How to Buy a House
How to Budget
As a first-time buyer it can be difficult to know where to begin in trying to work out how much money you have for the deposit and how much to spend on your monthly mortgage repayments. Your monthly outgoings as a homeowner will differ from those of a rent-payer. So, what payment costs do you incur when you buy your first home and what kind of monthly outgoings do you need to budget for?
Before you begin your house-hunt in earnest, it is essential that you sit down and work out how much money you have for a deposit. This may not just be a question of the money you have saved towards the deposit so far, as you need to remember that you will have some one-off payments when buying your new home. These one-off payments will include:
- Legal cover
- Stamp duty
- Evaluation searches
- Solicitor's fee
- Mortgage arrangement fees
And may also include any payments you may have to make on:
- Furniture
- Decoration costs
- Yearly bills such as TV licence
Once you have a clearer idea of how much money you have for your deposit you then need to calculate how much you will be able to afford to spend on your mortgage repayments each month. At this point, you can seek mortgage advice. In order to do this you need to take into account your monthly outgoings – these will differ from the ones you may have at the moment and also if you move out of your current area into a new area, say from Yorkshire to London. Use the checklist below to remind you of all the monthly payments you might incur:
- Bills (such as council tax, water, gas, electric, phone)
- House insurance
- Mortgage protection cover
- Food money
- Car/transport costs
- Gym membership
- Pension (if you have one)
- Clothes
- Money for socialising
- Annual service charges
- Grounds and property maintenance
Keeping your bills budget down is very important and insulation is key, as is fixing such as dripping taps and sealing drafts off. In some places grants can be obtained for roof insulation. Tips on reducing fuel bills through energy efficiency are easy to find, as is the order of priority. In theory first time buyers should be keener on keeping costs down but in actual fact all householders are keen on energy efficiency - it's in everyone's interest.
One of the most important things to consider is the effect of any increase in mortgage payment due to an increase in interest. If you take out a mortgage where the monthly repayment amount is tied in any way to interest rates then if they cahnge (up or down), you will be affected. It's important you are aware of how an intrest rate rise of say half a percent might iincrease your mortgage payments.
In terms of on-going property maintenance bills, it's always good to seek advice from parents, friends and professionals about property maintenance. Not only will you want to protect the fabric of their property but also to enhance it as an investment. Probably the most important area is the roof as if there can be any water ingress, this can effect the whole property. Damp is also something that should be remedied sooner rather than later as the damage can be extensive and expensive - not to mention unsightly! Major items needing fixing should be identified in the survey or possibly in the home information pack depending on how comprehensive it is. Window frames, if wooden can also be a cause for concern, and it is a good idea considering switching to double glazing for lower maintenance or they may need repainting or re-varnishing every two or three years. Chimneys will need anual sweeping and the boiler will need an anual service.
These costs can all mount up and should be taken into consideration when looking at budgeting after moving in.
The best way to avoid spiralling into debt is to be aware of what costs you are likely to face and spread the outlay so it is managable. Decorating and furnishing can be spread so only the most urgent expenses occur at first. There are ways to reduce costs such as doing it yourself, also by purchasing second hand furniture.
In terms of decorating and furnishing your new home on a budget, this is all down the the individual. Too often we hear first time buyers say they can't afford what they want but in actual fact they might be being particularly fussy. There are countless television programmes these days about how to smarten a place up with paint and throws - these are a great first step. Achieving your perfect home takes years - if not decades. Parents are usually keen to help their children live in a nicer environment and can be an enormous help.
Our advice on keeping costs down are to buy second hand furniture - you can get some lovely items from e-bay, the local classifieds or friends and family. Also, the use of paint, rugs and throws can do an awful lot to make somewhere feel cosy and colour-co-ordinated. You may want to try and buy white goods such as washing machines from the previous owners of the property - they might throw them into the package. New home owners can gradually upgrade as they go on, leading to a home they are very happy to live in and come home to.Once you have calculated these monthly payments you will then have a better idea of how much you will be able to spend each month on your mortgage. You can then enter your deposit into an online mortgage calculator to give you an initial idea of how much you can afford to spend on the price of the house itself. This will help you when you speak to the mortgage advisor as more information helps them to find the best mortgage for you.
Find out more about the house-buying process in our guide to how to buy a house:
How Much Can I Borrow? l Find a Property l Mortgages l Conveyancing Solicitors and Legal costs l Stamp Duty l Property Insurance Home Information Packs l Surveys and Surveyors l Solicitors l Removal Companies l Utilities Companies l Buying a House at Auction l Buying a Repossessed Property
Most useful and most popular pages on this site:
Look for your First Property l Seek First Time Buyer Mortgage Advice l See our Best First Mortgages Comparison Table l Find out about First Time Buyer Mortgages l Find out How to Buy a House l Learn all about The First Time Buyer Mortgage l Shared Ownership