The costs associated with buying a home amount to between 10 and 12 percent of the property’s value, which—combined with the fact that mortgages typically cover no more than 80 percent—means you need to have savings of at least 30 percent of the home’s price.
A ground-floor apartment with a garden or a penthouse with a view? In the heart of the city or in a newly developed neighborhood? Buying a home is a major decision—one that requires anupfront investment of time and effort to find the perfect home.
But beyond individual preferences, budget is a key consideration, and just about everyone should ask themselves, “How much money do I need to buy an apartment?” before embarking on a search that might otherwise prove fruitless.
The answer to this question isn’t just about the mortgage loan, which, in most cases, is used to become a homeowner. In addition to financing, it’s important to take into account other costs associated with the purchase, as well as certain monthly or recurring expenses such as property taxes or utility bills, which, if not factored in, would make the dream of buying a home unfeasible.
How much money do you need to buy an apartment?
One of the cornerstones of buying a home is having savings. Considering that mortgages granted by banks generally cover 80% of the home’s price, as a buyer, you’ll need to contribute at least the remaining 20%.
And there’s more.In addition to the down payment, you’ll need to have enough money to cover the closing costs, which generally amount to 10% of the transaction value. In other words, if you’re thinking about buying a house, you’ll need to have saved 30% of the property’s value.
Mortgage Loan
Some people don’t need one, but it’s most common to take out a mortgage to buy a home. Having enough money to cover the monthly payments is the first step in considering a mortgage application, and in this regard, financial institutions estimate that the monthly mortgage payments, combined with the borrower’s other outstanding loans, should not exceed 35% of their net monthly income.
The mortgage amount and term, as well as the interest rate, will determine the monthly payment, although banks also offer special terms if, in addition to the mortgage loan, you purchase products such as insurance, retirement plans, or similar offerings.
But is it possible to apply for a mortgage without savings? The answer is clear: no. While it’s true that some lenders offer mortgages for amounts exceeding 80% of the property’s value to certain types of borrowers, even if the loan were to reach 100%, you would still have to cover the costs associated with the transaction.
Costs Associated with the Sale
Aside from the cost of the home, there are a number of other expenses associated with any real estate transaction that you should consider if you’re thinking about buying a house.
Notary and Land Registry fees, for example, are mandatory and regulated by the government, just like VAT. Another tax that must be paid is theStamp Tax, which, in this case, is set by each autonomous community.
When it comes to resale homes, you’ll also need to factor in the Property Transfer Tax (ITP). Hiring a real estate agency, however, is an optional expense—though it’s recommended if you want to avoid letting red tape test your patience.
Watch out for monthly expenses
The mortgage loan and the costs associated with the purchase aren’t the only things you need to consider when figuring out how much money you need to buy a house. When crunching the numbers, you shouldn’t just rely on a mortgage payment calculator—you also need to factor in your monthly expenses. These include recurring or one-time payments that can put an added strain on your budget.
This category would include, for example, utility bills (water, electricity, heating, etc.), communication expenses (phone, internet, etc.), insurance, homeowners’ association fees, property tax, garbage collection fees, etc. Any miscalculation could be disastrous for your finances.
How to Save for a Home
If you already know how much money you need to buy an apartment and are determined to purchase a home, perhaps it’s time to start saving for your home. This requires a commitment on your part, although the first step is to be realistic about the type of home you can afford based on your financial situation and the mortgage payment, monthly expenses, and other costs you can handle.
From there, here are some recommendations that will be very helpful in raising the money for the down payment and achieving your dream of becoming a homeowner.
To start, you should set short-, medium-, and long-term financial goals and, based on those, establish routines that will help you achieve them. The first step is to fill out your monthly income and expense chart to see how much disposable income you have each month and, from that amount, set aside some money for your savings account.
Cutting out unnecessary expenses, cutting back on any social activities that involve overspending, planning your purchases carefully, and reviewing your bills, insurance policies, and various fees to avoid paying more than is strictly necessary are just a few recommendations that will help you save up to buy a house.
However, beyond the financial aspects, there are a number of other factors you should keep in mind when buying a home, and at Culmia we’ve put together a comprehensive guide covering all the steps you need to take to purchase your new home. You’re just one click away from downloading the guide to buying a home and taking the first step toward your dream of becoming a homeowner!
