Ongoing costs of home ownership

Regular ongoing costs of owning a home

Owning a home is a significant financial commitment, and not just when it comes to upfront costs. Once you've moved in, there are regular ongoing costs that you'll need consider in your budget. These include mortgage repayments, council rates, body corporate fees, home and contents insurance, and utilities, among others. Let's explore each of these costs to give you a clearer picture of what to expect.

Mortgage repayments

One of the most significant ongoing costs of home ownership is your mortgage repayment. This is because it combines paying off the loan itself (principal) and the interest (the cost of borrowing that money).

How is mortgage interest calculated?

Each month, a large portion of your mortgage payment goes towards interest, especially in the early years of the loan. Your mortgage interest is calculated daily based on the outstanding balance of your loan. This interest is then charged to your account monthly as part of your repayment. Here are some general tips to help you understand the process and manage your mortgage better.

• Typically, your lender will take the outstanding loan amount at the end of each business day, multiply it by the interest rate applied to your loan, then divide the amount by 365 (or 366 in case of a leap year). This is your daily interest charge.
• They’ll then multiply this number by the number of days in the month to arrive at your monthly interest charge.

If you’re making principle and interest repayments, you’ll also need to pay back a portion of your loan’s principal balance as part of your monthly repayments. While this sounds complex, it's a straightforward process that your lender will manage for you.

Offset account fees

A key benefit of a variable rate offset account is that it’ll offset the balance of your loan against your savings, reducing the amount of interest you pay. It’s worth noting though that an offset account comes with a small monthly service fee. While these fees are significantly lower compared to your overall home loan repayments, consider budgeting for it in your ongoing costs.

Council rates

Council rates are a form of property tax that homeowners need to pay to their local council. The money raised is mostly used to fund local services and infrastructure. The amount you'll pay in council rates can vary depending on the value of your property and the council area in which you live. Rates are typically due in quarterly instalments and need to be factored in accordingly in your budget.

Body corporate fees

If you own a unit, townhouse, or apartment, you'll likely need to pay body corporate fees. These fees are used to cover the costs of maintaining and insuring the common areas of the property, such as gardens, driveways, and lifts. The amount you'll pay in body corporate fees can vary depending on the size and location of your property, as well as the facilities and services provided by the body corporate.

Home and contents insurance

Home and contents insurance is critical to protecting your investment. This is both an upfront and ongoing cost of home ownership. This type of insurance is needed to cover the cost of repairing or rebuilding your home if it's damaged or destroyed, and replacing your belongings if they're damaged, lost, or stolen. The cost of home and contents insurance can vary depending on the value of your home and belongings, the location of your property, and the level of cover you choose.

Utilities

As a homeowner, you'll be responsible for paying for utilities such as water, gas, and electricity. The cost of these utilities can vary depending on your usage, the size of your property, and the rates charged by your utility providers.

Looking to manage your utilities budget better? Consider splitting your payments into easy-to-manage instalments, instead of paying everything up front.