The cost of moving into a new home should ideally not get in the way of all the fun activities included in the process, such as looking for the ideal home, having your offer accepted, purchasing tons of stylish furniture, getting to know your new neighbourhood, and so on. However, even though the planning part is frequently quite fulfilling, thinking about the money aspect of things can sometimes make one feel uneasy. With some prior preparation though, this need not be the case.
You will be significantly less worried throughout the entire process and better prepared financially for the numerous expenditures and fees if you handle budgeting wisely. In this article, we go over the fundamentals of budgeting for a new home in an effort to reduce the stress of this frequently difficult time.
Control your spending
Let’s start with the core concepts of budgeting. Although it may seem simple, you need to have a basic idea of how much money you spend in order to manage a budget. In other words, it makes no sense to figure out exact costs and continue the purchasing procedure until you are completely aware of your financial situation. Working out all of your monthly expenses in connection to your monthly income may seem like a difficult task at first, but doing so can help you determine the price range and type of mortgage you should be considered while looking at properties.
Put the kettle on, take a seat with a pen and paper, gather all the necessary documents, such as wage slips, invoices, utility bills, bank statements, Council Tax papers, and so forth, and begin calculating out your current income and expenses. Everything must be taken into account, and we do mean everything. This includes everything from the larger payments (such as energy bills, insurance documents, current rent or mortgage), all the way down to the little ones (school meals, gym memberships, and charity donations). When planning your budget for a new home, make sure to look around! The total amount that enters and leaves your pocket each month should equal two numbers.
Choose a Mortgage Strategy
After calculating your monthly expenses, you should have a good estimate of how much you may borrow to purchase a new home. There are three primary expenses to take into consideration when creating a budget for a mortgage (keep in mind that your budget should also take growing interest rates and shifting circumstances into account):
- Mortgage loan payments – the regular payments you make to your mortgage lender, which frequently cover a number of years based on the value of the property.
- Mortgage deposit – the initial payment you make toward the cost of the house in order to secure the loan; for first-time buyers in the UK, this amount averages 17% of the purchase price, while certain lenders may allow deposits as low as 5% to finance a property purchase.
- Mortgage fees – a number of up-front costs, such as booking fees, arrangement fees, and mortgage appraisal fees, are paid in exchange for the lender’s services.
Check out this helpful calculator for a more detailed understanding of the mortgages you could be eligible for. The same data points that mortgage lenders use to determine loan offers are requested. The very worst-case scenario is having your property seized if you find yourself in the future unable to pay your mortgage. Just remember that your lender will thoroughly examine your finances before granting the loan, and they wouldn’t do so if they didn’t believe you could make your monthly payments. As a result, the worst that may happen if your budget is off at this point is that your loan application will be denied. Therefore, don’t worry about putting yourself at risk for repossession; it’s quite unlikely if you secure the correct financing.
Estimate the significant up-front expenses
The practise of budgeting involves much more than just figuring out mortgage payments, of course. You should start out by being prepared for the numerous upfront fees associated with purchasing a home. Knowing exactly what to anticipate in the future and meticulously planning for every possibility are, after all, the keys to excellent budgeting. We acknowledge that it is somewhat repetitive. What’s worse, though, dealing with the consequences of poor budgeting for months, or even years, than spending a couple of laborious hours sifting through reams of papers with a calculator?
Start by taking a look at all the up-front expenses connected with the home-buying process. You previously took into account the one-time mortgage fees (see above), therefore you now need to figure in the following instalments to your budget:
- Conveyancing fees
- House survey costs
- Estate agent fees
- Stamp duty costs
- Broker fees
It’s okay to use approximate estimations in your budget until you get the precise figures for these payments. This can be done by using a variety of internet calculators that can produce a more precise estimate or by operating on the basis of national averages.
Calculate the ongoing expenses
Once you receive your keys, the money doesn’t stop leaving your account; you still have to account for a variety of costly one-time moving expenses as well as ongoing maintenance charges. You should consider the price of moving, transport, and any required fees for kennel or childcare services on the day you move out. Nobody loves a fridge that’s empty, so you might even want to think about including first week living expenses in your budget.
Don’t forget about the expenses you’ll have to pay once you’ve moved in, such as your monthly utility bills, Council Tax, insurance premiums, service fees, and any expenditures associated with furnishing, remodelling, decorating your new home or a house clearance removing all the old junk. Being upfront and planning ahead are crucial in this situation, especially since purchasing real estate is such a long-term investment. At first it may seem tedious but it is important. To remind yourself of the ongoing costs associated with maintaining and residing in a property, review your present outgoings and adjust your budget as necessary.
Speak with a financial advisor
Although it’s not always necessary, this step can be helpful if you start to feel overwhelmed when budgeting for a new home. After all, many of you will be extremely busy, and creating a budget can take a lot of time. By relieving some of that pressure, financial advisors enable you to concentrate on choices that are more urgent and practical. Additionally, they are quite skilled at budgeting and thoroughly familiar with financial domains that may be alien to you. The tension you’re under may be relieved by purchasing a home with the financial assistance of someone who is familiar with every step of the procedure.
If you’re in the lookout for a new home, have a look at the properties we currently have available in Glasgow.