The expected - and unexpected - costs of owning your own home

You’ve done it! You’ve graduated from being a homebuyer to a homeowner.

Now, the costs of home ownership begin.

Daunting as that may seem, with a little planning it’s possible to ensure you’re prepared to handle the many expected -- and even some unexpected -- costs associated with owning your own home.

What are the regular monthly costs of home ownership?

Death and taxes may be life’s only certainties, but utilities and other monthly expenses are close behind for today’s homeowner.

Sure, some of these costs will be similar to ones you encountered as a renter. But other expenses will be specific to homeownership and maybe even to your particular property.

• Mortgage repayments

If you’ve had to take out a mortgage to buy your home -- which most first-time buyers need to do -- you’ll be required to make monthly payments to your lender. These payments go towards covering the cost of the loan as well as any accrued interest.

• Basic utilities

The most obvious bills will be water, gas, and electricity Particularly when it comes to gas and electricity, the cost is heavily dependent on the size of your home, and the winter months account for an estimated 40% of the year’s overall gas/electricity expense. According to OFGEM, as of March 2020 the average variable tariff for a dual fuel customer (someone who uses one provider for both gas and electricity) was £1,177 per year, or nearly 4% of the average UK household budget. Meanwhile, the average annual UK household water bill is roughly £400 per year.

• TV (cable packages), broadband, and landline phone

These are increasingly seen as necessities in today’s world. British households on average pay nearly £27 per month on broadband. You can watch Free View TV with no added cost, while cable packages can range from £15 to more than £100 monthly. Landlines are less common than they once were, but remain vital for many parts of the country. Line rentals usually cost between £10-20 per month, with higher costs for specific calling packages.

• TV licencing

As of April 2020, a colour TV licence costs £157.50 per year, while a black and white licence costs £53 annually. You can pay for your licence all in one go or in weekly, monthly, or quarterly instalments.

• Council tax

Typically payable monthly. Property taxes are determined by the assessed value of your home as of 1991 in England (or 2003 in Wales), ranging in bands from A to H. You can check your Council Tax band here.

• Insurance

What type you pick is up to you and will determine the cost and frequency of your payments, which are usually monthly or quarterly. Building insurance covers the cost of repairing damage to your home’s structure, while contents insurance covers your possessions inside your property. You could also consider mortgage indemnity guarantee, repayment cover, and life insurance, which can cover your mortgage in case of death.

• Ground rent and maintenance fees

These expenses typically apply to leasehold flats and are usually paid monthly or quarterly. They’re often meant to pay for the upkeep in communal areas, whether stairwells, corridors, or the grounds immediately surrounding the building.

• Residents’ parking

If you own a car but don’t have your own driveway or garage, you may need to budget for a monthly or annual residential parking permit, especially if you live in a city. These permits don’t generally reserve a parking spot for you, but they enable you to park your vehicle in certain zones close to your home.

What one-off costs should you anticipate?

• Furnishings

This may seem like an obvious one, but once you’ve purchased a home, it’s easy to overlook the fact that now you need to fill it with stuff. Especially if you’re accustomed to renting furnished accommodation, these expenses can add up. If your new property doesn’t have storage built into it, you may need to consider renting out additional space, too.

• Home repairs, maintenance, and building work

Expect the unexpected. These costs will come up regularly, so it’s advisable to set aside some cash every month to be prepared. They’re extremely variable for each home and individual, but common expenses include: boiler servicing, electronics, home decorations, and renovations.

How do costs differ for each home?

Bear in mind when you’re on the hunt for your new home that all properties are different. What you’ll pay in regular expenses will vary depending on your personal situation, most notably what part of the country you live in and what type of home you own.

• Location, location, location

There’s a reason some parts of the country -- and within each town and city -- are more expensive to live in than others. Some people will prioritise access to good schools and outdoor living, while others want to live in close proximity to their workplaces and a happening nightlife. And these priorities translate to different costs of living. As of 2016, for instance, government figures show that London prices were on average 7% higher than elsewhere in the country, whereas prices in Northern Ireland were 2.3% lower than the rest of the UK.

• Old homes vs. new-builds

As charming as older homes can be, they naturally come with age-related issues: they usually require more frequent upkeep, for instance, and are costlier to heat. By contrast, new-build homes are required to adhere to the latest building regulations. Research from Energy Performance Certificates indicates that 84.4% of new-build properties have an A or B rating, compared with just over 2% of existing buildings. Properties with better EPC ratings are more energy efficient and therefore have lower energy bills.

Learn how to improve your EPC rating, here.

• Size

In terms of your regular expenses, size matters. Self-evidently, smaller homes are cheaper to heat. Plus, a bigger structure could increase your maintenance costs -- more windows to fix, roof area to resurface, or flooring to repair. Plus, a larger home will typically come with higher taxes and you’ll want to fill all those rooms with furniture.

• Transportation

Another issue to consider is how you’ll get around. Access to your new home may be different from your previous residence, necessitating the purchase of a vehicle just to get to work or do the shopping. Or if you’ve moved further away from your work or family, your commute by train or bus may now be more expensive.