You may know what your monthly loan repayments will be, but have you accounted for all the other ongoing costs to realistically determine if you can actually afford a property in the long term?
Here are some of the ongoing costs you need to consider when buying your first home.
As a home owner, insurance is a must and you should factor in this monthly cost when preparing your budget and assessing whether you can afford a property long term.
As well as home and contents insurance you may need to get lender’s mortgage insurance, mortgage protection insurance and – if you plan to rent the property out – landlord insurance.
While this seems like an obvious cost, consider whether the monthly repayments are something you will be able to afford long term in line with future plans which may alter your finances, such as starting a family. Also be aware that if you are on a variable rate mortgage, you will need to allow for fluctuations to your loan repayment.
A mortgage broker can assist you in finding the appropriate mortgage to suit your needs from all those on offer in the market.
Body corporate fees
If you’re buying into a complex managed by a body corporate, there’ll be a regular body corporate fee to pay. This fee assists with the general maintenance of the complex and any shared areas. Depending on the type of property, this could be anywhere from $15 per week for a small building with few shared amenities, through to $200 per week or more for a higher end property. This amount can also increase from year to year.
You will need to pay yearly or quarterly rates to your local council. This is usually charged at a rate per dollar of land value and is a regular cost that you must account for as a home owner.
Electricity, water and gas bills
Make sure to include the payment of regular utilities such as water, electricity and gas into your budget. These can add up, especially at certain times of the year.
Repairs and maintenance
You will need to have some money set aside for the general upkeep of the home. And as any homeowner will tell you, repairs can get very expensive very quickly, particularly if it’s a big ticket item like a faulty roof.
Also account for smaller but ongoing maintenance costs such as painting, cleaning and garden maintenance.
Are you buying a property that will need some work done in the near future, if not immediately? Don’t forget to factor renovation costs into your budget.
Renovations can be tricky to budget for and can often go well beyond the initial expected expense, so be sure to have a buffer if you do plan to renovate.
Read more on how you can finance your home renovation.
Internet, telephone and home entertainment
While entertainment such as Foxtel might be something you can easily go without, utilities like the internet are fast becoming home staples. Think of your lifestyle and how much these things cost you per month, and if you will be able to cover the costs of them long term once you are a homeowner.
Lifestyle considerations and a bit extra for contingencies
It’s not unusual for new home owners to be surprised that they can no longer live as lavishly as they used to, once they actually get into their home. Holidays, meals out and new clothes are soon thrown to the wayside when there’s a mortgage to pay.
Be reasonable about how your budget will change as a homeowner, how this will impact on your lifestyle, and the sacrifices you may have to make.
Furthermore, avoid putting all your eggs in the one basket. That is, do not use all of your savings on a house deposit – try to have a bit extra for unexpected events.
Say for instance you were taken ill not long after buying a home and needed to pay medical bills on top of a mortgage. While you never want those things to happen, it’s all about being smart with your money and having a bit extra for contingencies.
In a nutshell, when preparing for the costs of your first home, it’s all about being realistic with your budget in the long term, choosing a property that is appropriate for you and one that you can afford in the long term.