What are the costs of owning a home? Mortgage payments, council tax and other bills explained

What are the costs of owning a home? Mortgage payments, Council Tax and other bills explained

Buying a home can be an expensive process, and the cost of home ownership extends well beyond finding the deposit and making the monthly mortgage payments.

First-time buyers and home movers need to budget for Stamp Duty, solicitor and conveyancing fees, mortgage arrangement charges, valuations, surveys and moving costs. Once they have the keys, there can also be decorating, furniture and home improvement bills to consider.

On top of this, homeowners need to allow for ongoing costs such as Council Tax, buildings insurance, energy bills, maintenance and repairs. Buyers purchasing flats or properties on managed developments may also need to pay service charges, estate management fees or other annual charges.

What costs do you need to budget for when buying a home?

Some of the main costs can include:

How much Stamp Duty will I pay?

Stamp Duty can be one of the largest additional costs when buying a property.

In England and Northern Ireland, standard residential Stamp Duty Land Tax currently starts above £125,000, with progressively higher rates charged on different portions of the purchase price. First-time buyers can qualify for relief when buying properties worth up to £500,000, with no Stamp Duty charged on the first £300,000. (GOV.UK)

Buyers purchasing an additional residential property will normally face higher rates, so it is particularly important to calculate the potential tax bill before agreeing a purchase. (GOV.UK)

Different property taxes apply in Scotland and Wales.

Don't forget about Council Tax

Council Tax is another significant ongoing cost that should be included when working out whether a property is affordable.

The bill depends on the property's Council Tax band and the amount charged by the relevant local authority. Buyers can check the Council Tax band of a property online before they purchase it. (GOV.UK)

Council Tax bills can differ considerably between areas, so two similarly priced properties can have quite different running costs.

For buyers stretching their mortgage affordability, it is sensible to check the Council Tax bill alongside estimated mortgage repayments, service charges, utility bills and insurance costs before making an offer.

Watch out for service charges and management fees

Service charges can make a significant difference to the overall cost of owning a property.

They are most commonly associated with leasehold flats, where the charge may contribute towards building insurance, maintenance of communal areas, lifts, concierge services and repairs.

Some newer freehold houses also have estate management charges.

Buyers should establish how much these charges are, how frequently they are reviewed and whether any major works are planned before committing to the purchase.

A property with particularly high service charges may also affect the lender's affordability assessment.

Homeowners should budget for maintenance

One major difference between renting and owning is responsibility for repairs.

If the boiler breaks, the roof needs replacing or there is a plumbing problem, it is normally the homeowner who has to pay.

Older homes, listed properties and properties requiring renovation can be particularly expensive to maintain, which makes a thorough survey even more important.

Keeping an emergency fund after completing the purchase can help homeowners deal with unexpected bills rather than using all of their savings for the deposit.

Aaron Strutt, Product and Communications Director at Trinity Financial, says:

"Getting on the property ladder clearly isn't cheap, with Stamp Duty costs, moving bills, mortgage setup costs, property surveys and solicitor's bills, not to mention decorating and home improvement bills to bring homes up to their buyers' standards.

"While owning a home is expensive at first, we all need somewhere to live, and for many people renting simply isn't an option.

"If you buy the right property, particularly one that is in good condition and does not have substantial ongoing service charges or management fees, home ownership can become more affordable over time.

"Mortgage balances gradually reduce for borrowers with repayment mortgages, the furniture and initial improvement costs get paid off and, hopefully, people's salaries increase as their careers progress.

"Council Tax is another expense buyers should check carefully. It is easy to focus almost entirely on the mortgage payment, but the Council Tax band, service charges, energy bills and general running costs all form part of the true cost of owning a home."

Can a mortgage broker help work out how much a home will cost?

A mortgage broker can help buyers understand how much they may be able to borrow, compare different mortgage rates and structures, and explain how factors such as the deposit, mortgage term and repayment method affect the monthly payments.

Trinity Financial's brokers regularly arrange mortgages for first-time buyers, home movers, higher earners and clients with more complicated income structures.

It can be useful to establish a realistic mortgage budget before starting a property search, while also allowing enough money for Stamp Duty, solicitors, moving costs and the ongoing expenses associated with owning the property.

Speak to Trinity Financial

If you are buying a property and would like to understand how much you could borrow and what your monthly mortgage payments may be, contact Trinity Financial to discuss your options with one of our mortgage brokers.

Call Trinity Financial on 020 7016 0790 to secure a mortgage, book a consultation, or complete our mortgage questionnaire. 

The information contained within was correct at the time of publication but is subject to change. It is for general information purposes and is not advice.

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