What does owning a home cost on top of the mortgage?

The shock for a first-time owner is not the mortgage, which is a known number arriving on a known date. It is everything else: the bills that were included before, the repairs that were somebody else's problem, and the slow accumulation of things that need replacing on a fifteen or twenty-five year cycle. All of it is predictable in aggregate even though no individual item is, which is what makes it budgetable.

Step by step

1. List the fixed annual charges.Council tax, or rates in Northern Ireland, buildings insurance — a mortgage condition — contents insurance, and for leasehold, service charge, ground rent and any reserve fund contribution. These are known figures and they belong in the monthly budget.
2. Add the utilities you now pay in full.Energy, water, broadband and any standing charges. Standing charges are payable whatever you use, so a home that stands empty still costs money.
3. Set a routine maintenance allowance.Servicing, gutters, small repairs, decorating, garden. It is easier to budget a monthly amount than to react to each item, and a home that receives regular maintenance costs less overall than one that does not.
4. Build a replacement schedule for the big items.Boiler, roof covering, windows, kitchen, bathroom, external decoration, flooring, appliances. Write down what you have, roughly how old it is, and its typical life. That list turns an unknowable future into a schedule.
5. Turn the schedule into a monthly figure.For each item, divide the likely replacement cost by the years remaining, and add them together. This is the number that stops a boiler failure becoming a crisis, and it is what a landlord or a service charge reserve is doing on your behalf when you rent.
6. Add the periodic professional checks.An annual boiler service, chimney sweeping where relevant, and an electrical installation condition report at the interval recommended for owner-occupied homes. These are small and they prevent large costs.
7. Allow for the ones that only appear sometimes.Insurance excesses, tree work, drain clearance, a survey, remortgaging fees, and anything the neighbours share — a party wall, a shared drive, a communal roof. Not annual, but not rare either.

Tips

• Leasehold flats have a specific risk that houses do not: a major works bill decided by the freeholder. Read the service charge accounts and the reserve fund position before assuming the charge is the whole cost.
• A survey before purchase gives you the replacement schedule for free — it lists what is near the end of its life. Keep it and use it rather than filing it after completion.
• Deferred maintenance is a loan at a bad rate. Damp, blocked gutters and failed pointing all get more expensive the longer they are left.

Common mistakes

• Budgeting only for the mortgage and bills — It works until the first substantial repair, at which point there is no money for it and the repair goes on credit — which is how a predictable cost becomes an expensive one.
• Assuming a new-build has no maintenance costs — The warranty covers defects, not maintenance, and the replacement cycle starts on day one. Service charges on new developments can also rise sharply after the first years.

Questions people ask