How to Budget for a New Home
When it comes to budgeting for a new home, there are a few expenses to consider.
While your budget for a new home may vary based on the location, size and age of the property you’re eyeing, certain costs will tend to be similar regardless.
Here are the big ones you need to be aware of:
Your Mortgage Deposit
A mortgage is a loan the bank gives you to cover the cost of your home. Whilst the mortgage itself is expected to be paid over the long term, with interest, you’ll still be expected to pay a one-off deposit towards your home.
A deposit is calculated as a percentage of the overall cost of your home. With new homes, this percentage will likely be determined by the developer.
Before you consider buying a particular home, it’s important to determine how large a mortgage you’ll need to take out and, to that end, what deposit you’ll need to pay upfront in order to secure the property.
It’s worth noting that, before offering a buyer a mortgage, most banks will want to carry out an independent valuation of the property you’re interested in. They charge for this service, so you’ll need to factor this in when applying for a mortgage.
NOTE: You should also consider securing the services of a mortgage broker. Several mortgage brokers get paid by commission, being paid by the bank providing the loan so they may not be an actor you necessarily need to budget for. It’s worth, however, confirming this with the mortgage broker you decide to secure the services of.
Any Legal Fees
The home purchasing process can be a minefield of legal terminology and terms & conditions, and most people who’ve gone through the process before will highly recommend acquiring the services of a competent solicitor.
The best lawyers aren’t cheap, however, if you can afford one, they are absolutely worth securing for your peace of mind alone.
They will question the things you might not know to question and provide invaluable guidance that will help keep the home buying process straightforward and manageable.
Stamp Duty
New builds are, similar to existing properties, subject to stamp duty. Stamp duty usually works out to be 5-12% of the value of the property you’re purchasing, if the value of the property is over a certain threshold.
It should be noted that first time buyers aren’t subject to a stamp duty as high as those who already own properties, but regardless of whether you are buying your first property or are looking to up/downsize, it’s worth considering this expense when budgeting for a new home.
Learn how the UK government calculates your stamp duty land tax.
Furnishing
The furniture budget for a new home really depends on your personal tastes; what do you need to make a house feel like a home?
There are a few essentials that, if not provided by the developer as an integrated appliance, should be top of your shopping list. These include a washing machine, a comfortable bed, an oven, and a fridge/freezer.
If you’re just at the start of your buying journey, furniture may not be at the top of your priority list when it comes to putting money aside as some of the essentials can be expensive.
However, it’s still important when considering how to budget that, for a new home, you consider both your short-term and long-term costs.
After all, what good is a home that isn’t ready to be lived in?
Budgeting for a new home isn’t easy, as it’s one of the most important purchases you’ll ever make.
However, by taking everything one step at a time and by viewing your home more as a long-term investment rather than a short-term expense, it will make the whole process feel much more manageable.
