Buying a House > Cost of owning a home

When buying a property, it is easy to believe that you’ve ‘made it’. You are no longer paying money to line someone’s pockets and pay for their holidays. You can put pictures on the wall and refresh those sepia-stained rooms. The property is yours. You don’t have to answer to anyone; there’s no estate agent, no landlord, no one.

However, while owning a home features on plenty of bucket lists, is it all it’s cracked up to be? Yes, renting can be frustrating and it can feel like you’re throwing your money away, but you’re also oblivious to many of the bills that come with property ownership.

As anyone who has ever bought a house will tell you, they are expensive to run. They might be a big lump of brick and mortar, but that big lump costs a lot to maintain. On top of your mortgage payments, you’ve got to contend with bills, insurance and a load of other expenses. Don’t worry, however, we are going to give you a run-down on these costs. If you’re buying, we hope this educates you. If you’re renting, this will (hopefully) make you feel a little bit better about seeing your landlord drinking champagne on a yacht paid for by you – sorry!

 

Hidden Homeowner Bills

Buildings Insurance

So, your offer was accepted, the surveys were carried out, and now you’re ready to move in. But, before you exchange contracts, have you got buildings insurance? Buildings insurance covers the cost of repairing the damage caused to the structure of your property by the likes of fires and storms. It is a must-have for homeowners, with most lenders refusing to offer a mortgage without the guarantee that you will have a policy in place from the date you exchange contracts.

Buildings insurance may not be required if you are buying a leasehold property, with it often being included in the service charge (we will come onto this later).

 

Contents Insurance

Once you’re moved into your new home, you are going to bring your belongings with you. Whether they have material or sentimental value, you need to keep your belongings protected from the likes of theft or damage. Contents insurance insures the contents of your home and people often combine with their building insurance, which is referred to as home insurance. While you don’t have to purchase contents insurance, it is advisable.

 

Mortgage

Paying to keep your property and belongings safe from damage is one thing, but paying for yourself to live in it is another. Unless you’ve bought the property outright, you’ve got to pay your mortgage repayments.

Mortgage repayments can feel a little bit like rent, with you being required to pay a certain amount each month. However, rather than paying for your landlord’s lifestyle, you’re paying for outright ownership of the property.

Mortgage repayments go towards repaying the loan and covering the interest. The amount that you have to pay each month is determined by how much you’ve borrowed and the period that you’re paying the loan back over. It also varies depending on the interest rate and whether you’re also paying off any fees.

Your payments may also change throughout the term of your mortgage. If you have a fixed-rate mortgage, payments will remain the same each month throughout the deal. However, if you have got a variable-rate mortgage, the amount you pay each month, unsurprisingly, could vary.

 

Running Costs

Outside of your mortgage and insurance, you’ve got the running costs. Houses need a lot of different things to keep them habitable, and these cost a lot of money. To keep your house warm and the lights on, you will need to pay gas and electricity bills. These bills can be provided from different energy companies or you can keep them with one supplier. You will also be offered several payment options from your provider, with it being common to have the option of paying either quarterly, monthly or annually.

Your energy bills should rise in parallel to inflation, but this often isn’t the case. Most energy suppliers increase their charges at a much faster rate than that of inflation, so make sure you’re aware of how much your energy bill is costing you and keep an eye out on what other providers are offering. There’s no loyalty in the energy bill game, with plenty of people switch their providers regularly.

If you’re in the process of buying a property, you should be provided with an energy performance certificate. This certificate will show you how energy-efficient the building is and will give you an indication of how much your bills might cost.

So you’ve sorted your heating, your lights and TV are working, but how are you going to wash and, well, live? Although you’re entitled to free tap water when you go to a pub, the same can’t be said for your home. Water UK reports that the average UK water bill is £405, or £33.75 a month. While this price is reasonable (around the cost of a good mobile phone contract), your water bill will vary depending on where you live and the availability to water.

If there are not many people in your household, it’s worth exploring the possibility of having a water meter installed. This meter will mean that you are charged on the water you use, which if there is one of you, isn’t going to be that much.

While you can change your gas and electricity provider, you can’t switch your water supplier. Suppliers are assigned to certain areas of the country, meaning that if your bill is more expensive than the national average, you’re just going to have to deal with it!

Council Tax

Another bill that you’re just going to have to deal with is council tax. Properties are classified in bands from A to H and, while it may seem ludicrous, your council tax bill is determined by how much your property was worth in 1991.

An estate agent should be able to provide you with the required council tax information, but if they can’t, you can use the government website to look up your postcode online and work out how much you are going to have to pay.

While council tax is unavoidable, you can appeal against your banding if you think you are paying too much. However, should you choose to appeal, the council may decide to move your property into a more expensive band. If you are ever unsure, research what people on your street are paying to find out if you’re on the receiving end of a bad deal.

Similarly, if you are living alone, you can apply for a 25% council tax discount.

 

Internet, Phone and TV

They are not a ‘necessity’ as such, but not many of us could live without TV, internet and a phone. If you are someone who can survive without tech, well done you, but how are you reading this article?

TV, broadband and landline phone bills can be expensive, so it’s worth shopping around to find the deal for you. New customers tend to be offered some pretty good deals, so take a look at different providers and make them aware of what their competition is offering. Research by Which? found that 86% of people who haggle a deal on their broadband are successful, with some people saving over £200 a year on their bill

Even if you have paid for your TV provider, you still need to pay for your TV licence.

A TV licence allows you to watch or record TV on any channel through your television or a website. The common misconception is that it only applies for BBC channels, but you need a TV licence whether or not you watch BBC channels, use Freesat, Freeview or any pay-TV service. It is also required that you have a TV licence to watch programmes on BBC iPlayer.

There are two different prices for a TV licence, with a colour TV licence costing £154.50 a year, while a black and white TV licence will set you back £52. It’s up to you how you pay for the licence, you can either pay it upfront, weekly, monthly or quarterly.

While people aged 75 or above are currently entitled to a free TV licence, as of 1 June 2020, only those who receive a Pension Credit will qualify for this.

 

Service Charges and Ground Rent

We mentioned it previously, but if you’re buying a leasehold flat, you’ll need to factor in service charges and ground rent. Service charges cover the management and maintenance of the building’s communal areas, such as lifts and stairwells and can cost between £100 and £200 a month depending on the type of building.

It’s good practice to have your solicitor to look over the lease before you purchase a leasehold property, as some contracts may contain penalties for damages.

Emergency Repairs

Buying property costs a lot of money, but it’s a worthwhile investment. Seeing as you’re going to (probably) live in this building for a number years, you need to be aware of the costs for potential repairs and maintenance. Although these costs can vary from one property to another, it’s always worth keeping some money aside should something go wrong.

Whether it’s a broken boiler or a leaking sink, there are so many things that can go wrong with a property and you don’t want to end up being left with a faulty house and no money for repairs. Make sure that your rainy day pot can cover the likes of boiler servicing, electrical safety checks, decoration and potential renovations. Having your boiler and electrics checked regularly will locate any potential issues that could arise at a later date and cause further damage.

 

Parking

The last cost to consider is parking. With more people than ever before owning cars, parking spaces – particularly in the city – can be hard to come by. When buying a property, ask the agent or owner if a parking permit is required and how much it will cost. While the permit is unlikely to be unbearably expensive, it is an added cost and another bit of administration that you need to carry out before you move in. The last thing you want to happen is to move in, park your car, and wake up the next day to a big yellow sticker on your windscreen.

 

Owning a home is a huge milestone in anyone’s life, with it being a liberating feeling to leave the world of renting behind. However, even though renters may feel like they’re getting a raw deal, homeownership just as – if not more – expensive. Of course, once you pay your mortgage off things get a little easier, but the first few years are going to be costly. If you are in the process of buying, make sure that you understand the costs that come with owning a home. If you’re ever in doubt, never be afraid to ask. As the old saying goes, ‘those who fail to prepare, prepare to fail.