Right all, looking for the wisdom of the STW collective as ever.

My fiance and I currently live in a rented house but are looking to buy our first place together. Asides from the mortgage repayments instead of rent what other cost might be involved on a monthly basis (different to renting) and how much are they looking like? Or is it kind of like how long is a piece of string?

Currently we each stick in £500 to a joint account which pays the rent of £600 then all then bills including utilities, council tax, tv, internet etc.

Im assuming home insurance will be abit more now, contents and buildings rather than just contents but barring the roof falling in, in a like for like house will the rest be pretty similar owning rather then renting?

Boiler service and cover.

home insurance as you say.

the other thing to consider is life insurance and income protection insurance.

as you say it really is a bit of a guessing game, can only tell you what ive got and what i pay. it might help a bit

3 bed semi just outside glasgow, built 1965 so kinda half modern

council tax is £119 per month (inc 25% disc for single ocu)
gas bill is £50 per month (A rated combi with 9 rads)
leccy is £25 per month
phone line with internet £17.50 per month
house insurance is £275 per year inc bikes

thats just the essientals you then have things like sky / cable / boiler insurance etc etc

i saved money by moving closer to a train station so i now get the train to work rather than drive

try and buy under the stamp duty threshold if you can can save a bundle

use a group law firm rather than independent for legal work i used connvencing direct all in cost £380 local lawyer wanted £1200

On a monthly basis, the only differences will be the home and contents insurance and council tax (dependant on propert value). The insurance cost probably will not be much more than just contents insurance for a rented propert though. It will however cover a far greater sum of money as you need to take into concideration all furnature, carpets, curtains, electrical goods etc in the overall insured value.

For example i used to pay £175 /year to ensligh for contents and now pay £240 for home and contents.

Buildings insurance and life insurance (decreasing cover) were the only additional things for us. Cost of those together with mortgage payment still less than rent which is nice.

Probably the biggest increase for us from renting a small flat to buying a small house, is the income protection for the wife as she only gets statutory sick pay (we lowered it to match the mortgage payment as it was cheaper than matching her whole salary) and the life cover for each of us.

Unless you buy a place that is perfect, you will spend a small fortune on paint and other DIY stuff. And obviously you now need to have a bit set aside for stuff like fencing being blown over, leaks, appliances breaking down.

You might want to build up a fund for ongoing maintenance and repairs which you are currently not liable for.

First time buyers exemption for SDLT ends on 24th March, so if you are thinking of spending more than £125,000, you can save a lot of money if you buy before then.

Buildings cover shouldn’t cost too much more than you currently pay for contents, but it will be a bit more. If you buy in a factored development (e.g modern flats etc), find out what the likely factors bills are, as they can be pricey if the building has lifts or other features which are expensive to maintain.

Leaving aside monthly costs, for one off purchase costs, don’t forget to factor in things like moving costs, costs involved in registering your title and the cost of applying for the mortgage (although normally most of the latter can be added to the mortgage if you are strapped for cash).

use a group law firm rather than independent for legal work i used connvencing direct all in cost £380 local lawyer wanted £1200

£1200 sounds like a fair price to me for the time involved in properly examining titles, dealing with issues, ensuring the contract is watertight and protects you etc. I can guarantee that for £380 the title will not have been properly examined, which is fine for the 90% of purchases where the title is fine, but for the remaining 10%…*

* may be slightly biased in this paragraph 😉

Stamp duty? Not a monthly outgoing, but a big chunk of change to give away for nowt.

Currently we each stick in £500 to a joint account which pays the rent of £600 then all then bills including utilities, council tax, tv, internet etc.

Mortgage repayments might be more than £600 – unless you get lucky with a really good product, or are buying a cheap house. We paid £155k for our place, with a 10% deposit. So ended up taking a £140k mortgage, fixed for 3 years at £900pm.

That was literally the best product we could get as first time buyers. It was a couple of years ago now, so you might have more luck finding a better product.

Insurance about 50% more for us.

Budget *at least 10%*, probably a little more of the mortgage payments as extra money for maintenance / stuff wearing out, plus a fair bit of cash for the first year you live there when moving in. – eg. we needed big curtains for several rooms, which even at Ikea prices would have been the best part of £1000 in total, a cooker, a fridge, washing machine etc. which all added up.

For example, if you think about a £600 a month mortgage, you have to do a couple of grand’s work on the roof (not unlikely), that’s 3 years worth of 10% of the mortgage. Even if you only have one maintenance task like that every 5 years or so, there’ll still be all manner of little things that cost money.

Above this, the biggest spend is niggles you just want to change – for example our house needed a new patio, as the old one was basically a load of sharp gravel (about a tonne of it – I know as I removed it!) laid over poorly drained concrete, so we got a proper well drained stone slab patio laid, that was best part of a grand, similarly kitchen floor was poorly laid laminate, good few hundred quid to lay reclaimed quarry tiles instead.

If you can avoid having to buy a house in poor condition, buy somewhere that has been done up well, and doesn’t need much work doing on it – typically cheaper than buying a house to do up, unless you can actually do 100% of the work yourself (and even then it is often pretty marginal).

Thanks alot for those so far guys.

I hadnt even thought about life insurance. I know I get it if I die at work but I hadnt thoguht about it otherwise. Do we really need to bother with it as we dont have any dependants yet. We are only in 24 with no kids so if the worst did happen the other would probably move anyway.

Thanks for the Stamp Duty heads up, have a feeling that we may already be too late for it as we dont even have our mortgage sorted yet!

If poss, find a house you like where you’re pretty much happy with the existing kitchen & bathroom – these rooms are the most expensive to redecorate/refit … other rooms are mostly just paint & wallpaper.

Our life insurance just covers the remainder of the mortgage, it’s about 9 quid a month to cover both of us. All very well saying you’d probably move but what if the remaining partner can’t sell the house/is in negative equity etc.

Get central passageways if you are going for a semi – less noisy…

Only other thing I can think to add to the above is water rates? – this was always covered by my landlords

Oh presuming you live in a furnished place set aside a decent amount for furniture.

Invest in a decent bed, sofa and shower. The rest of our stuff was cheapy argos but I am so glad we spent a little extra on those.

I think life insurance is a legal component of the mortgage? might/and probably am wrong.

DT78 – Luckily for us the place we are in now was unfurnished so we have gradually been buying furniture. We also currently do pay for our water so once again that will probably lessen the shock.

We are very fortunate that her family has a company that does soft furnishing so things like curtains, sofas etc can be sorted out with minimal fuss.

Im starting to think this is do-able. Will have a look at the life insuarance to cover mortgage and if it is required for a mortgage. Have to sort that out first which Im sure is a barrell of laughs!

Life insurance is not required for a mortgage; it can sometimes be a condition with certain lenders, though. What they offer will not always be the best deal, so you can cancel after a month anyway.

It will be the next big thing that is claimed on for mis-selling.

For mortgages, find a good local IFA – sometimes they have access to products that are not advertised to the public. You can then compare a bunch of products together and see what’d be best for you.

An IFA can also help with stuff like life insurance etc. taking most of the hassle out of it.

Apologies if you have done all your research and know this already, but there will be considerable one-off costs as well from all the carpet-baggers professional services that you are likely need along the way, unless you do the searches, conveyancing, surveys yourself.

The ‘heads-up’ on the stamp-duty kinda suggests you think it will be a case of stopping paying rent one month, moving, then simply making mortgage repayments the next month. I can’t remeber how much all this was last time we moved, but I seem to recall it being a bit north of £5k all in.

We got the life insurance simply so that the remaining partner doesn’t lose the house, it is the diminishing type where the payout reduces as the mortgage is paid off. Same reason my wife got income protection…my sick benefits are better so I thought I’d save myself the £30 monthly premium.

Also, as you are renting, if the two properties are close its dead handy keeping hold of the rented place for a week after completion as it makes it much easier to move all your clutter, and also you can clean the rented place much easier once you are out.

I can’t remeber how much all this was last time we moved, but I seem to recall it being a bit north of £5k all in.

On the flip side, our one off payments were limited to solicitors fees and van rental – about 650 in total. We paid out less than we received back from the deposit on our rental place.

On the flip side, our one off payments were limited to solicitors fees and van rental – about 650 in total.

As I said – depends how much you do yourself/you can get away with with the particular property/mortgage product. As a FTB’er, I would expect some caution/hand-holding first time round.

EDIT: The 5K included the stamp duty IIRC, but it was a while ago

Bristolbiker – the heads up was that I had forgotten that there was no Stump duty ATM and that it was ending in march!

Have factored one off costs of legal fees, mortgage set up, stamp duty, moving costs at about £4-5k so hopefully that should see be ok.

You dont need life insurance although many Financial advisers will give you the impression it is a requirement and almost a standard add on.
It is not a requirement, it is a decision you can make based on what your circumstances and more importantly what you can afford.

Don’t take this the wrong way, but as you are only 24 do you really want to be held down by a house? Clearly I know nothing about your financial circumstances, but it is clear from this thread that the cost of ‘owning’ a house is likely to be more than renting. House prices aren’t going anywhere fast, and there is a good chance they will continue to drop over the next few years. Why not rent a bit longer, save some more cash towards your deposit, have a nice holiday or two, and see how it plays out. The last thing you want at your age is to be stuck in negative equity…..

I know where you’re coming from but I think our circumstances do actually mean that buying would be the best option. Unless people have any other ideas?

We have a good deposit available to us and we know that we are going to be based where we are from now on. The mrs works at the family business so were tied to where we are by that. Plus the fact her family is here, it’s handy for biking and we generally like being here!

It seems ponitless giving someone else £7200 a year when we could be paying off our own motgage.

With respect to negative equity when does that become an issue?

Keep some money safe for the maintenance fund, buy a good DIY book.

When you have the survey done get the best one you can afford include boiler inspection as it better to find out it’s a lemon before you invest your money in a property. Don’t be afraid to haggle on the price on the basis of the survey report.

Take some one older and wiser to keep yourselves in check as you’ll gloss over many potential problems if you set your heart on home.

Look at the other properties in the street, if a few have had new roofs fitted then budget for yours doing in the near future regardless of what the survey says.

Happy house hunting

think about how it will all be split up if you split up

It’s a buyers market so you should never be in a negative equity position unless the housing market crashes. You should be able to knock the seller down on price but compare prices of what has sold on the same street here

With respect to negative equity when does that become an issue?

at 24 i doubt this is on the immediate agenda, Kids. I don’t know how big a house your looking at, if you buy a small 1 to 2 bed house have a couple of kids and need to move, if the mortgage is bigger than the resale value of the house you could have issues.

Obviously if you split up and can’t sell the house this could also prove to be a problem.

Maintenance and upkeep.

If you are there for a while you will occasionally need to redecorate and replace the carpets, not very often but it can be expensive when you decide to do it.

Generally you need some money set aside for maintenance. To start with you’ll know what needs doing but where as in a rental you may move on in 5 years you won’t in your own home and things will start to look worn out. It’s little stuff but every time I go to a DIY shop I seem to spend £50+ not buying very much.

You might also become more house proud. I know now we own our own place that I’m more concerned with getting things fixed and making sure things are working and how I want them.

Really big problems will hopefully be covered on house insurance but the little stuff will add up. How much depends on you and your house. In our victorian terrace it’s been quite a lot over the last 18 months – although some of it was voluntary but would have needed doing eventually.

The other thing is the risk of interest rate rises which could dramatically increase mortgage payments. They are currently at a historic low and are more typically around 5% and have got to nearly 20% (but when I was a kid).

Why not have a look at some of the data on housepricecrash.co.uk, there is some interesting info and stats on there and some compelling information which points to prices dropping over the coming years.

There is a link to a report on there today with RICS forecasting falls of up to 10% in 2012. If you have a deposit of 10%, how would you feel if that had effectively disappeared in a year or two from now? If you dont understand how or when negative equity could become an issue to you, are you sure you have fully understood the implications of the single biggest purchase you’ll ever make??!

Have you actually looked at the amount of mortgage you pay off in the first few years of a mortgage? It is very little, and quite surprising when you actually look at it; you are mostly paying interest. People talk about rent being dead money, but then paying interest to a bank is equally ‘dead’ money.

Well I would hope that with a deposit of 25% that we wouldn’t have to worry about negative equity. I knew what it was but didn’t really know how it would effect us, surely if ours dropped in value then others would have too so it wouldnet have Such a big effect.

Surely you have to start paying it off at some point so if I put it off a few years we will still have the problem that your mostly paying off interest and we’ve spent a few more years giving money to a landlord first?

Only pain with negative equity if you don’t want to sell the house is that you may not be able to re-mortgage if your fixed rate (or discounted tracker) runs out. Which can leave you stuck on a silly high interest rate.

Obviously also if you need to move, you can’t move if you owe more than the house is selling for.

But if prices drop and that deposit became 15%, 10%, 5%, or even 0% over the next couple of years, how would you then feel? Especially if you wait, and prices do drop, then your deposit may suddenly become 30%, 35%, or 40% (by virtue of prices falling). In that time you would have ‘paid off’ more of your mortgage buy not even having a mortgage – go and figure out how long it would take to pay off 10% of your mortgage. Without referring back to any numbers, I’d suspect you wouldn’t pay 10% off in 3 years.

I’d strongly recommend you try and do some reading up on the subject – understand exactly how a mortgage works, find out what the balance of your mortgage will be on a month-by-month or year-by-year basis (a real eye opener!), and then also look at what economic factors underpin the housing market (availability of cheap credit etc). When you have done that, you can then make an informed decision on what you are doing.

Sorry if I come across as harsh – it really isn’t my intention to. I see so many people brainwashed into thinking that buying a house is a one way bet, but it really isn’t. What I’m saying is just understand what you are doing and how things could pan out differently to how you might envisage!

The other pain with negative equity is that when your mortgage deal ends, you would end up on the standard variable rate which may not be as competitive as the previous rate. If your equity has dropped, you may not be able to get such a good mortgage rate – so you’ll end up paying more when you re-mortgage. That is of course assuming that you are able to move off the SVR and get a new mortgage deal.

Why do you think banks are asking for higher deposits nowadays, and being increasingly picky about who they let have a mortgage? Do you think they want a 20% deposit because they expect prices could drop by 20%, therefore protecting themselves against the mortgage owner defaulting, and leaving the bank with a house worth less than the mortgage owed on it…..?