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

Tags: Residential mortgages

Quick Summary

Buying a home involves far more than finding a deposit and making monthly mortgage repayments. First-time buyers and home movers may need to budget for Stamp Duty, solicitor and conveyancing fees, mortgage arrangement charges, valuations, property surveys and removal costs. Decorating, furniture and home improvements can add further expense after completion.

Ongoing home ownership costs can include Council Tax, buildings and contents insurance, energy and water bills, repairs and general maintenance. Buyers purchasing leasehold flats or homes on managed developments should also check service charges, estate management fees and whether major works are planned. Council Tax costs vary depending on the property's band and local authority.

Trinity Financial's Aaron Strutt says buyers should consider the full running costs of a property rather than focusing only on the mortgage payment. Over time, home ownership can become more affordable as repayment mortgage balances reduce and initial furnishing and improvement costs are paid off.

What are the costs of owning a home? Mortgage repayments, 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 repayments.

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:

Home ownership cost	What buyers need to consider
Mortgage deposit	Buyers normally need to provide at least part of the purchase price themselves, although the minimum deposit varies between lenders and mortgage products. To access the lowest rates, borrowers need a 35% to 40% deposit. No deposit mortgages are available now.
Mortgage repayments	Monthly repayments will depend on the size of the mortgage, interest rate, repayment method and mortgage term.
Stamp Duty	Buyers in England and Northern Ireland may need to pay Stamp Duty Land Tax depending on the purchase price and their circumstances. Click here to calculate your Stamp Duty bill.
Mortgage arrangement fees	Some mortgages have no product fee, while others can charge £999, £1,499 or considerably more. These are often added to the loan amount, and as a general rule, the lower rates have the highest fees.
Solicitor and conveyancing costs	Legal work is required to handle the purchase, property searches and transfer of ownership. Finding a good solicitor is very important when buying a property. Trinty's brokers have used Steph Lyke for years.
Property valuation	The mortgage lender may arrange a valuation to check the property provides suitable security for the loan.
Property survey costs. Are the lender's free surveys sufficient?	Buyers may want a more detailed survey to identify structural problems, damp, roofing issues or other potential repair costs. A full structural report or home buyer's report is likely to be more expensive, but if it finds problems, you can use it to renegotiate the asking price. It can also save you from expensive repairs if you buy the property and issues arise. Lenders often provide free surveys for their own purposes; they do not send a copy to the broker or the person applying for the mortgage. This does not mean the property has no issues if it comes back OK; it just means it is suitable security for the mortgage.
Removal costs	Moving companies, storage and transport can add to the upfront cost of buying.
Furniture and decorating	New homeowners often spend additional money decorating, replacing flooring, buying appliances and furnishing their property. Home extensions are also expensive and need planning.
Council Tax	Homeowners normally need to pay Council Tax to their local authority. The amount depends on the property's Council Tax band and the rates set by the council. Click here to work out your Council Tax band.
Buildings and contents insurance	Buildings insurance is normally required where a property is mortgaged, while contents cover protects belongings.
Energy and water bills	Gas, electricity and water costs can vary considerably depending on the size and efficiency of the property.
Repairs and maintenance	Boiler repairs, plumbing, roofing, decorating and general property maintenance can create unexpected costs.
Service charges	Many leasehold flats and some managed developments have ongoing service charges. Check these thoroughly and discuss them with a solicitor before buying a property. Lease extensions can also be particularly expensive. Use this link to get an estimate.
Estate or management charges	Some newer freehold developments also have charges for maintaining communal areas, roads or landscaping.

Is it worth paying for your credit report?

In many cases, it makes sense to pay, at least for a short period. Checkmyfile.com offers a free trial, then charges £14.99 a month; it is a good system because it checks multiple credit reference agencies.

A blip on your credit report or error can be very costly and stressful, particularly when you are trying to buy a property or remortgage.

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.

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.

Different property taxes apply in Scotland and Wales.

Don't forget about Council Tax

Council Tax is another high 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.

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 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. Paying for your credit report is also a good idea if you are planning to get on the property ladder.

"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 good 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.

Any links to third-party websites are provided for information and convenience purposes only. We are not responsible for the content or availability of external sites

Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage