Can I afford to buy a house?
Last updated: 05/04/2022
If you’re wondering if you can afford to buy your first home, you’ll probably start by considering house prices: how much do properties cost where you plan to live, and could you raise a big enough deposit?
But, even at the early stages of planning to buy a home, it’s important to consider all the extra costs you’ll face when buying a property and then living in it – from monthly mortgage payments to a Netflix subscription.
Here’s a rundown of some of the main costs to plan for.
Saving enough money for a deposit is a big hurdle for first time buyers to overcome.
To get an idea of how much you might expect to pay, it can be helpful to find out how much you might expect to spend on a property in your area. For example, the average house price for Wales is £226,577 according to Principality’s House Price Index. If you saved for a 5% deposit, which is generally the minimum, then you would pay £11,329, rising to £22,658 for a 10% deposit, which are more common.
Our house saving calculator will let you know how much you will need to save each month to reach your savings goal.
There are several other big costs to consider before you move into your new home.
These may include stamp duty or land taxes (although many first time buyers are exempt), as well as lender, surveyor and legal fees. Other costs include paying a removal company.
We’ve gone into more detail on these specific home-buying expenses in our ‘How much do I really need to save’ blog.
Assuming, like most first-time buyers, you need a mortgage to buy your home, then one major cost you’ll face as a homeowner is monthly payments to your lender.
These go towards repaying the loan, as well as the interest charged on the loan.
The amount you pay each month will depend on how much you've borrowed and over what time period you're paying the mortgage back over - but it’ll almost certainly be your biggest monthly outgoing.
Bills, bills, bills. It’s all part of being a homeowner!
Utilities are a big expense, especially when prices are rising; there have been warnings that average UK energy bills could hit £3,000 a year.
Alongside electricity and gas (or other fuels like oil), you’ll also be charged for water. According to Water UK, the average annual water bill in England and Wales is £419.
Hopefully you’ll have had a thorough look around your new home, and, where relevant, will have had a professional surveyor in to check for any potential problems too.
But however careful you are about checking over your new home before you buy, there is always the chance of problems arising that you hadn’t expected. For example, if you’re buying an old property, you might find unexpected plumbing problems or outdated electrics, while even new build properties may have some unexpected issues.
These costs vary from one property to another, so you can’t accurately plan for them. But you can be sure to not stretch your finances too tight, and always leave some aside for the unexpected.
There are several types of insurance policies you may want to take out as a homeowner.
As part of your mortgage, your lender will require you to take out buildings insurance. This covers the structure of your home as well as any permanent fixtures and fittings.
It’s a good idea too to get contents insurance, so you have peace of mind that your belongings are covered, should something happen.
The average cost of a combined home insurance policy – meaning it includes both buildings and contents cover – is £142.
Getting a mortgage may also be the moment that prompts you to take out life insurance. In fact, some mortgage providers will insist you do (although you don’t have to take their specific policy – shop around). Life insurance costs vary significantly, but the average monthly cost for 18-29 year olds is £13.24, rising to £21.03 for 30-39 year olds, and if you’re buying with a partner, the option of a joint policy can sometimes bring the cost down.
Don’t underestimate the cost involved in decorating and furnishing your home. It can all quickly add up.
All in all, Britons spend, on average, £330 per person per year on redecorating the home. But when you first move in, you could easily spend thousands on decorating and furnishing your home. Be realistic about what you want to do in your first few months living in your home, and set a rough budget for how much you think it’ll cost you. You can then factor these decorating or renovation costs into your home buying budget and savings plan.
Gardens can be surprisingly pricey too, if you’re lucky enough to have one as part of your new home. People spend an average of £678 a year to keep their gardens, terraces and courtyards in good condition.
The size of your council tax bill will depend on factors including the size of your home and its location. Each home is given a council tax valuation band, and a different amount of council tax is charged on each band.
The average council tax bill costs Britons almost £2,000 every year. You’ll be sent a bill in April each year and will normally have to pay the fee in 10 monthly instalments, followed by two months of not making any payments. However, you can ask your council to spread your Council Tax payments over 12 months if that makes it easier for you to budget.
For more information on how this works, take a look at our Council tax explainer.
Data gathered in 2020 showed that households spent an average of £552 a year on sign-up services, whether that’s meal kits or streaming services like Netflix (don’t forget £159 for a TV licence too).
So that’s not an insignificant cost. It just shows how they all add up. If you’re saving to buy a house, then it’s really important to try and figure out as many ongoing costs you’ll face as possible, and that will help you to understand exactly what you can afford.
Click on the sections below to explore what you need to know at each stage of your home buying journey: