Five Tips for Planning your Budget when Buying a House
Sun 20 Mar 2022
Ian Woodhouse-Smith, Lettings Manager
Whether you’re a first-time buyer or an existing homeowner, planning your budget is a vital step before buying a new property. It pays to be organised – creating spreadsheets with your total income, outgoings and other costs will give you an idea of how much you can afford, and if you’re applying for a mortgage, how much you could borrow.
Here’s five top tips for planning your budget when buying a house.
Calculate your total income
The first step when planning your budget should be to calculate your total income. You should factor in all sources of income, such as your salary, investments, pension, state benefits and business profits. Then, you’ll need to deduct the tax you pay on each source of income to give you a figure for your net income.
Assess your outgoings
It’s essential to have an accurate review of your outgoings when planning your budget. Start with large monthly costs, such as travel, insurance, bills, rent or mortgage payments. List all essential outgoings that you cannot cut down on – this should include food, phone contracts and personal care costs.
Then, you can assess all non-essential outgoings like meals out, holidays, gym memberships and new clothes to determine if you could cut them out to save for your home quicker.
An easy way to review your outgoings is to examine your bank statements.
Check your credit score
A poor credit score can hinder your chances of securing a good mortgage. If you’re planning to buy a new home soon, there are some steps you can take to improve your credit rating.
- Join the electoral register
- Pay off debts
- Take out a credit card and make payments on time
- Pay bills on time
- Check your credit report for mistakes
Remember the additional costs
When planning your budget, don’t forget to factor in the additional costs that come with buying a property. This can include stamp duty, arrangement fees, survey fees, legal costs, land registry fees and removals costs.
You should be able to afford to make these payments after purchasing your home – if not, you may need to reduce your deposit.
Find out how much you can borrow
When you’ve calculated your total savings and income (minus essential outgoings), you should find out how much money you can borrow from mortgage lenders. Online calculators can give you a rough idea of how much you could borrow, but speaking to a mortgage adviser will provide you with a more accurate figure.
A mortgage adviser will assess your financial circumstances and give independent advice on how much different lenders would be prepared to loan you.
If you’re planning to buy a house in the Alresford area, Hellards can help. Our partner mortgage advisers L&C can help you assess your finances and find out how much you can borrow. For expert property advice about our part of Hampshire, get in touch with the Hellards team today on.