What Mortgage Costs Can You Afford?

Looking for a home to buy can be an exciting time, but it’s important to consider all the costs that come with any property, not just the monthly mortgage payments. All too often, those who have not spoken with a financial advisor or sat and worked through all their expenses, thought they could afford their mortgage payments easily, but are later caught out by the additional costs that come with both the property and their everyday lifestyles.

Draw Up a Budget – This must include everything you spend as well as everything that you earn currently. Include bills, food shopping, going out and entertainment, direct debits (such as a mobile phone contract, Sky TV, gym membership etc) and debts you have. This can easily be created on a spreadsheet or you could use the Money Advice Service Budget Planner, as it will do most of the maths for you. At the end of this exercise you should be able to see what cash you’ll have left to spend each month.

However, to get more accurate figures for the costs that may change once you move, you’ll need to do some research of your own. Here are some guidelines of what to consider:

Council Tax – Depending on the size of the property, your Council Tax bills are likely to change, if you’re upsizing and/or changing your post code, you need to allow for the fact that this cost may well be higher than you are currently paying. The MAS website could help with advice on how to identify or even cut your Council Tax Bill.

Utility Bills – Switch energy providers to find a tariff suit your budget.

Water Rates – Although most homes are on a flat rate, check if the house you will be buying has a meter. Although a meter may bring savings for a single occupant or a couple, it may see increased water bills for a family.

Service Charges – This usually will only occur if you are buying a flat. Maintenance and/or ground rent charges can add additional monthly and annual costs which you will need to consider and dependant on the apartment itself, prices can be steep if buying or renting a high end property, with some charging over £300 pcm in addition to your mortgage or rental payment.

Insurance – It’s wise to have contents insurance in addition to your building insurance. If your home is broken into, floods or a fire starts, insurance will cover the cost to replace all your belongings, which would add up to several thousands of pounds. However, be careful to read the small print, it may be that you are only liable to claim if a working security alarm is installed and all your windows and doors have locks. You must also declare expensive items such as jewellery if you want them covered (usually items worth £2,500 or more), which can increase your premium.

Other Bills – Don’t forget to add the costs of a phone line and broadband service, digital or Sky TV, a television licence, car tax and insurance costs (which may change dependent on your new post code – get a quote online), pet bills and any other personal costs, such as a cleaner.

Travel – When you move, you may end up being closer or further away from work, family and friends. If it’s a longer drive you’ll need to factor in petrol as an extra expense.

Upfront Charges – Last but certainly not least, don’t forget the upfront costs when buying a property, such as deposits, mortgage fees, estate agency fees, stamp duty, moving fees and solicitors.

Investments, Mortgages