks when it comes to luring in custom, and things like restaurant discount cards and gadget insurance are also available at banks, as a means of saving you money.

Compare your options

Once you’ve weighed up options and garnered what benefits and drawbacks all the different accounts have, head to a comparison site to compare your options for one last time.

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Stamping down on stamp duty
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Stamping down on stamp duty

As you enter the house buying process, you’ll no doubt be tightly managing your finances. With a number of costs and taxes to account for, you could be forgiven for losing track. One recent alteration to the fees you’ll pay when purchasing a new house relates to stamp duty.   In 1997, Gordon Brown revised the stamp duty system in response to rising housing prices as a source of government revenue. Over 15 years later and for much of the same reason, in December 2014, the 1997 system has been revised to become fairer by progressive taxation. So if you are thinking about buying your first home or just an overview of how the new system works, then look no further.

Breakdown:

The good news is that £4,500 is the amount saved on an average price home but how will this system impact on you?

Untitled

As you can see from the image above, for any property up to £125,000 you won’t have to pay a thing; this is very much the same as the previous system. Under the old system you would have been liable to pay 1% on homes between £125,000 – £250,000, whereas the new system 2% is the threshold. However, the current system is a progressive tax where you will only pay a percentage based on the amount you are over any given threshold. This in turn means you’ll be financially better off under this system than the last.

In addition, under the new rate you’ll pay 5% on any property up to £925,000 progressively. The old system would have meant that you’d have paid 3% between £250,000 – £500,000 and & 4% for anything over £500,000. This ensures that anyone buying a home under the £937,000 mark will pay less or the same, treasury figures show.

Paying stamp duty and possible exemption:

Although the system is now a progressive system and is therefore fairer, there are still some ways that you can either reduce paying the tax or not pay it at all.

Paying stamp duty:

It is important to pay stamp duty or a £100 fee could be incurred. Your solicitor usually takes care of this but should you choose to do it yourself, then you need to complete the form and send it off. It is your responsibility to ensure that all documents are completed within the 30 days on completion of a deal.

Think about the band system:

The first thing to do, regardless of the system or not, is to ensure you get the best possible price for the house. This may be the difference from being put in one band to another. For example, if the house was on the market for over £125,000 and you as the buyer was able to get a deal for just under that figure then you wouldn’t be liable to pay anything at all.

Transferring of property:

If you transfer the deeds of your home to someone else, they will not have to pay the stamp duty on the market value of the property. This therefore means you could be eligible to pay less stamp duty if you pass the house over as a gift or leave it in your will.

 

CC image sourced via Google Image free to use search.

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Top 7 blogs for financial advice
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Top 7 blogs for financial advice

Buying your first home is exciting, but  can be equally as nerve wracking. It is a major decision which requires a lot of research, planning and most importantly; financial budgeting. Once you have raised afunds for your deposit, you may be left struggling financially; however by finding ways to make a little extra money, starting to manage your living expenses more effectively and spending your money more wisely you will soon find a more stable financial footing. Here is our guide to the best blogs on the internet if you’re these helpful hints and tips than from some of the best and most influential finance blogs.

  1. Couple Money (@elle_cm) centres on finding ways to build your finances together as a couple, and aims to educate couples on ways to live on one income whilst having fun with the other! Check out their posts on how to pay off your debt faster, how to build your savings and ways to earn more in the meantime.
  2. Magical Penny (@magicalpenny)  is a personal finance blog which strives to “help you to grow your pennies through conscious spending, automatic saving, and simple, low cost investing”. His posts range from turning your hobby into a money maker, varying house prices, energy comparison shopping and helpful tips when getting a mortgage. It’s definitely a helpful one for a first time home buyer.
  3. Young Adult Money (@davidcarlson1 ) encourages the balance of earning more and spending less, something which can seem like an impossible task. Again this is one to help those of you in your 20s and 30s, with the blog covering topics as diverse as real estate, making more money, cutting expenses and even travel. This blog should be the go to guide for all financial savvy young adults.
  4. Help me to save (@karenbryan) is a blog devoted to helping you spend less, save money and enjoy life. Not only is there advice offered on money saving tips, but posts also focus on providing helpful ideas for making money and ways of managing your living expenses more effectively.
  5. Master the Art of Saving (@MasterTAOSaving) is a blog written for those who want financial tips written in an everyday conversational style. Created by Jen Perkins, the site states outright that it is not a professional financial service, but is a source for easy to read tips and advice. Although it is American, it has a readership that far exceeds that nation, and the tips and advice can easily be applied to UK home owners looking for financial tips.
  6. Young and Thrifty (@youngandthrifty) Kyle and Justin created Young and Thrifty when they left University after having beaten student financial issues. Having then been faced with new financial challenges as young adults such as making investments and getting a mortgage, they have turned to blogging to offer tips from their experience. They now cover all bases on the key issues for first time buyers such as investing, banking, taxes, real estate, and ways to monitor your day-to-day spending habits.
  7. Phillip Taylor Money (@PTMoney) is all about finding ways to build wealth, spend money wisely and make extra income. This blog will help you to discover the best rates when it comes to credit cards, bank accounts and even mortgages. Phillip gives his top tips on saving money, spending wisely and making extra money a read to stay financially secure and savvy.

Have we missed off your go-to blog when you’re looking for sound financial advice? If so, make sure you drop us a comment below.

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Sorting your council tax ahead of moving house
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Sorting your council tax ahead of moving house

When moving home, as we’ve mentioned previously, you’ll have a lot on your plate, particularly when it comes to informing your local authorities and utility suppliers. However what many people struggle to understand is the way in which you’ll need to organise your council tax when moving.

If you’re well prepared, and plan plenty in advance, then the process of paying your existing council tax requirements and closing the account associated with your old home is a reasonably simple process.

Getting in touch

If you’re moving locally and your new home is within the same local constituency, then it might be as simple as switching your old address for your new one. If your new home isn’t located within the same district, setting up your new account simply requires you to make a quick and easy call to your new council and make sure they’re well aware of your new address.

Online

You can even notify them of your change of address online. All you need to do is search for your local authority’s website and find the change of address form in the section of the website that is focused on Residential matters. Obviously, it’s crucial to know that your old council will continue charging you until they’re notified that you’ve left the area. Avoid paying more council tax than you need to by informing them of your moving date ahead of time.

Timescale

This is the reason you don’t want to leave this task until the last minute, as it can take several weeks for your old council tax account to be closed. It depends entirely on the processing queue at your local council, however it makes sense to ‘get your house in order’ ahead of your move. Avoid paying any bills you receive for at least four weeks following your account closure to make sure you don’t overpay. If you’ve overpaid your council tax account, your local council can transfer the credit to the account for your new home. Alternatively, your balance can be refunded and used to pay the council tax at your new property.

What information do I need to provide?

It’s important to make sure you have all relevant details when carrying out this process. You’ll need to provide detailed information on your account and living situation in order to close your council tax account. In order to close your existing council tax account, you may need to provide the following information.

What will my new council tax be?

Council tax is divided into eight bands, from the cheapest A band, to the most expensive homes, which fall into the H band. Similarly to stamp duty, it all relates to the size of your home, so it’s worth bearing in mind that, should you move from a smaller premises to a larger dwelling, your council tax bill will probably increase.

Photo credit: CC image via Gary & Anna Sattler

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Extra fees to be aware of when moving home
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Extra fees to be aware of when moving home

When planning a home move, it can be a costly period of time. With home buying fees and organising your removals, it can take a big chunk of both your budget, and your savings. If you have an impending move, and you have a tight budget to stick to, you don’t want to under cost the value of the jobs at hand, and end up being stung by additional fees. In order to prepare for your move, here is what to look out for.

Legal fees

When buying a new home, it’s likely you’ll need to hire a solicitor or licensed conveyancer to handle the legal areas associated with the move. It’s important that for aspects such as transfer of ownership/funds that they’re done by a professional. Legal fees typically cost anything between £500 and £1,000. It’s easy enough to find the right person or organisation for you, and often can come down to a good word-of-mouth referral.

Stamp duty

Most homebuyers have to pay Stamp Duty Land Tax on home or land purchases over a certain value amount. If you buy property for more than £125,000, you pay Stamp Duty Land Tax of between 1% and 7% on the whole purchase price.  If you’re unaware, Stamp Duty is charged at different rates according to the price of the home or land. The rates rise incrementally in brackets, which are set by the government and can be found online.

Valuation/survey

Before being approved a mortgage, it’s highly likely that your bank or lender will insist a valuation is carried out on your new home to ensure that  it’s worth the price you’re willing to pay, giving peace of mind to both yourself and the lender that  the property is a reasonably sound purchase. As valuations are the cheapest type of survey, you may want to spend a little more and have a more thorough check carried out. Whilst they might be a more expensive option, they do provide further insight into any potential problems a home may have.

Buildings insurance

Insurance is hugely important, especially when it comes to a property, and it will be required as a mortgage condition in most cases. Obviously, the policy will need to take effect from the date of exchange (when you take possession of your new home).

Contents insurance

Another piece of important insurance you’ll require is for your home contents. It’s important that both old and new items are covered at your new address, and means that should any disaster strike, your belongings won’t be in jeopardy.

Removal firm/van hire

One expense that is an optional one, is that associated with hiring removal services for your big move day. When it comes to shifting your belongings, the budget option here is to do the removals yourself, in which case the only real expense you’ll encounter is van hire and fuel costs. However, if you’re not so keen on the idea of taking all the responsibility in your hands, and want the experts in to take control of the situation, a removal firm should be more than willing to accommodate most of your needs.

Utilities

Whilst you might get away without doing this through the summer, in winter, you want to avoid moving into a cold, dark home. To make sure your new house is habitable upon arrival, make sure that the gas and electricity is connected before you move in. The seller will probably have informed the utilities companies of a change of ownership, but it’s important to remember that you’re not in any way obliged to stay with the same providers.

Council tax

This one is sadly unavoidable, with this payment going towards local council services such as  your rubbish collection, policing and other municipal costs. It’s divided into eight bands, from the cheapest A band, to the most expensive homes, which fall into the H band. Similarly to stamp duty, it all relates to the size of your home, so it’s worth bearing in mind that, should you move from a smaller premises to a larger dwelling, your council tax bill will probably increase.

 

Image credit: CC image via Alan Cleaver from flickr.

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