It’s becoming more and more difficult to get on the property ladder. Property prices continue to rise, and the average salaries aren’t increasing in line with the increased cost of real estate. But it’s not just about the increasing cost of property; there are many more costs that come with purchasing property, but often these are overlooked by first time buyers.
While it may not be what any first time buyer wants to hear, there are unfortunately many hidden costs that come with buying your first home. We’re going to outline 10 of the most common overlooked costs that pop up when buying your first home.
Home Inspection Fees
Most real estate purchases are subject to several inspections. Home inspections come in a range of forms. Some test for mould, some for pests, and others for structural damage to the property. The bottom line, however, is that these inspections cost money. But as they are far from the most exciting part of purchasing your first home, buyers often don’t even realise that these inspections are part of the process. Obviously, different properties require different inspections, but it’s worth having at least £1,000 set aside to cover the fees.
Home Maintenance & Repairs
It sounds obvious, but it’s easy to forget that homes need to be maintained and repaired. This applies to both inside the property and outside the property. Again, these will drastically vary from one property to another. Those moving into a brand new home can expect to pay less to maintain the property compared to those moving into an older home, which is more likely to come with structural issues and dated interior.
It’s hard to put an exact figure on how much you set aside for maintenance and repairs, although some experts recommend budgeting around 1% of your home’s value. This will cover things like emergency leaks, boiler servicing and garden maintenance.
Insurance
Buying a home comes with different forms of insurance. Again, it’s not the most exciting part of buying your first home, so it’s often forgotten about and unaccounted for when budgeting. Building insurance covers structural issues that may be caused by a fire, storm or vandalism.
Contents insurance covers your possessions should they be damaged in the event of extreme weather, theft and similar. Different policies cover different things, and some may even cover your belongings should they be stolen or damaged when on a holiday abroad.
In the UK, those wanting to get a mortgage must also take out life insurance, although this isn’t mandatory in other nations such as the US.
Legal Fees
A big part of buying a property is your relationship with a conveyancer, whose job it is to advise you and also handle the legal side of buying a property. If you’ve never bought a property before, you could be forgiven for not knowing the costs. It’s also important to understand that you will have to pay your conveyancer to do their job, but also pay them for any legal fees, like land registry fees and search fees.
Costs can vary from one conveyancer to another, mostly depending on experience but also on the value of the property you are buying. The most important thing is to get an upfront quote to make sure that any hidden fees aren’t added on throughout the process.
Moving Costs
In the vast majority of cases, a new home won’t come furnished, meaning you’ll need to set money aside to add furniture, appliances, and any other extras. Don’t forget the essentials too like security locks. While there are ways to reduce moving costs, it is best to put together a budget beforehand.
If you are working to a tight budget, buying pre owned items or picking up items at a thrift store are great ways to lower furnishing costs. It’s also worth asking around family and friends to see if they can gift any unwanted items as a moving gift. You could also try to view this as an investment by adding value to your home.
Storage Costs
When moving into a new home, it’s common for things not to go entirely as expected. If you’re left with a gap between moving out of your old home and moving into your new home, you may need to store your belongings. While smaller items can come with you to a temporary home, things like sofas and beds are commonly put into storage facilities, which don’t come cheap.
The best way to avoid this is to move from one property to another, but it’s not always as simple as that. This is why many buyers look for properties with no chains, which means the sale of one property isn’t dependent on the current owner purchasing a new house, which can make for a smoother process.
Taxes
Taxes are a part of life, but it’s easy to forget about them when making a large scale purchase such as a new home. Unfortunately, the larger the purchase, the higher the taxes. But taxes do vary by location and fortunately, some countries are more favourable towards first time buyers. If buying a property in the UK, first time buyers will benefit from lower stamp duty rates, which are a form of tax.
You may also be required to pay more taxes if you are not a resident of the country where you are buying a property. Make sure to thoroughly research the tax laws in your location although your solicitor/surveyor should be able to advise on this.
Final Thoughts
It’s important to understand that the cost of buying a property goes far beyond an initial deposit and your monthly mortgage repayments. This is a major reason why first time buyers run into financial difficulties, hence why it is vital that you are aware of the total cost of buying your first home, including those hidden costs you hadn’t considered that won’t show up during a desktop valuation. While this article covers the most common hidden costs, always carry out your own due diligence to make sure you have a clear idea of how much your first home will cost.
