Home truths: count the cost

The price you pay for a house has only the most tangential link with the amount the property is going to set you back – and if you don’t do the sums properly you could end up in a world of pain.

A house with a selling price of €350,000 bought with savings of €50,000 has a starting cost of €300,000.

With a standard variable rate mortgage – the days of the tracker are long gone – of 4.5 per cent spread over 30 years, the total monthly repayment will come in at €1,520. You will make 360 of these payments before the place you call home is yours, so the house that had an asking price of €350,000 is going to cost you €547,221 (the €300,000 borrowed plus €247,221 in interest payments).

Interest is, by a huge margin, the largest additional cost a home buyer has to deal with but there are others.

Expect to pay stamp duty of about 1 per cent for a modestly sized property – it climbs as the price does. If it comes in at the lower end of the scale, the stamp duty will add another €3,500 on to your final bill.

And then there are legal fees. No standard charges are associated with conveyancing, and the prices charged by solicitors have fallen in recent years, but any home buyer should be not be surprised if legal costs come to €1,000.

The total cost of your home now stands at €551,721, and that’s before so much as a scrap of curtain is bought.

The property will have to be surveyed and a valuation report will be needed, adding another €200, after which you will have to move on to mortgage protection insurance and life insurance. If you’re not careful these can cost you dearly.

Earlier this year, the National Consumer Agency (NCA) published a life-insurance comparison survey in which it reported that individual consumers could make savings of as much as €3,087 on mortgage protection insurance while couples could potentially save up to €5,687 on dual term life insurance and €3,881 on joint mortgage-protection insurance.

It focused on six of the main insurance companies and found a difference of €13.54 per month between the cheapest and most expensive provider for a couple, each aged 23 and smokers, seeking dual term life insurance cover of €350,000 for 35 years.

That may sound insignificant, but totted up it amounts to €5,687. The NCA also found a difference of €9.24 per month for a couple, both aged 23 and nonsmokers, seeking joint mortgage-protection insurance of €350,000 for 35 years. Again it seems small, but it is €3,881 over the life of the policy for the same level of cover.

About €10,000 should be budgeted for the cost of a basic mortgage-insurance policy that will cover the lifetime of the mortgage.

Next to consider is the ongoing cost of property tax, heating, bin charges, water tax and phone and broadband costs.

Every year AA Ireland publish a useful survey showing the average costs of running a home.

Last year’s figures, including servicing a 92 per cent mortgage on a purchase price of €170,000, was €16,000 a year. The mortgage repayments on that relatively small loan are about €9,000 a year, so the additional running costs when all of the above are totted up are about €7,000. This takes the monthly cost of servicing a home with a mortgage of €300,000 to about €2,300.

The tally now stands at €630,721 – or more than twice the size of the mortgage taken out.

Renting or buying, life does not come cheap, but buying now at least gives you an asset in 30 years.