How can you decide whether a property is affordable? The price tag will tell you how much you have to fork out to get your hands on the keys - but what about the costs you will face once you walk in the door?
Becoming a homeowner is an expensive business and if you’re not careful, you could be forced to shell out far more than you expected to. A survey by Yorkshire Bank reveals that, within a year of buying a property, one in three homeowners have to replace or repair a broken cooker and one in eight have to buy a new boiler. Three quarters also find they need to buy a new kitchen and bathroom at an average cost of £6,500.
Keeping enough cash aside from the property purchase to create an emergency contingency fund for such home improvements is essential, says Halifax spokesperson Paul Fincham. “If you’re doing DIY, figure out how much it will cost and how long it will take before you buy,” he warns.
It’s not only the costs of decorating and furnishing a property that you should take into account when determining your budget for a property purchase.
The running costs of a home are often hidden and yet can run into thousands of pounds depending on what type of property it is.
“Older properties have minimal insulation and so tend to be more expensive to heat than more modern buildings,” explains Jenny Irwin, marketing manager at the Ecology Building Society. “Many also have smaller windows, so you have to put the lights on more, which means larger electricity bills.”
Yet the Yorkshire Bank survey found that only a quarter of homebuyers find out how much the previous occupant paid in utility bills.
Your mortgage lender will require you to take out buildings insurance to protect the structure of the building, but you should also consider contents and life insurance. Contents insurance will cover the cost of replacing your possessions if your home is burgled or flooded, while life insurance will ensure your loved ones don’t lose the roof over their heads if you die.
Use a price comparison website such as yourmoneyguide.co.uk to compare different insurance deals and work the cost of these premiums into your annual budget.
Finally, remember that you are about to make the biggest financial decision of your life. It may well be worth spending a few hundred pounds now to ensure that decision is the right one - and to save yourself thousands later.
Grade II listed buildings can prove particularly expensive investments. “Any building work or alteration to the exterior of the property - even if it’s a change of a window frame - will require ‘listed building consent’, which can be obtained through the local planning authority,” says Stewart Lilly, president of the National Association of Estate Agents. “The local authority also has the right to force you to carry out maintenance work and if you refuse, they can get their contractors to do it and send you the bill.” Even minor works, such as painting or repair work, may fall under the reach of this Act. And here’s the really bad news: if you fail to comply, you can go to prison or be forced to pay an unlimited fine.”
Houseboats can enable you to live a carefree lifestyle - but at what cost? Your mortgage lender is likely to charge you a higher rate if you are borrowing to fund such a purchase. Mooring fees can come to as much as £7,000 a year or more. And remember you will have to pay fuel and hardware costs and your property is likely to decrease, rather than increase, in value over time.
If you are buying a flat, it is likely to be a leasehold property. This means you are buying the right to live there for a certain length of time, usually around 100 years. After this period is up, ownership of the property reverts to the freeholder.
If the lease on the property is shorter than 60 years, many mortgage lenders will not lend to you because they anticipate the property will be difficult to sell at the end of the 25-year mortgage term. Leasehold properties also usually involve extra monthly costs such as service charges and ground rent to pay for communal costs. This can be around £2,000 per year.