Budgeting for a new home: How to get your finances in order – Mummascribbles

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Buying a house is an incredibly exciting prospect. Not only are you putting down roots and creating a new home, but you’re also investing in an asset that is likely to appreciate over the years. Purchasing a new house or apartment is a major decision, and it probably represents the most significant financial outlay you’ve made to date. For this reason, it’s crucial to be prepared and to ensure that you’re making the right decision. If you’re looking to buy a new home, here are some tips to get your finances in order. 

Saving goals

Many of us start saving money with a view to putting a down payment on a property. It’s not easy to save when you’re paying a mortgage or rent and you have household bills to cover, but if you can put money aside on a regular basis, this will be hugely beneficial when it comes to taking out a mortgage or home loan. The more you can put down on a house or flat, the less you have to borrow from a lender. If you are looking to buy your first home, or you’re keen to move up the ladder and explore new areas or buy a bigger house, it’s wise to start saving as soon as possible and to set yourself targets and goals. Use a monthly budget to help you plan ahead. If you draw up a budget, you should be able to calculate how much money you have available to save each month. List your regular outgoings and one-off costs for the month ahead and take the sum away from your income. Once you know how much money you have after paying bills, you can set a budget for other household costs, for example, petrol and groceries, and then decide how much to transfer to your savings account. It’s best to pay into your account on payday so that you don’t spend the money you wanted to save. 

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Mortgage and home loan comparisons

Most people who buy real estate have to borrow money and then pay it back over a period of several years. If you’re looking to take out a mortgage, it’s important to undertake extensive research to find the best home loans. There are different types of mortgages available, and rates will vary according to how much you put down, the length of the term and the value of the property. If you have a substantial deposit, you should be able to access preferential rates. When you’re comparing home loans, it’s a good idea to gather information from reputable, reliable financial websites and to arrange to see a financial adviser or a mortgage broker. Mortgage brokers can explore offers and deals from multiple providers on your behalf and offer recommendations based on your circumstances, while an adviser may be able to help you save more, build up a larger deposit and identify ways to improve your financial situation before you buy a house or an apartment. If you have existing debts, for example, it may be best to pay them off before you apply for a mortgage so that you have a better credit score. 

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Reducing debt

When you apply for a mortgage or a home loan, a lender will evaluate your capacity to pay back that loan based on several factors. Your income is important, but lenders will also look at your current financial situation. If you have a lot of debt, this can affect your ability to borrow money. If you have credit cards or you’re already paying back a loan, for example, this will affect your monthly outgoings, and the amount you can afford to borrow. If you’re already finding it difficult to pay bills, as well as paying your loan repayment and the minimum payment on your credit card, adding a mortgage into the mix is going to increase pressure. Reducing debt is beneficial for increasing your chances of being able to take out a loan to fund your new home purchase. You’ll be able to free up income each month, which could cover your mortgage, and your credit score will improve, which means that lenders will deem you a less risky prospect. To clear debts, it’s important to take stock of your financial situation and make sure you’re aware of how much you owe and who you owe. You can choose to start paying off smaller debts or tackle high-interest debts first. Some people respond positively to crossing off smaller debts on a more regular basis, while others prefer to get rid of the debts that are costing them most each month. 

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Fees and charges

When you buy a house, you don’t just pay the asking price. There are fees and charges to add to the purchase price. It’s important to budget for these costs, so that you don’t end up out of pocket or face unexpected surprises once you’ve found your dream home. You’ll need to factor in legal fees to complete the transaction and you may also need to add agent fees if you’re selling and buying at the same time. Research costs, get some quotes and incorporate any extras into the total budget for the acquisition. 

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Putting money aside 

Being a homeowner can be an expensive business, and this is why it’s helpful to have a savings pot or an emergency fund. If you need to carry out repairs, you want to redecorate or renovate, or you’re keen to overhaul the garden, for example, it’s incredibly useful to be able to dip into your savings. You could also use your fund to help with household bills. 

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Buying a new property is exciting, but it can also be daunting. For most of us, spending thousands of pounds is not an everyday occurrence, and signing up for decades of mortgage repayments is a scary prospect. If you are looking to buy a new home, it’s beneficial to get your finances in order and to take your time to set a realistic, affordable budget and find a home that crosses all of the boxes.