Budgeting Tips for Buyers

Budgeting tips for property buyers – what do you need to know?

At present, buying a home will prove a difficult task with the current lockdown measures in place – until at least May 7 – and various rules on social distancing and staying at home as much as possible.

Unless you are a long way into the process – past the exchange point and close to completion – and your house purchase is either critical or can’t, for one reason or another, be amicably postponed to another time, you are likely to be waiting a little while until you can put your home-buying plans into action.

The definitive government guidance on buying and selling during the Covid-19 outbreak states that there is no need for people to pull out of transactions, but everyone needs to ensure they are following guidance to stay at home and away from others at all times, including the specific measures for those who are presenting symptoms, self-isolating or shielding.

Sellers can still market their home for sale in the normal way, and accept offers, but there can be no physical, in-person viewings at this time, and you should not be visiting the home you are looking to buy in the flesh.

If you are happy, as some are, to make an offer on the basis of a virtual viewing, video tour or even the images of the property and gut feeling alone, this is still possible – but you must bear in mind that the transaction is likely to take much longer than normal.

It may be best, at present, to hold off on committing to a purchase until the stay at home guidance has been relaxed and the post-lockdown landscape is clearer.

This doesn’t have to be a negative, though, as it gives you extra time to prepare for when normal market activity does resume. It gives you time to carry out more research, to make sure the home is right for you (and in the right location) and to make sure your budget is in place and has been worked through to ensure you can afford the home you are looking to buy.

The last point is particularly important, because budgeting is one of the key areas – if not the key area – when it comes to buying a home. There is, after all, no point in purchasing a nice new home if it’s going to cause you financial difficulties, or if you know you are going to struggle to afford the mortgage repayments each month.

Build up your deposit

The biggest upfront cost when it comes to purchasing a home is the deposit – which is typically 5%-25% of the overall house price of the property you are buying. Depending on the cost of the home you are looking to buy, this can be a significant amount of money. Even if you are only putting down a 5% or 10% deposit, this can still add up to a not insignificant outlay.

It’s also important to remember that the bigger deposit you put down, the less you’ll be paying back in mortgage repayments every month, and the shorter time period it’ll take to pay off your mortgage. What’s more, a higher deposit usually leads to better interest rates – and, at present, mortgage rates are already very favourable for most borrowers, so increasing the amount you have in your deposit pot will help no end.

Now is, in many ways, the perfect time to save more – as there is very little to spend on in terms of social, leisure, entertainment and going out costs. There is no reason to spend £5 on that morning latte from Pret or Starbucks at present, no eating out in restaurants or pubs, and no cinema screenings, theatre shows or football matches to attend. 

With the current lack of sport on the telly, if you have a Sky Sports of BT Sports package, it may be worth your while cancelling this until the football season and sporting events restart.

Other possible ways of cutting costs and adding to your deposit include freezing any gym memberships you have (if possible), growing your own vegetables and herbs (not a quick-fix, but potentially a money-saver over time), walking everywhere instead of using the car (if feasible) and making sure you are much better at not wasting food.

Do some working out

Now is the time to try and work out exactly what your house purchase could cost you, breaking down the major costs in terms of things that will need to be paid upfront, costs associated with the mortgage, and ongoing spending obligations once you have bought your home.

As well as the deposit, other major upfront fees to consider include stamp duty (not applicable to most first-time buyers), legal fees for the conveyancing process, a valuation fee, and a surveyor’s fee. An electronic transfer fee, typically around £40-£50, will also need to be factored in. This covers the cost of your lender transferring the mortgage money from them to your solicitor.

Do your research, ask around your family and friends for an idea of how much they paid for these various costs, get quotes if need be, ask your agent and other experts for advice and guidance, and put together the outline of a rough budget from this. It won’t be exact, and can only ever be a rough estimate, but it will help to give you an idea of where you stand.

Mortgage costs to consider include arrangement fees, mortgage valuation fees and a booking fee, with these fees likely to vary slightly by lender and type of mortgage. Again, do your research and get in touch with a mortgage expert to ensure you’re getting the best possible deal.

It’s generally recommended that you pay these costs upfront, rather than adding them to your mortgage, as they accrue interest over time.

Ongoing costs to be aware of, meanwhile, include mortgage repayments (your largest monthly outlay), plus the day-to-day running costs of your property such as utilities (broadband, water, gas, electricity, etc) and also things like maintenance and repairs. It’s always good to have some spare money saved up for emergencies – such as a broken boiler or a leaking roof. You will also face council tax costs, which varies depending on where you live and the valuation band your property is bracketed under.

Now is the time to get your home moving budget in order so you’re primed and ready to go once the market restarts.

To find out more about how we can help you through the crisis, and improve your chances of buying with ease, please give Angels Sales & Lettings a call on 0800 043 6778. At a time like this, community is currently more important than ever, and you can find out more about the work in our local area here.

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