The First Time Buyer’s Journey and Hidden Costs to Be Aware Of.
For most of us, a house is the biggest purchase we will make in our life and it’s also the most important. It’s important because, our home loan will be far bigger than any personal loan or car loan; you agree to a term that lasts several decades, and, in most cases, you must save and make a deposit on the property (at least 10%).
The average house price in Ireland is around €263,000 (DAFT.ie report). But unfortunately, this isn’t the only price to pay. There are many other costs, some hidden, which can seriously impact your finances and your chances of completing the purchase.
I want to write about some of these additional costs in this post, so that you can make sure you can afford to pay them. Hopefully these insights will help you prepare for buying your ideal home.
Costs of Buying a Home Not Included in a Mortgage
Many first-time homebuyers (FTBs) make the mistake of looking only at the deposit and the mortgage costs. They review their finances, check mortgage calculators, and invariably, miscalculate how much they can spend.
It is only when they begin the mortgage application process does the truth sink in and they realise that they’ll also have to pay other, additional costs.
These costs would include:
-Stamp Duty (1% of house value)
-Solicitors Fees (€1,500 – €3,000 + VAT)
-Valuers Report (c.€200)
-Surveyors Report (c.€350 + VAT)
-Property Tax (c.0.18% of house)
-Registry search Fees (c.€200)
-Land Registry Fee (depends on house price – say €600)
-Insurance (Mortgage Protection + Life – (c.€600 pa)
-Estate Agent Fees (may be bundled into the house price)
-Removal Fees (if not a FTB)
Are They Really Hidden Costs?
Well, I suppose they might be construed as unexpected costs, to the less well prepared. But, in essence, the very fact that I’ve listed them above means that they are not hidden, per se.
Also, most of the costs will be outlined on the mortgage documents. No one is going to stick you with an unexpected bill if you’re paying attention during the process or you have professional advice.
If in any doubt the best approach is to use a mortgage broker to work with. For instance, with MortgageLine, we will find the most suitable mortgage offer for you, get your loan estimate, check your tax situation, understand where you stand with regards to mortgage protection and life insurance, and make sure you have access to all the money in advance.
How Much Money Should You Save Before Buying a House?
Many of our clients, initially ask the question, “How much money should we save?”. We always advise “the more you save, the better.”
Any extra money will help you finish the house, which can be costly if you’re buying your first home.Of course, you also must consider utility bills and, general living expenses. There is no point in spending all your savings on a house and then not be able to enjoy it thereafter. Having a professional help you with this aspect can avoid a lot of stress.
Steps to Take When Buying a Home
The road to buying a home can seem long, especially if it’s your first. But by preparing, putting the time in and doing your research, you can avoid potential pitfalls and ensure you’re ready.Follow these steps to get on the right track and make sure you stay there.
1) Begin Early
The sooner you start looking for homes, the better. It’ll give you an idea of what’s on the market and what’s in your price range. Browse the online and press listings, over say 6 months, and have a look in the local estate agent’s windows.
Doing this should give you an idea as to how long certain homes stay on the market, and how much they sell for. Also, keep your eye on the ‘For Sale’ signs around and see how long they remain on the market.
2) Calculate Affordability
Most buyers have a rough idea of what sort of house they can afford, but from our experience, it’s more than they actually can afford. People don’t think about the additional costs that I mentioned earlier.
Also, they assume they’re going to be offered very favourable mortgage rates and terms. That isn’t always the case as there are many variables and regulations in the Irish market.
3) Get Pre-Loan Approval
Obtaining preapproval for a mortgage amount will be a big help with your considerations. It is not a guaranteed loan, but it does mean you have been assessed and it’s been determined how much you can afford.
4) Start Saving
As alluded to above, start saving as soon as you can. Even if you have the required deposit—it always helps to have more.
5) Find an Estate Agent
Estate agents can help when you’re buying and selling. They offer expertise, knowledge, and experience in a package that doesn’t cost you anything. An estate agent will get a margin from the sale of the house and this is often covered by the seller.
6) Arrange an Inspection
7) Make an Offer
8) Closing Paperwork
The most important thing you can do when buying a home is to take your time. Many buyers rush in. They want to stop renting, stop living with parents, and get their hands on their dream home, but obviously, this increases the risk of mistakes and oversights.
Our recommendation is that at Stage 2 (above) of your Buying Journey, you contact us here in MortageLine. We can help you study the market, find the right lender, understand your personal tax situation, and look into insurance for your mortgage and your home.
Be a smart buyer, not an impulsive buyer, and remember that this is as much about a valuable, lifelong property investment as it is about buying your ideal home.
We have a First Time Buyers Guide that you can download for free by clicking the link or as mentioned, any of the MortgageLine team will be available to meet with you to discuss further details. Call us on 01 7079880.
Thank you – Stephen