The ongoing costs of owning a home

Buying a home can be exciting! Especially when you’re dreaming about the future you’re going to build there, or how you are going to turn a property into a home that’s just for you. But do you ever think about what costs there are beyond the purchase price? There are plenty of other costs involved in the process like LMI and stamp duty – but, that’s another article altogether!

In this article, we’re going to look at some of the ongoing costs you’ll encounter as a property owner. Hopefully it will help you get an idea of how much you’ll need in your budget when you become a homeowner; it’s not just your home loan repayments you’ll need to cover after all.

Rates

One cost that first-time homeowners often aren’t familiar with is council rates. Every homeowner is required to pay their rates annually, and the money raised is used by your local government to pay for infrastructure and services such as waste collection, parks and recreational facilities, roads and CCTV.   

Rates are calculated based on a land valuation and a Gross Rental Value (set by the Valuer General and Landgate), which means individual costs will differ depending on how much your property is worth. Houses will typically attract higher council rates than units, and you may not pay the same amount as your neighbour.

To learn more about rates and how they’re calculated, and how much you may have to pay in rates for a particular property, check with the real estate agent, vendor or the council.

Water

Here in WA, our water is mostly provided by Water Corporation (unless you’re in Bunbury or Busselton) and water bills are issued every two months. The amount you must pay will include water use charges (which is the cost of how much water you have used during the period) and service charges.

Service charges are an annual charge that is spread over a year. The service of water, sewerage and drainage are covered by the charges, and you will only pay for the services available to your property. Visit the Water Corporation website to learn about service charges in more detail.

Bear in mind that water charges can apply to vacant land, so even if you’re building and you haven’t moved in yet, you could still receive a bill.

Strata fees

If you buy a strata titled property, such as an apartment or unit, you’ll likely have to pay body corporate fees as a result. These fees are usually calculated and charged on a quarterly basis.

Body corporate, or strata, fees are charged to residents of a building or complex by the body corporate itself. The body corporate is a legal entity comprised of the owners involved in a community title scheme and the fees are ordinarily made up of property tax, legal fees and property maintenance charges.

The property maintenance charges generally cover the upkeep of common areas such as shared driveways or swimming pools, structural repairs, some utilities and building insurance coverage. Before purchasing a strata home, take a look at the body corporate fees so you can budget for them accordingly.

Insurance

Some banks and lenders will refuse to even finance your property purchase if you don’t show evidence that you’ve taken out insurance on the property. Home insurance is another of those annual costs that homeowners can often forget about, especially if you choose to pay for your policy in one lump sum.

It’s a good idea to review your policy and the cover it provides each year and make any appropriate changes to reflect the value of your home and/or belongings. We have some tips that could help you avoid being under-insured because getting the right level of protection for your home will pay off if you ever find yourself in the unfortunate position of having to rely on your insurance policy.

As mentioned above, if you buy a strata property, you generally won’t be required to take out buildings insurance (as it will likely be covered by your strata fees) but you should still consider contents insurance.

Other costs

As well as utility costs (gas, electric or both) there are a few other things that you’ll likely find yourself paying for when you become a homeowner.

• Internet/phone line: There aren’t many of us who could live without being connected to the world-wide-web anymore.
• Pest control: If you build your home, you may find that your builder’s warranty requires you to undertake regular pest inspections and treatments.
• Security: You may want to protect your home with a monitored security system which will be another ongoing cost.
• Repairs and maintenance: Even if you move into a brand-new home, wear and tear is still a thing that you’ll have to deal with and budget for.

We know it can be difficult balancing a budget when you’re a homeowner – unexpected bills, regular payments and everything else in life can soon add up. That’s why we have the mymo by P&N Bank app available for download. It’s a personal financial assistant in the palm of your hand, and it can help you budget smarter and get an overview of your financial situation, in real-time.