Buying and owning a house: the costs explained
The prospect of becoming a home-owner is exhilarating, but there are many more costs involved than the purchasing costs. Do your sums using the following guide to help you get to grips with the monthly outgoings and hidden costs in owning a home.
You'll need to decide between variable, tracker and fixed rate optionsr Bear in mind that interest rates, although currently low, are not guaranteed to stay that way. Soaring rates will have a huge impact on your monthly payments with some types of mortgage. Read our article on interest rates and their impact on mortgages for more information. Use an online mortgage calculator to estimate your payments, and speak to an independent financial advisor who can give you more personalised advice.
Short leasehold impact
As well as short leases limiting your options of mortgage lender when buying, they can be a stumbling block to selling your property in a weak market, and are potentially a more risky investment for you. If you are selling a property in a weak market, a short lease of less than 70 years could cost around £10,000 on a £150,000 mortgage to extend. In a buyers market you will find it harder to sell without the extension. The shorter the lease, the more expensive it is to extend it so make sure you know the number of years left on the lease before you make an offer and be aware of it becoming a potentially expensive problem further down the line.
As well as buying the house, you also need to fill it. If you don't already own all the furniture and furnishings for your new home, don't forget to allocate some money to it - white goods and even basic furniture add up quickly, as will storage if the property doesn't have that built in.
Check the band the property is in so you know the costs up front. If you're moving to a new council tax area entirely, the difference in annual charges for a similar banded property can be hundreds of pounds.
As well as building and contents insurance, there are other important policies your should consider such as mortgage indemnity guarantee, repayment cover, and of course life insurance that covers the mortgage value. Don't forget that your new address can affect your car insurance, so factor that in too.
Unless you've bought a completely self-sufficient house, you're going to need fuel and power. Shop around for competitive rates as they can vary enormously between suppliers.
Ground rent and maintenance fees
Usually this only applies to flats. Check what fees you will be liable for; usually they are quite reasonable, but they still need to be paid for ongoing.
Sadly things go wrong in all houses from time to time so set aside some contingency budget for emergency repairs and essential maintenance, from doorbells to new boilers.
It may seem minor, but for many urban residences, you will require parking permits which can be surprisingly expensive.
Capital gains tax
Make sure you are aware of the implications of capital gains tax. It is wise to consult a tax expert so you are fully up to date on the rules.
It may seem a long way off but you do need to bear in mind what will happen to your property in the very long-term. A solicitor or tax advisor will be able to assist and advise on this area.