6 Steps To Your New Home

6 Steps To Your New Home

April 15, 2016

6 Steps for Budgeting for Your New Home

Buying a house is a huge investment, and one that will have an impact on your life for years to come. With the average length of a mortgage topping 25 years you’ll be making repayments for a long time, so spending within your means is key before committing to a budget! Setting your budget and sticking to it is the cornerstone of a successful property purchase, so we’ve put together this convenient walk-through for you to follow:

Step 1: How much deposit can you afford?

The larger a deposit you can pay on your new home, the better a rate your mortgage provider will offer you, and the more money you’ll save on your repayments. Though it can be a bit of a sting to suddenly find your savings account empty after years of careful stockpiling, bear in mind that any discount you can secure on your mortgage rates now is money saved in the future!

Step 2: What’s your monthly income?

You’ll need to know how much money you can rely on your household making each month. You should include regular payments like salaries, dividends and pensions, but exclude anything that can’t be predicted, such as inheritance, tax refunds or prize money. This is because your budget needs to be as solid a guarantee as possible of your future income, so that you can reliably pay the mortgage that you take out.

Step 3: How much do you spend each month?

Once you know how much money is coming in each month, you need to work out how much of it you’re spending. Good financial records will really help you out here, but if you’re registered for online banking you can also use their system to help work out your monthly expenses – this will include things like utilities and council tax, but you’ll also need to account for things like travel expenses, car maintenance and food shopping. Make a note of any expenses that you think you could cut back on; you may decide to forego a few evenings out in order to boost your budget!

Step 4: Will your income/expenses change when you move?

Once you’ve moved, your expenses and costs are likely to change – maybe your new job pays better, or you’ll have a longer commute. If you’re in rented accommodation you’ll of course no longer be paying rent, so you can remove this from your equation. Though predicting how your expenses will change is to an extent a guessing game, it is possible to do some research in order to come up with hard numbers; look up the council tax bands for your new area to see how they compare to your current property, calculate how your travel costs will change, get quotes for home insurance and homeowner’s association fees. Anything you can think of that makes your budget more accurate will really help you out when it comes to making repayments, so think hard!

Step 5: Calculate your mortgage

Now that you have your net monthly income, you can use it to calculate the amount of mortgage you can afford. Using an online mortgage calculator like the one at HALIFAX you can get an estimate of the monthly repayments you can afford to make, and the size of mortgage you can afford to repay, but remember this is only an estimate, not an offer! You’ll need to formally apply to a lender to begin the process of a mortgage application; the online calculator is only a rough guideline to the rates and total loan you can expect to be approved for.

If your total mortgage is lower than you were hoping for, don’t despair! Take a look back at the monthly expenditures you’re making; can you make any cuts? Similarly, is there any way to increase your monthly income? Try experimenting with the information you give the calculator to find out how much you’ll need to save to get the loan you want.

Step 6: Other payments to keep in mind

Buying a house is a costly process in and of itself; aside from the costs of your mortgage, you’ll need to pay for Stamp Duty, solicitor’s fees and surveys, the costs of which will vary depending on the value of your new property. These costs are likely to add up to several thousand pounds, so be sure to keep back enough cash to pay for the services required when making a purchase.

As a new homeowner you’ll also be responsible for the maintenance of your property, so having some savings left over to tackle any urgent issues with your new home is vital – you don’t want to be stuck with a leaky roof or a dud washing machine, and there’s no landlord available to help you out!