The hidden costs of home ownership

Buying your first home represents a big financial milestone. When you’re looking for your dream home, the sale price, deposit amount and mortgage loan are usually the first financial aspects you’ll focus on. But there are other important costs to factor into your budget.

In this handy guide, we’ve shared the hidden costs of home ownership to help you plan your finances when buying your first property.

1. Mortgage arrangement fee

Lenders charge a mortgage arrangement fee (also known as a product fee) to cover the costs of arranging and setting up your mortgage. Depending on the mortgage product you go for, it could be a flat fee or a percentage of the mortgage loan amount. Lenders will either ask for the payment up-front or let you add it to the mortgage loan. Adding it to your mortgage means you’ll pay extra interest over the term, so check how much extra interest you’ll pay.

2. Mortgage broker fees

Mortgage broker fees cover the costs of finding your mortgage and supporting you through the process. Not all brokers will charge a fee as some cover their costs through commissions paid by the lenders. The amount you’ll pay will vary as brokers set their own fees. Some charge a fixed fee and others charge a percentage of the mortgage amount, so check this before choosing a broker.

3. Surveys

When you’ve found somewhere you want to buy and you’re approved for a mortgage, your lender will organise a survey of the property. This is to check its condition and make sure there are no underlying problems. This type of survey is often referred to as a House Survey, Home Survey or Homebuyers Report. Survey costs start from around £400 but are dependent on the value, age, size and condition of the property.

4. Stamp duty

Stamp duty is a tax you pay when you buy a property for over £250,000. There are some tax reliefs and exemptions in place that could alter the amount of stamp duty you’ll pay. You can use YouGov’s handy stamp duty calculator to work out what you’re likely to pay.

5. Legal fees

When you buy a home, you need to instruct a solicitor to cover all the legal aspects of the purchase. They’ll make sure all the legal work including ownership transfer and property searches are completed. Legal fees can be up to £1500* but some lenders will give you cashback or fee free legal work if you use a solicitor on their approved panel.

6. Moving costs

You’ve found your home and secured the mortgage, now it’s time to start planning the move. If you already have furniture, working with a reputable removal company keeps everything safe and makes moving easier. Removal companies can do as much or as little as you’d like, from basic transportation to a complete packing and unpacking service. For a simple transportation service, you can expect to pay anywhere from £450-£1200*.

7. Insurance

Home insurance has two main products – buildings and contents cover. Buildings insurance covers the cost of rebuilding or repairing your home. Lenders require buildings cover to be in place from the day you exchange contracts. This is when you become legally responsible for the property. Contents insurance covers the costs of your furniture, household items and other personal possessions. This should be in place before you start moving in. Home insurance costs will vary, so shop around to find the best deal. Choosing accidental cover as an upgrade may cost extra, but covers you for any sudden, unexpected events.

8. Repairs and maintenance

As a homeowner, you’ll be responsible for the repairs and ongoing maintenance of the property. Setting aside money each month in a separate savings account will help you build a pot to cover maintenance and repairs.

9. Interest rate changes

If your mortgage deal has a fixed interest rate for a set number of years, you’ll have peace of mind knowing your monthly payments won’t change. Once your rate ends, you can move to a new rate but this could be more expensive depending on the economy. Before taking a mortgage, calculate your monthly payments for higher rates to check you could meet higher repayments.

10. Utility bills

Along with your mortgage and insurance payments, you’ll also have a whole host of utility bills to pay for. Broadband, a TV licence, energy and water bills are just some of the regular payments you’ll be making. Most suppliers have calculators on their websites so spend some time shopping around to see where you can get the best deals.

The financial aspect of owning a home can feel daunting. Being prepared and having a budget in place helps you stay in control of your money. Always check customer reviews before taking a mortgage or any other financial product. Reading reviews will help you to identify which companies provide the product, service and experience you expect.

A mortgage is a long-term financial commitment, so finding the best product for your needs is key. Read mortgage reviews on Smart Money People to see what homeowners have to say about their lenders. Customer reviews can give you valuable insight into the lender and its products so you can shop with confidence.

*Please note: The costs in this blog are just estimates based on the information provided in this Checkatrade blog. Ensure you do your own research to calculate the cost of these services in your area.