Once you decide on a budget for your new property, it could all seem smooth sailing at first glance.
However, getting to that figure is a tiresome act. Not all people have the same figure they can simply copy from online since it’s highly specific to your area and needs.
And once you get into forking out for expenses, there is a high likelihood for even further expenditures to slip through the cracks in your budget.
Let us take a look at these four expenses that every new property investor should look out for, lest they get a headache once it arrives.
Have you ever thought about insuring your home before moving in?
It’s always a good idea to have coverage for your property just in case things take a turn for the worse. There’s always the ongoing threat of theft, vandalism, impact damage (perhaps from a car or tree), kitchen fire, burst water pipes and natural disasters to spoil the quality of your home.
Instead of continuously worrying over the possibility of these expenses, property insurance can give you both the peace of mind and the help you could need for your new property and its overall wellbeing.
There are three types of property insurance plans:
- Contents Insurance
- Building Insurance
- Contents and Building Insurance
If the new property is totally under your ownership, you may like looking into the contents and building insurance to protect all aspects of your new home.
Alongside those types of insurance above, the insurers could include benefits such as temporary accommodation, should your home becomes inhabitable, and legal costs cover (covers payment should an injury occur or someone’s property is damaged at your home).
Loan Establishment Fee
While you might be familiar with the loan structure of your new property, some (not all) lenders can charge this to the property owners as a fee. The reason for this fee is to account for the lender’s expenses for the administration of the process of undergoing the loan.
These are the expenses that are covered in the loan establishment fee:
- Conveyancing Fees
- Stamp Duty
- Valuation Fees
- Title Fees
- Mortgage Insurance
This fee, also known as an application fee, gets spent the moment you first put down your signature on the mortgage. It is a one-time, upfront fee that tends to be around £250 on average and can reach £800 to £1000 on the highest levels.
Ongoing regular Loan Fees
Apart from the upfront payment, there are also the yearly and monthly charges of your loans to account for. Lenders charge only one type or the other – so have it written down to help fully understand the breakdown of your costs.
The reason for ongoing loan fees is to pay for the operational costs of keeping the loan on your home. Additionally, it is also chargeable as part of the mortgage package fee, if it’s tied up as a set with other banking products.
It is also important to bear in mind that not all properties will have this fee; in fact, more homes on average are not charged annually for their loans.
The interest is not considered a fee as such, but do not skimp on your budget for it. It is the biggest expense you will add on a home loan. If you have a nice low interest rate, you may be potentially saving thousands of pounds from the purchase of your property.
Typically, owner-occupier loans are considered to be the low-cost option compared to investment home loans, so please keep that in mind while making the purchasing decision for your house.
According to recent statistical studies, the average variable home rate for owner-occupiers is 3.3%. For a 2 year fixed home rate for owner-occupiers, the interest is much lower at 2.3%.