Buying your first home is a big financial hurdle—but don’t just save for the deposit.
While the deposit is a major upfront cost, there are many other ongoing expenses to factor in to ensure you can afford your new home long term.
It’s easy to focus on the deposit and forget about the other costs of home ownership. Know and plan for these costs to avoid financial stress and enjoy your new home.
8 Key Costs When Buying a Home
1. Mortgage Repayments
Your mortgage repayment will be your biggest ongoing cost. Make sure you can afford these payments long term.
Here are some key points to consider:
- Affordability: Calculate your monthly repayments based on different interest rates, especially if you have a variable rate mortgage. Think about how future changes, like having a family, might impact your ability to pay.
- Fixed vs Variable Rate: Understand the difference between fixed and variable rate mortgages. A fixed rate gives you stability, while a variable rate might be lower initially but can increase over time.
- Extra Repayments: If you can, make extra repayments to pay off your loan principal faster. This will save you a lot of interest over the life of the loan.
A mortgage broker can help you find a mortgage that suits your situation and needs. They can also advise on how to manage your repayments.
2. Insurance
Insurance is non-negotiable with home ownership. You need to budget for the following types of insurance:
- Home and Contents Insurance: Covers your home and belongings against damage or loss.
- Lender’s Mortgage Insurance (LMI): Required if your deposit is less than 20% of the property’s value.
- Mortgage Protection Insurance: Covers your mortgage repayments if you lose your job, become ill, or can’t work due to injury.
- Landlord Insurance: Essential if you’re renting out your property. Covers rental income loss, property damage by tenants, and legal expenses.
Shop around and compare different policies to get the best cover at the best price.
3. Body Corporate Fees
If you’re buying into a complex with a body corporate, you’ll need to pay body corporate fees.
Things to consider:
- Fee Range: From as low as $15 per week to over $200 for luxury developments.
- Annual Increases: These fees typically rise each year. Check the complex’s financial history.
- Special Levies: May be charged for major renovations or unexpected expenses.
4. Council Rates
Council rates are regular expenses that fund local services like waste collection, parks, and road maintenance.
- Payment Frequency: Usually billed annually or quarterly.
- Rate Calculation: Based on the land value of your property.
- Increases: Check your local council’s historical data for guidance.
5. Electricity, Water and Gas Bills
Utility bills are a big part of home ownership. Budget for:
- Electricity: Manage your usage and use energy-efficient appliances.
- Water: Usage may vary, especially if you have a garden or pool.
- Gas: Factor in if you use gas for heating, cooking, or hot water.
Compare utility providers and adopt energy-saving habits.
6. Repairs and Maintenance
Owning a home means maintaining it—both routinely and unexpectedly.
- Routine Maintenance: Gutter cleaning, servicing heating/cooling systems, garden upkeep.
- Unexpected Repairs: Leaking roofs or faulty plumbing can be expensive—keep an emergency fund.
- DIY vs Professional Help: Some jobs can be done yourself, others need pros—budget accordingly.
7. Renovations
If you plan to renovate, include this in your financial planning.
- Cost Estimation: Always get multiple quotes and plan for cost blowouts.
- Project Scope: Stay focused on upgrades that add real value.
- Buffer Fund: Unexpected renovation costs are common—set money aside.
8. Internet, Telephone and Home Entertainment
In today’s world, these are basic utilities.
- Internet and Phone: Choose the right plans for your needs. Bundles often save money.
- Home Entertainment: Streaming services like Netflix or Foxtel should be budgeted for monthly.
Lifestyle Considerations and Contingencies
Owning a home may shift your spending habits.
- Budget Adjustments: You may need to reduce spending on non-essentials.
- Emergency Fund: Always have a backup fund for medical expenses or urgent repairs.
- Long-Term Planning: Think beyond monthly costs—what will home ownership mean for your future lifestyle?
Conclusion
Being prepared for the costs of owning your first home goes beyond just saving for the deposit. By understanding and planning for all the ongoing expenses, you can enjoy home ownership without unexpected financial strain.
Choose a property that fits your budget and long-term goals—and always keep a buffer for the unexpected.
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FAQs on ‘Preparing For the Costs of Owning Your First Home’
How much deposit do you need for a first time home buyer in Australia?
For first-time home buyers in Australia, a deposit of 20% is ideal as it avoids the need for lender’s mortgage insurance. Consider using the First Home Super Saver Scheme for savings up to $30,000, and establish a dedicated savings account to systematically set aside funds each week.
How much money do you need to have to buy a house in Australia?
To buy a house in Australia, it’s advisable to save as much as possible. The minimum deposit often required is 10%, but aiming for 20% is beneficial to avoid additional insurance costs like Lenders’ Mortgage Insurance or a Low Deposit Premium if borrowing more than 80% of the property value.
How to buy a first home in Australia?
To buy your first home in Australia, start by saving for a deposit. Next, determine your borrowing capacity to see what you can afford, then search for the best home loan rates. Find a property within your budget and proceed to negotiate the purchase.
What is the average age of a first home owner in Australia?
The average age of first-time home buyers in Australia has been trending upwards, currently around 36 years. This represents a significant increase from the average age of 25.7 years in the 1970s.
