Unveiling The True Costs of Homeownership

Are you a rental faithful? Or ready to jump into homeownership?

As a faithful London-based renter, the idea of owning a home has probably crossed your mind once or twice. And while you have attempted to brush the fantasy from your mind like Claudia Winkelman’s voluminous fringe, the whispers of homeownership still linger in the air. (Let’s face it, that fringe is going nowhere). Yes, after years of renting you’re probably tired of throwing money away on someone else’s mortgage. But before you rush into homeownership, it’s crucial to understand the true cost of owning a home. It’s not just about removal vans and deposits, my friend. There are hidden costs lurking in the shadows and underneath cloaks, ready to surprise you when you least expect it. A rental faithful such as yourself can be recruited into the world of property ownership in the dead of night, so let’s gather all the facts in the meantime…

Illustration of a couple putting coins into a piggy bank

Getting to know the deposit
Ah, the deposit. That initial lump sum you need to cough up to secure your dream home. It’s like the entrance fee to the homeownership club. Traditionally, a deposit is at least 5% of the purchase price but usually around 20%. So, if you’re eyeing a £400,000 two bed in N4, you’ll need a hefty £80,000 upfront. But who has that kind of money lying around unless they’ve just completed an arduous reality show in the Scottish highlands? Fear not, rentally-trapped, wannabe homeowners. There are options for smaller down payments, such as government-backed schemes or private mortgage insurance. Just make sure to do your research and choose wisely. You can always ask us for advice when it comes to the perfect scheme for you.

Upfront costs to discuss at the breakfast table
Once you’ve successfully tackled the deposit obstacle, don’t crack open the fizzy rose just yet (’tis but a poisoned chalice nowadays anyway, isn’t it Faithful?). There are additional upfront costs waiting to ambush your bank account. First up, we have a whole host of taxes and fees to wade through. These expenses include valuation fees, solicitor fees, Stamp Duty, Land Registration Fee, and even something called Engrossment Fee which sounds hideous, but only applies to new builds and typically costs around £120-150. Then there’s the cost of inspections – you’ll want to get a thorough inspection to uncover
any hidden issues down the line, and lastly but not leastly – don’t forget about those moving expenses. Whether you hire professional movers or bribe your friends with Ben and Jerry’s, it’s going to cost you. So, be prepared for these extra financial expenses before you sign on that seductively dotted line, as Claudia Winkelman watches and smiles from the corner of the room.

Inevitable monthly expenses
Now that you’re a proud homeowner, the financial responsibility doesn’t end with the deposit and upfront costs.  There’s a whole new world of monthly expenses awaiting you. First, let’s talk about the mortgage. Your mortgage payment will likely be your largest monthly expense. But don’t forget about utilities either. Heating, electricity, water, internet – they all come with a price tag. While we’re here, let’s look at those pesky homeowners association (HOA) fees if you’re living in a community with shared amenities. These monthly expenses can quickly add up, so make sure you’re
prepared to handle them. When purchasing a leasehold or Share of Freehold property, it’s also crucial to consider potential service charges and ground rent. Both charges are legally binding and non-payment could have serious consequences. Yikes.

Maintenance and repairs
Ah, the joys of homeownership. You can finally put that tool belt to use and channel your inner Nick Knowles. But with great power comes great responsibility – in this case, financial responsibility. Home maintenance and repairs are inevitable and can be costly. Always make sure to do a thorough inspection and ask questions to uncover any potential hidden costs, particularly if you’re buying an older home. From fixing leaky faucets to replacing a faulty HVAC system, you’ll need to budget for these unexpected expenses. It’s a good idea to set aside a portion of your monthly income for home repairs. That way, when the inevitable happens, you won’t be caught off guard.

Be savvy and get budgeting
Now that we’ve unearthed the costs, you might be wondering how the devil you’re supposed to budget for homeownership. Fear not, my fellow faithfuls for we have some tips to help you manage your finances for just such an event. Firstly, create a
detailed budget that includes all your monthly expenses, including mortgage payments, utilities, insurance, and taxes. Don’t forget to allocate a portion of your budget for home maintenance and repairs. Secondly, build an emergency fund to cover unexpected expenses. Aim for at least three to six months’ worth of living expenses. Lastly, consider seeking professional financial advice to help you navigate the complex world of homeownership costs. With a solid budget in place, you’ll be better equipped to handle the financial responsibilities of owning that charming Stroud Green maisonette complete with
private courtyard. Winner!

So, after delving into the hidden costs of homeownership, you might be questioning whether it’s worth the financial investment. The answer ultimately depends on your personal circumstances and goals. Homeownership can provide stability, the freedom to personalize your space, and the potential for long-term financial gain. However, it also
comes with significant financial responsibilities and potential risks. Before taking the plunge, and accepting your new role beyond the realm of rental faithful, make sure you’ve weighed the pros and cons, done your research, and assessed your financial readiness. With careful planning, budgeting, and research, you can navigate the world of homeownership costs like a pro in a cloak. Remember, knowledge is power, so educate yourself before making one of the biggest financial decisions of your life. Happy house hunting Faithful!

Disclaimer: The information provided in this article is for general informational purposes only and should not be considered as legal or financial advice. Please consult with professionals in the field for personalized guidance.

Contact us:

alex@daviesdavies.co.uk – Lettings Director (contact for lettings and property management)

mark@daviesdavies.co.uk – Sales Director (contact for sales, new homes and chartered surveying)

020 3820 2492

Davies & Davies Estate Agents, 85 Stroud Green Road, London, N4 3EG

Article & images by Barefaced Studios

25 January 2024
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