Costs to consider after moving

Buying a property will likely be the most expensive purchase you’ll ever make, and it is important to consider the ongoing cost of owning a property as well as the purchasing costs. Before proceeding with an offer, you should check the property running costs as you want to avoid getting yourself into financial difficulties. Below we have highlighted some of the most common ongoing costs to consider after you have moved.

Mortgage Repayment

Your mortgage adviser and mortgage provider will explain what your monthly repayment cost will be based on how much money you borrow and the terms of the loan (mortgage rate, length etc.). The cost of the mortgage repayment will vary for each person but between April 2021 and March 2022 the typical average mortgage was £753 Money.co.uk (external site). With the interest rate hikes in 2022 & 2023, the cost is likely to be much higher.

Service Charge and Ground Rent

If you are purchasing an apartment or new-build home, a service charge and/or ground charge may be payable. Apartment owners are required to pay service charges which go towards the upkeep of shared areas such as the roof or hallways. Service charges can be invoiced either monthly, six-monthly or annually and this will depend on the terms of the lease. It is typically accepted that most service charges will be around £1,000 to £2,500 a year.

On top of a service charge, ground rent will likely be due for apartment owners. Ground rent is typically paid to the freeholder and usually costs up to £400 per year. The Government introduced new rules regarding ground rent cost, anyone buying a home on a new long lease will now be freed from these annual costs Gov.uk (external site)

Council Tax

Council Tax is a yearly fee your local council charges you for the services it provides, like rubbish collection. The fee you pay is based on the value of the property. You may have heard of the term ‘council tax band’ which is how the fee a homeowner pays is determined. Council tax bands are labelled A-H, with the cheapest band being A and the most expensive being H. So, in principle, the higher the house price, the higher the council tax.

The average council tax for a band D property is set to be £2,065 Gov.uk (external site) for 2023-24.

Insurances

Life insurance is a really important cost to allow for when owning a property. You’re not legally required to get life insurance for a mortgage, but some lenders require it before you borrow money to buy a home.

Life insurance is particularly important to consider when buying a house as a couple. If you are purchasing your home with your partner, your mortgage agreement is likely based on your combined salaries. If you or your partner passed away while your mortgage was still outstanding, you have to consider if one of you on your own would be able to keep up with the regularly mortgage repayments?  Life insurance can help by paying out a money if you pass away during the length of your policy, which can be used to help pay the remaining mortgage.

Industry research suggests that monthly insurance premiums range from £15.85 to £30.40. This depends on your individual circumstances and the type and length of cover you choose.

Home insurance is another cost which needs to be accounted for in your ongoing expenditure. Home insurance covers loss and damage to your house and household contents. Home insurance typically comes in two parts – buildings insurance which covers the physical building, and contents insurance which covers your belongings. You can buy them individually or together as a combined policy.

For example, if your home is damaged by an insured event like subsidence or fire, your home insurance should cover the cost of any repairs or replacements needed although this will depend on the policy.

Typically, the cost of a combined building and contents insurance policy is around £140 a year. This will depend on several factors including house price, location, security measures etc.

Utilities

One of the most costly property running costs will be utilities such as electricity, gas, water and the internet. It is difficult to provide an accurate cost estimate for these items and they will vary significantly depending on the type of property, the usage, your personal needs etc.

To give you some kind of idea, British Gas say for a medium size home (3-bedroom with 2-3 people) the average energy bill is likely to be £208.52 per month. This can be a significant outgoing, you may consider looking for properties with higher EPC ratings to reduce the cost.

Water is provided by a local provider and unfortunately there is little you can do to reduce the cost. Unlike gas and electricity where you can shop around for better deals, you are stuck with your local water provider. The cost of water per month is estimated to be £38.

Finally, the internet. One of the first things you will likely want to do when you move into your new home will be to sit back, put your feet up and stream your favourite TV show. To do this, you will need an internet contract which may include additional TV packages. The cost of the internet will depend on the speed you require and if you include a TV package. You should always shop around to find the best deal before proceeding. Currently, UK households are paying on average £30 a month for basic broadband.

Total Monthly Budget – Property Running Costs

Purchasing property can be an expensive process and ongoing costs must be considered so you can set your budget accordingly. Below is a summary of the average costs provided on this page: