What is the true cost of buying your first home?

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Buying your first home is a huge life event. Having the freedom of living independently or with a family of your own is an exciting prospect. However, when buying your first home you are committing a lot of financial resources. Here, we will explore the true cost of buying your first home.

Putting down a deposit

Most people will have to take out a mortgage to buy their first home. In order to do this, you must first put down a deposit. The deposit is normally 5-25% of the price of the property. Paying a higher deposit can give you cheaper interest on your mortgage. According to the Office For National Statistics (2020) the average UK house price stands at £256,000. Therefore, you would be expected to pay a deposit of £12,800-£64,000 when buying an average-priced UK house.

Fees

Not only do you have to pay a deposit and make monthly mortgage repayments, there will likely be fees associated with taking out a mortgage for a range of reasons. These include, but are not limited to: Arrangement Fees, Booking Fees, Valuation Fees, Telegraphic Transfer Fee (sometimes known as CHAPS – Clearing House Automated Payment System), Mortgage Account Fee, and various fees for things such as missed payments. The potential cost from the mentioned fees can be anywhere from around £350 to over £2,200! Be sure to factor this in when looking into getting a mortgage.

Moving in

Once your deposit and mortgage are arranged and you have paid any fees, it is time to move in! Transporting any furniture and possessions you have can be done personally, or you could use a removal company. This can cost you anywhere from £250 to over £1,000 depending on how much you have to move and the distance.

Insurance is something many banks will require you have for the property, and you will probably want to include some insurance for your belongings. The cost of insurance can vary depending on what you are insuring, the location, the level of cover you require and a range of other factors.

Depending on the property you are purchasing, you may need to buy furniture for the whole house, or just a couple of items. Be sure to factor this in when looking at pricing properties, as you do not want to move into an empty house and find you have little to no budget remaining to furnish it.

Mortgage repayments

The rest of the cost of the house, after putting down a deposit, will be paid via a mortgage. This is where you take out a loan with a bank to buy a property or land. You then make monthly repayments to the bank for around 25 years. If you cannot keep up with your repayments, the bank can repossess your house and earn their money back by selling the house.

According to MoneySuperMarket data, the average monthly mortgage payment for first-time buyers is £674. This depends on how much you borrow from the bank, the duration of your loan and the interest rate which you are charged.

This is a regular monthly cost until the mortgage is paid off. Bare this in mind with any monthly budget planning to ensure you can keep up with your repayments.

  • The information provided in this article is for guidance and educational purposes only. Police Credit Union Ltd. does not offer regulated financial advice. Please seek independent financial advice.

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