If you’re looking to invest in an asset that’s as valuable as a home, then it makes sense to do some planning before finalising the deal. By getting the budget in place, you can make the home an asset going forward, rather than a liability. This can feel pretty daunting (!!) so I thought I’d share some of my home budgeting tips to get you started.
Understanding Your Financial Limits
To begin with, it’s important that you understand exactly how much you have to spend. Going beyond your means can make life uncomfortable, and you might end up having to make sacrifices in order to make ends meet. Every pound that goes toward your monthly mortgage payment, is a pound that can’t be committed to other priorities, like holidays, cars, and fun activities! Make sure you are budgeting for these things too when you start to plan your overall finances.
Hidden Costs Beyond the Purchase Price
Of course, there’s more to the cost of a property than the purchase price. You’ll also need to factor in the various hidden costs that go along with the process. Conveyancers, removal specialists, and surveyors will all need to be paid, after all. Then there’s stamp duty and renovation work to consider. Investigate the entirety of the purchase. When you have an idea of where your money is going, you can make adjustments. This will help you to save a little here and there. The average cost of moving house is around £14,000 – but this figure can vary depending on the complexity of the transaction.
Bear in mind that new-build homes, almost by definition, require less maintenance and retain energy more effectively. As such, they’re cheaper to run in the long term.
Saving for a Down Payment
You can bring down the overall cost of your mortgage by committing more up front. The larger your deposit, the smaller the risk for the lender, and the more favourable the rates you’ll be offered. You might find that saving a little bit more to begin with means that you spend far, far less over the duration of the mortgage.
Mortgage Options and What to Know
Mortgages come in many different varieties. Distinguishing between them, and picking the one that best suits your circumstances, is often a matter of shopping around. Ideally with the help of a professional broker, who might have access to deals that aren’t available to you.
Some mortgages are designed especially for first-time buyers. These typically have a loan-to-value ratio of around 95%, and, when used in conjunction with government schemes, can be a great way to get onto the property ladder. There are also specialised mortgages available for buy-to-let landlords, which require a much larger deposit.
Long-Term Budgeting After Move-In
You’ll also need to figure out how you’re going to keep the household budget in order after you’ve made the move. Establish this before you commit to the purchase, and see how much extra cash you’ll have left over at the end of each month.
LL x
*This is a contributed post. As ever, all opinions are my own.
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