Planning for both expected and unexpected costs can make the transition to first-time homeownership smoother.

In addition to the initial deposit and statutory cost, you might also need furniture, pay for relocation, or cash for immediate minor repairs or major renovations.

Beyond the upfront expected costs, you'll probably spend between 1% and 4% of your home's value on unexpected maintenance each year. 

Maintaining a cash emergency fund before you move in is a smart way to build a buffer into your budget.

First-time homeownership has been a bright spot for the Australian property market in an otherwise dismal financial year. 

With mortgage rates at all-time lows and people seeking more space for amenities like home offices and backyards, the homebuying surge is expected to continue well into 2022.

If you're in the market to buy your first house, there's no such thing as overplanning — especially when it comes to budgeting for both expected and unexpected costs.

No one has to buy a house, so you might as well go into it as financially prepared as possible.

Planned costs includes your deposit and more

It's not uncommon to spend years saving for a deposit, but many people overlook less obvious expenses they'll need cash for as a new homeowner.

There are of course costs associated with the purchase itself. Depending on the property value, there may be stamp duty payable on purchase, mortgage insurance, home and contents insurance, and if buying into a strata complex, on-going body corporate levy.

But it doesn't end there, anyone moving from a unit to a free-standing house, will likely be blessed with more space. More space means more furniture and decor to fill it. In other words, you can expect to buy those items that turn a house into a home. 

There might be immediate repairs or renovations to make shortly after you move in, and those should be budgeted for as well. Depending on the condition of the house you're buying, but if you know a major system is nearing it’s useful life (i.e. the hot water system is 20 years old), then you should plan for a replacement in the near future.

Save up to 4% for emergencies

When you’re a renter and something breaks, you generally don't have to foot the bill. It's different for a homeowner. Everything from leaking roof to a burned-out lightbulb to termite infestation can become your responsibility as soon as your contract becomes unconditional.

A typical homeowner could spend anywhere from 1% to 4% of their home's value on maintenance in an average year. 

Consider this your home emergency fund: a pot of cash that sits in an offset or redraw facility where it's easily accessible and saving you interest payable on your loan. 

Using the above guideline, a house worth $600,000 would require emergency fund between $6,000-$24,000. It might seem overwhelming to add on a few thousand dollars to your initial savings goal, but unforeseen issues could crop up as soon as your few months of homeownership, and you don't want to be applying for personal loans with high interest rates.

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Differentiate between needs and wants

It's important for homeowners who don't have an unlimited supply of cash (and borrowing capacity) to distinguish between wants and needs. You might want to purchase state-of-the-art home theatre system, but you need to fix the plumbing before a real catastrophe occurs. 

Be mindful where your available money goes first. You might not be able to watch footy from a humongous screen, but you'll be prepared to afford any real expense that comes up.

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This article via BI does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.