Owning your own home is not only a huge accomplishment, it’s also likely to be the biggest investment you’ll ever make. Moving from renting to owning is an exciting personal step, but it can also come with its peculiar paperwork, jargon and future unknowns that, as a renter, you never even considered.
What’s the difference between renting and owning a property?
To state the obvious, once the transaction has been processed and the conveyancing stage is complete, the property is yours. You’re now responsible for its upkeep, including any repairs and maintenance work. If you have a mortgage, you’ll pay a large deposit and continue to pay regular amounts until your mortgage has been payed off.
Here are five key things to know about the transition from renter to home-owner, and what now lies in store.
1. There are some upfront payments
Along with home ownership come a number of financial outgoings. The biggest of these is likely to be your initial deposit or down payment. Expect the deposit to be 10-20% of the total price. Next, you can expect to pay closing costs to cover the likes of land surveys, appraisal and insurance escrows. These will typically be just over 10% of the total property cost.
2. You’re paying for more than a mortgage
It’s important to remember that you’ll still have monthly payments. These will cover your mortgage, but also homeowner’s insurance, which is essential to cover your home and belongings. Also included in your monthly bill will be property taxes.
It may sound like a lot, but our total monthly payment for home ownership is still likely to be less than when you were renting.
3. You may need emergency funds
It’s a good idea to protect yourself against any unexpected scenarios that could prevent you from paying your mortgage, such as redundancy or illness. It’s therefore a good idea to have at least three months of salary saved up for any potential setbacks.
4. It’s all down to you
When you were renting, you would tell your landlord if something needed fixing or replacing. That responsibility is now yours. We recommend having appliances inspected when you move in to ensure everything is in working order, and then make a list of home improvement tasks you’d like to undertake in the next few years in order of priority. That’s where some of that emergency fund can come in handy.
5. Get on the right side of your neighbours
Become acquainted with – and stay on the good side of – your neighbours. Being open and transparent about any potential issues early on, such as overgrown trees or loud music at late hours, will help you build an understanding and a long-lasting relationship. Now you’ve settled in your own home, they could be your neighbours for a while, so it’s a good idea to be on friendly terms with them from the start.
If you’re getting ready to put down roots, it’s vital to be prepared for the new responsibilities – both practical and financial – and lifestyle changes involved. For more tips on buying a home and going from renter to homeowner, have a look a tour various articles on our Engel & Völkers website.