Can I afford to buy a house?
Last updated: 15/02/2023
If you’re saving to buy your first house, it’s important to think about the extra costs that come with buying a property. Here’s a rundown of the main costs to plan for when buying your first home.
Costs before you buy
Saving a deposit is step number one for first time buyers.
To get an idea of how much you need to save for your deposit, it can be helpful to find out how much your ideal first home will cost. That’s because your deposit will be worked out as a percentage of the total cost of the property. According to our house price index, the average house price in Wales is around £240,000.
So if you want to save a 10% deposit, for a house costing that amount you’ll need to save £24,000 for your deposit. Our house saving calculator can help you work out how much to save each month. You can also create a free, personalised savings plan with our First Home Steps app.
You might not know about some of the additional taxes and fees you need to cover to buy your new home.
These include stamp duty or land tax (although many first time buyers are exempt), as well as legal fees, and any fees charged by your lender and surveyor. We delve into more detail about these costs in another blog to help you understand how much you really need to save.
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.
Also, while you don’t have to take out contents insurance by law, it’s a good idea so you have peace of mind that your belongings are covered, should something happen.
You can buy these as separate policies, or combined in one package. The average cost of a combined home insurance policy – meaning it includes both buildings and contents cover – is £203.
For many people, getting a mortgage is also the moment that prompts them 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 a 20 year old starts at as little as £3-4 per month, and if you’re buying with a partner, the option of a joint policy can sometimes bring the cost down.
Remember to shop around and compare prices to look for the best possible deals.
Costs when you move
When you take out a mortgage to buy a new home, you agree to make monthly repayments to your lender. These go towards repaying the loan, as well as the interest charged on the amount you borrow.
The amount you pay each month will depend on how much you've borrowed the time period you're paying the mortgage back over.
You’ll usually have to pay council tax if you own or rent a home.
The size of your council tax bill will depend on things like the size of your home and its location. Each home is given a council tax valuation band which determines how much council tax you’ll pay. For 2022-23, the average council tax for Wales is £1,777 (based on the average property band D).
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 payments over 12 months if that makes it easier for you to budget. It’s worth reading our council tax explainer to understand what you can expect to pay.
You should take a thorough look around the property you’re hoping to buy and should consider having a professional surveyor check for any potential problems. But however careful you are, there’s always the chance of unexpected and potentially pricey problems arising; an older property may come with plumbing problems or outdated electrics, and even new build properties may have some unexpected issues.
The cost of fixing problems in a new home will vary from one property to another, so it’s hard to accurately plan ahead. But you can be sure to not stretch your finances too tight; always try leave some aside for any unexpected costs.
Making your house a home
Britons spend an average, £330 each year on redecorating their homes. 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 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 in your new home. People spend an average of £678 a year to keep their gardens, terraces and courtyards in good condition.
Data gathered in 2021 showed that households spent an average of £620 a year on subscription services, whether that’s meal kits or streaming services like Netflix (don’t forget £159 for a TV licence too). This is a great area to make savings by ditching any subscriptions you no longer need.
Once you’re in your new home you’ll be paying for essential services like water, gas and electricity. 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.