One of the most expensive things you can expect in your life is buying a new home. When you prepare a budget for buying a home, you can always expect 10% more on the bill due to various hidden charges. If you are not prepared with such unexpected expenses, then it could be really hard on you during the first few years of owning the house.
Hidden Costs of Buying a Property
It is true that the cost of paying for a new home is overwhelming. The burden keeps on increasing as the time roll. But there are other hidden costs that you must be aware of, to avoid last minute surprises.
- Approximately, 7% of the cost of the home could be added to the expense as Stamp Duty.
- Depending on the value of the home that you are buying, Conveyancing can cost. Conveyancing includes the search fees and registration with the Land Registry.
- Depending on the type of survey and the value of the property, the Survey and Valuation charges might vary. This might be expensive and vary between a few hundred to thousand pounds.
- Mortgage companies often charge a fee for Mortgage arrangement. This Mortgage Arrangement fee is usually 1% of the mortgage and is usually added to the mortgage. But there are also few companies that insist the customers pay it up front.
- Though not charged by most of the lenders today, the Mortgage indemnity fees are charged by the lenders if the loan-to-value ratio is high. This would be the fee that would cover the insurance and they will take if the person is not able to pay the loan back.
- Most of the Mortgage brokers charge a fee called Mortgage Broker fee which is usually a considerable amount.
- There are some cases where the property seller needs to pay a fee. This is called Estate agent fees.
- Life Insurance is purchased by people when they take a mortgage. It will be a source of money for covering the debt in case of the death of the loan payer. So, look out for the commission and cancellation fee while taking life insurance.
- Moving companies charge you when you want to move to the new house. If you have minimum furniture, then this won’t be a problem. But in case you have a lot of furniture and things to be moved, this cost would go higher. So, keep an eye on that.
- When you want to buy new furniture for your new home, then you have to think about the budget being allocated to it. One can either go for second hand or spend thousands based on one’s ability.
- Certain homes, when bought, do not need any work done to them but many houses require redecoration or some building/repair works. Though Do-It-Yourself can cut some cost, it might require some budget to be allocated to the work.
Hidden Costs of Owning a Property
We have discussed the hidden costs involved in buying a property. Once it has been bought and you have moved to the place, there are some more hidden costs involved.
- Owning a property is no child play. There are standard monthly bills like water, gas and electricity bills. Though these bills can be reduced, they cannot be avoided.
- Other monthly bills like the telephone bill, cable connection, broadband connectivity, and television are all included in the monthly bill category.
- Property / Council Tax needs to be paid by the property owners and it would cost a few hundred pounds per year for small houses and may cost several thousand pounds for bigger properties.
- Insurance for the property and its contents are very important and the cost varies depending upon what is being insured, how much the property is worth, the age of the property, etc.
- Sometimes, it is required to pay a fee for the parking area.
- Owning a property involves major/minor maintenance work on a periodic basis. It might be repairing a roof, correcting wiring, blocking a leak, etc. This is an unavoidable cost.
Once you identify all the hidden costs involved in buying and owning property, then you can make your plan accordingly. It is very critical to understand the hidden costs to avoid any surprise at the last moment.