The Essential Guide to Budgeting for New Homeowners

Buying your first home is an incredible milestone but budgeting is equally important hence why we are sharing this essential guide to budgeting for new homeowners. As a first-timer buyer myself, I know the importance of understanding how owning your own home will impact your monthly budget as well as understanding the hidden costs associated with being a homeowner.

The essential guide to budgeting for new homeowners is something as a new homeowner I wish someone had explained to me in detail. I am a budgeter at heart and I planned for every expenditure I could think of but from a renter’s perspective and not a homeowner’s perspective. This is why I hope this guide will be useful to all new homeowners and those thinking of buying their first home.

What will this Essential Guide to Budgeting for New Homeowners Cover?

This Essential guide to budgeting for new homeowners will cover everything from your mortgage, costs associated with that, everyday bills to consider and axillary costs that you may not have thought of but are good to budget for. The list below is not comprehensive but it does cover the most important things you should know before you make that purchase.

• Mortgage – what lenders are looking at
• Home + Life Insurance – why it’s important
• Stamp duty Land taxes – you owe the government
• Home maintenance and repair costs (boiler, garbage disposal) – it’s your responsibility
• Home Furnishings – decorate how you wish
• Utilities (gas, electric, internet, council tax, water) – somebody will be knocking
• Personal Expenses (mobile phone, memberships, eating out, food + shopping) – because life is for living
• Car expenses (insurance, fuel) – you need it for everything
• Pets (if applicable) – best friends for life

Buying a new home can be such an exciting time in one’s life, at least, for me it has been such an amazing adventure being able to afford my own home. When I was jotting down my budget for a new home, one thing I found helpful to have was a budget tracker and a separate savings account. This Essential Guide to Budgeting for New Homeowners aims to share all the expenses you should consider when buying your first home.

Mortgage – what lenders are looking at!

The first time I considered buying a house I did some research on now mortgages worked but I found it a bit challenging to know which lender I should choose. I opted to find a mortgage advisor (aka my lifetime financial advisor) who would explain to me every minute detail and give me options that were affordable for me.

Lenders are much harsher on first time buyers than other buyers and often have plenty of demands before they can lend you the money. Some lenders require you save at least 15% of your mortgage, have a good credit history, no defaults on your account for the last 12+ months and can afford your mortgage should interest rates go up.

I was well aware that a hard credit search would be done on my account to get a full picture of my money habits, affordability and any late or defaulted payment issues I may have had or could potentially have. Lenders will always need a full financial background before they can lend to you.

Important information to know is that you will have to pay your mortgage advisor, your lawyer, surveyor and other administrative costs associated with the home buying process.

Home & Life Insurance – why it is important

The life insurance talk always makes me feel some type of way as if I am preparing for my death real soon. But it shouldn’t be like that, insurances are there to give you a peace of mind and essentially assure you that should the worst happened you are covered for most eventualities. Speak to your mortgage advisor on what type of insurance you should get for your home and yourself.

The insurances I went for were for my home (buildings and content), life insurance, loss of work or income insurance and pay around £200 for all of them. This is expensive and not something I had considered beyond buildings and contents insurance. Loss of work insurance is something I chose purely on my personal fears because if you can’t afford to repay your mortgage, your home can be repossessed.

Having a frank discuss with your financial advisor is one thing that I truly encourage to ensure you have considered every possibility. We live in such uncertain times and I think it’s important to protect not only yourself, your kids but also your home and it goes beyond what kind of decor you life.

Stamp Duty Land Tax

Stamp duty land tax (SDLT) is a property tax that you pay to the government when you house is above a certain threshold and this differs for each region. This is something that I did not know about when I was researching about housing buying. It came as an expected bill to my already increasing budget but I am glad I had allocated spare money got any eventualities.

Depending on the price of your house and the area you are in, the SDLT might be higher or lower. When it comes to making the payments, these can and should be handled by your lawyer. Take the time to understand the threshold and use can use the calculator to find out if you should pay stamp duty or not.

Home Maintenance and Repair Costs

Until I had bought my home, I did not know how much I would need to have saved for those home maintenance projects and unexpected repair costs around your home. I am glad that my lawyer insisted on having the boiler, the heating system and such was checked a couple weeks before I moved in so I knew it had a good clean bill of health.

Repair costs will always vary but it’s good to start planning for them and hopefully, you can save up enough before you actually need to use the money. Otherwise, you might find yourself getting into debt soon after buying your home because your funds are depleted. One thing to decide before buying a house is whether you are happy to do some repairs or not.

I opted for not a new build but also not too old that I need to change a lot as soon as I moved in. One thing I did know is that I didn’t want to be performing repair works around the home other than changing the curtains and hoovering the carpet. If you are ok for a fixer-upper which most times are cheaper then I would budget for them as well.

Home Furnishings – Decorate it

Furnishing my home was the biggest highlight of my adulthood, I knew exactly what I wanted, how expensive the items I needed were and budgeted for each and every single one. I made sure to leave extra money for home furnishings as I knew I would want to buy a lot of new items for my house. From sofas through to cushions and artwork, I budgeted for it all.

People often ask me how much I spent on furnishing my home and I tell them I kept £10k just for things I would like. Everyone has different tastes and budget and I am not different but I knew this is my forever home so I invested in it big time. With the current pandemic I knew I made the right decisions because home is were I am spending 99% of my time.

Utilities – someone will be knocking

When it comes to budgeting for utilities I based my calculations off the property I was rented but doubled the price as I was moving from 1-bed to a 3-bed house. After I doubled the price for the utilities, I then budgeted for 3-months worth and kept to the side. Whether I overestimated the cost or underestimated it, it didn’t matter as I know this money squared away.

If you are not sure how to make estimations for your new home, I would check typical costs for that area on estate agent websites or even the council websites. I also made sure to write down every single utility bill I would need to pay for, for that house. Every house will be different i.e. some might not have gas bill because the property is purely electrically managed.

Personal Expenses – because life is for living

For most, personal expenses don’t make it onto their budget planner because either there are minimal personal expenses or they wing it. I am a budgeter and always budget for personal expenses too. Obviously my mobile phone and gym memberships are personal expenses that I absolutely need, I budget for these monthly.

Food shopping is another thing I budget for quite rigidly because I know what I like and want to ensure is always in my home. When it comes to my monthly food shop, I always assign between £150 – £200 and during the months when I don’t use it all, I keep it for takeaways. I also budget for eating out and I try not to spend above £150 a month eating out.

Depending on how often you intend to be going out versus cooking at home, you can either allocate £100 for a food shop and £100 for eating out. Whilst budgeting is important, you need to be disciplined with your spending and only use what you have and don’t spend it on the credit card unless you can pay it back in full that month.

Car Expenses – you need it for everything

I love my car and take great pride in owning it, well, technically I don’t own it but more renting it until a certain time, pay off the remaining finance and it will be mine. When it comes to car expenses, you need to start a car fund where you save a spare change every so often and keep it for when your car might need it.

Most car expenses include the car loan repayments, car insurance (+ roadside assist, fuel money, car tax and repairs. Whilst major car repairs will be dealt with by your insurance, with smaller repairs, I prefer to pay for it myself and not make a claim. The important thing here is to ensure if it’s under warranty for the duration of the finance deal, you use their certified dealer to handle repairs.

Pet Care and Insurance (if applicable)

I love pets and want to adopt one but I am never home longer enough to give it adequate time and attention. Pets are not just for Christmas and as many pet owners know, there is a number of things you need to ensure you budget for. From their feeds, insurance to registering with the Vet, fleecing them and grooming them as often as necessary.

If you are a pet owner then I am sure you already know this but for those who don’t know there is a lot of costs associated with owning a pet. I would recommend budgeting for your fur babies too either on a monthly basis or 6-monthly depending on your affordability. Grooming is something important for your pet but you could also save money and do it yourself.

As a first time buyer myself, I know how daunting all this is and how expensive might seem and I won’t lie, owning a home is expensive but so worth it. Think of it as an investment, your forever home, no more renting and it’s your very own space and can decorate and manage as you wish. But also remember everything is now your responsibility, no more calling your landlord to fix anything because you are the landlord.