The Hidden Costs of Buying a Home

by | Apr 16, 2021 | Mortgages | 0 comments

It is no secret that buying a home is a costly process. From saving for a deposit to budgeting for the monthly mortgage repayments – not to mention the expense of fixtures, fittings and furniture – it is likely to be the most expensive purchase you will ever make. But what about those hidden costs that many first-time buyers don’t anticipate?

Unfortunately, because these additional costs are not frequently discussed, many first-time buyers may find themselves a little short of the mark when their dream home is finally within grasp.

Avoid confusion and disappointment at the final hurdle by familiarising yourself with – and preparing for – the hidden costs involved with buying a home.

Solicitors’ Fees

Along with your mortgage broker, your solicitor is likely to be the person you liaise with most throughout the property-buying process. A solicitor is responsible for overseeing the legal framework that surrounds the purchase of a house and will be with you every step of the way until you sign on the dotted line.

With such responsibility comes a hefty price tag, with €1,500 to €3,000 being the rough ballpark, depending on the individual solicitor’s rate – and don’t forget to include VAT in your calculations when shopping around for quotes.

Stamp Duty

Depending on the purchase price of your home, stamp duty can be a significant addition to your bill. It is equal to one percent of the house’s value, so if you have bought a house for €400,000, your stamp duty will come in at €4,000. For properties that exceed €1 million in value, the stamp duty rate rises to two percent.

Property Tax

First introduced in Ireland in 2013, local property tax (LPT) is a self-assessed tax based on the market value of your home. The current LPT rate on houses that cost up to €1 million is 0.18 percent of the property’s value. If a house’s value exceeds €1 million, the LPT rate jumps to 0.25 percent. It’s also worth noting that the rates are set to increase from November 2021, so this potential hike should be factored into your planned outgoings if you purchase your property after this date.

The Hidden Costs of Buying a Home - Symmetry Financial Management

Valuation

In a bid to ensure you are paying a fair and acceptable price for your new home, your lender will arrange for a valuation to take place. This will be carried out by an independent valuer who will inspect the house on behalf of your mortgage provider and share their insights into whether or not the current market value is appropriate. Valuation costs usually come in at around €150, so while it’s not a big expense in the grand scheme of things, it is still one to be aware of.

Mortgage Protection

In order to protect your asset and anyone that might be sharing it with you, mortgage protection – which is a type of life insurance – is an essential investment that lenders will require you to make. It covers the outstanding mortgage balance on your home in the event of your death.

In the case of a joint mortgage, both parties will be required to take out a policy. You will pay this insurance for as long as you are paying your mortgage and the price of monthly payments will be dependent on certain factors, such as how much your house costs and what age you are.

Property Survey

As per the SCCI’s (Society of Chartered Conveyors Ireland) grading system, there are three types of residential property survey.

The report generated from Type 1 features the least detail, with no in-depth structural examination carried out; Type 2 – and the one most sought after by first-time buyers – will assess particular spaces of interest such as the roof, the attic and even the outside drains, with emphasis also on potential defects and fire hazards; while a Type 3 survey will dig even deeper, looking under floorboards and examining the workings of various energy systems within the property.

If you opt for a Type 2 report, the associated cost will vary depending on the size of the property in question, how long the survey process takes and how detailed the report, but you could be looking at a minimum spend of €500 – and possibly up to double that figure.

Snagging

“Snagging” refers to the drafting of a snag list following an inspection of a new build. It is an important process that allows you to identify any potential damage to or faults in the building work.

There are a wide range of companies offering a snag list service, which involves an independent professional assessing the build to identify any defects and bringing these to your attention through a thorough report. The service could cost up to €400, varying depending on the company of choice.

Although a costly process, it is a worthwhile one, considering that an estimated 50 to 80 snags could be identified in an average newly built, three-bedroom property.

Home Insurance

Much like car insurance, home insurance is an absolute must to protect your house and its contents in the event of unforeseen incidents, such as flooding, fire and more. Policy prices vary greatly depending on the size of the house, its value and location, so be savvy and shop around.

The Hidden Costs of Buying a Home - Symmetry Financial Management

Utilities

Even in rented properties, utility bills have to be paid. However, when starting out afresh in your very own home, you will need to set up accounts from scratch in your own name with the likes of refuse companies, energy providers, broadband providers and more. Because many of these services require an initial set-up fee or one-off charge, be sure to have a little extra cash to hand to cover these must-have expenses.

As a first-time buyer who is new to the world of mortgages, conveyancing, property tax and all of the other costs mentioned, it can be hugely beneficial to seek clarity from those that know the process inside out. Symmetry Financial Management offer clear, simple and concise advice on all the major questions you need to be asking as you prepare to invest in your first home, such as how much you should borrow and how long for.

If you are in search of a helping hand to guide you through what can be a daunting process and steer you in the right direction, make sure to contact Symmetry Financial for a no-obligation consultation today.

If you’d like a free, no-obligation consultation for your mortgage, pension or financial needs, get in touch here, call us on 01 6831673 or email us directly on info@symmetryfinancial.ie.