All The Costs

All the costs

The actual cost of buying a house and securing a mortgage is a big enough expense in itself, and when you start adding the other bits and bobs like the survey, estate agent fees, buildings insurance, and bills then the cost will seriously mount up, especially when you compare it to your current rent!  There will be immediate costs and long term costs to think about – and it’s these costs that people tend to forget about.

Freehold vs Leasehold

The one thing you have to ask when you’re buying your next home is, is the property freehold or leasehold?  Freehold would mean that you have complete ownership of the land and the building that stands on it for an unlimited amount of time. 

A leasehold property on the other hand means you own the right to occupy the property for a certain period of time.  Now this will be a particular amount of time left on the lease, but you don’t actually own the land on which the property is stood.  You normally find this with properties like blocks of flats.

The leasehold document would also specify who is responsible for maintaining and repairing different parts of the property. You may need to pay a maintenance or service charge for covering the costs of any repairs.  You may also need to pay a ground rent to the owner of the land (i.e. the freeholder).  The point is this will be another cost for you to think about!

And whilst we’re talking about extra costs, whether a property is leasehold or not may have an impact on whether you need buildings insurance.  If you buy a leasehold property, then the freeholder may have arranged buildings insurance for the whole block, and therefore you would not need your own individual buildings insurance.  But buying into a freehold property would mean you have to take out your own buildings insurance.

One off or ongoing costs?

It’s an expensive business buying a house. It isn’t just the costs of making the actual purchase that you have to worry about. Buying a house or flat changes your monthly outgoing costs too.
There are two different types of costs to consider when you are buying a house or flat. One-off (or short term) costs that are part of buying a house and ongoing (or long term) costs that continue as part of your budget once you’ve moved in.
From the list below see if you can you sort the one-off costs from the ones you’re going to have to keep paying.
1.    Solicitor's fees
2.    Stamp muty
3.    House Maintenance
4.    Home insurance
5.    Council tax
6.    Furnishing
7.    Survey
8.    Moving costs

How did you do?

One off costs

The one off costs include:
1.    Solicitor's fees - you need to pay a solicitor to sort out the contract that makes you the legal owner of the house. Always get a few quotes – as it’s best to shop around. Some solicitor’s costs might be cheaper than others.
2.    Stamp duty - over the years, stamp duty costs have changed so make sure you have the most up to date information before buying a house or flat.
7.    Survey - the survey makes sure that the property is worth its price and tells you about its condition.
8.    Moving costs - Removal firms can cost anywhere between £500 - £800. You could save money by packing and moving your own things or asking friends to help. Many removal firms will offer you insurance, but check your home contents policy as you might already be covered for any damage to your belongings during the move.

There are other one off costs to consider, like:

• Deposit
• Estate Agent fees
• Bank/Building Society fees.
  

Ongoing costs

The ongoing costs are:
3.    House maintenance - maintenance is an ongoing cost. It’s best to get a survey done so that you know how much maintenance the house needs before you buy it. And don’t forget, there might still be surprises so you need to have an emergency fund!
4.    Home insurance - it’s best to have building and home contents insurance. Most mortgage providers insist on buildings insurance.
5.    Council tax - this is a fixed yearly cost for services like rubbish collection and road maintenance. You risk a prison sentence if you don’t pay it. This is called rates in Northern Ireland.
6.    Furnishing - this is an ongoing cost but you don’t have to spend a fortune making your home comfortable. You can find some bargains in second-hand shops, on the internet or even ask friends.

There are other ongoing costs to consider, like:

• Monthly mortgage payments
• Savings schemes
• Ground rents
• Utilities/ council tax/ water etc
  
• Other new insurances, like life insurance
  

Summary

What you have to keep in mind in the middle of all this excitement is the extra costs.  You might have a budget in mind for the actual house but you will need some funds for things like surveys, mortgage fees and insurance.  What if the seller pulls out at the last minute or your mortgage doesn’t get approved?  What if your survey uncovers some bad things about the property?  All these factors will push up the spending on the house and they’re things you need to consider.

Here are some things to consider

• There are always lots of mortgage deals on offer so look around to find the best one for you.

• Set aside an emergency fund – for purchasing the property and to make sure you also have an emergency fund saved up for when you move into the property to pay for any unexpected costs.

• Consider spending additional money on a full survey if you are buying an older property, or one that needs lots of work. Otherwise, you could find the property becomes a costly mistake!

• Some bills are fixed, like council tax and your television licence, but others can vary. You can save money by switching gas, electricity, telephone or other suppliers. Visit the links section on this page to check out some useful websites where you can compare prices to find the cheapest deals.

• Sometimes, it is cheaper to pay your bills using direct debit (regular monthly payment through your bank account).

• Some property developers offer cash-back where they’ll give you a percentage back on the cost of the property. For example, if you buy a property for £100,000 in cash and the developer immediately gives you £10,000 'cash back' then you have in effect purchased the property for £90,000. While this might sound like a good deal, there are a few things to watch out for. If the developer offers delayed 'cash back' after say two years, then you are making a loan to the developer. Also, if you purchase a property for £100,000 but this time you use a 100% mortgage and the developer gives you £10,000 'cash back' then, if you do not immediately apply the 'cash back' to paying down the mortgage, you have in effect, taken out a loan that you have to repay.

• You can get help with your mortgage if you work within the public sector under the Key Worker Scheme. You can also get a lot of information from your Local Housing Association. Check out the links section on this page. 

• When you set up a new home, you may not have much money. Think about the essentials first. If you shop around you can find bargains on the things you need for your home.
• Find out when your local shops have their sales.
• You don’t need to buy brand new – browsing through charity shops and second hand furniture shops can often turn up bargains.
• Don’t forget to ask friends or family – they may have things they no longer need.
• And remember! Buying a house is a long-term commitment.

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