Buying a new house is never a simple process — even for the most prepared and financially savvy among us. There are always hidden costs, unavoidable hiccups and the possibility of the move falling through completely. When considering how to manage your money over the few months before and after moving house, there may be additional costs to factor in that could have a significant effect on your finances.
In the UK, the average cost of moving house is just under £8900. This is a considerable amount of money to prepare in advance, even if you are downsizing and will be left with some equity from your previous home. Some of the expenses are upfront costs which means you may have to pay for them on, or even before, the completion date. These can include:
This means you need to have the funds ready, as you can’t use the equity from your house sale or funds from your new mortgage to cover the payments. As well as upfront costs, there are also things you may need to pay for on the day of the move or in the few days following. Commonly this includes things like:
It’s unlikely that moving house is a snap decision, and even if it is, it usually takes at least three months to sell your property and find a new place to live. The months preceding your house move are vital in building your financial resilience and stability. As soon as you start to debate whether you are ready to move house, you should start diverting your savings into a new house fund if you haven’t already. This may be to assist with the moving costs listed above, or it could form part of your deposit as well. In either case, it’s important that you remain realistic and leave yourself sufficient funds to meet your existing financial commitments. While instant cash loans and other types of borrowing will remain available, it’s not usually advisable to take out unnecessary credit before you move house or buy a new property as it could affect your mortgage application.
Budgeting is something most people do every month or at least at the start of each year to ensure they stay in control of their finances, and so they know when and where they can make savings. But less commonly, people use budgeting for major or significant life events such as moving house. Creating a budget isn’t something that should be done only for day-to-day spending, as it can help navigate difficult or large financial commitments by offering a plan of action and a guideline to stick to. Adjusting your budget in times like this is crucial and is probably much simpler than you think. Start with your usual budget but focusing only on your priority expenditure. This includes your mortgage, utilities, food and internet. These are the monthly costs that you can’t adjust. The income you have left over, however, is your disposable income and this can be adapted to maximise the amount you put into savings. Because it’s only a temporary change, you can afford to make bigger sacrifices as your expenditure will return to normal once you’ve settled into your new home. Consider putting the additional savings into a separate but accessible account. This way you are less likely to spend the savings than if you left them in your everyday current account, but you can also access the money if you have to meet an unexpected cost or pay an upfront fee quickly.
As with many big life events, moving house can invite unexpected or hidden expenses that haven’t been budgeted for, but require immediate action. It can be tempting to look at ways to get money quickly, but sometimes taking a moment to breathe and assess your current finances is more practical, especially if you’ve budgeted for emergency payments.
Taking out credit before completion could risk your mortgage application being declined, as the agreement in principle is dependent on your circumstances staying the same as when you applied. Instead, review your savings and current budget to see if there is any room for re-allocation of funds. If the issue is only temporary, then you may be able to subsist for the couple weeks until payday on a smaller budget in order to meet unexpected expenses. If the emergency throws up more long-term issues, you may need to rethink your budget entirely and even put your property search on hold. It will be harder to move house if your finances are in disarray, so you should work towards financial stability before making any major financial decisions where possible.
A guide to managing your money: Sustainable Budgeting
A guide to managing your money: Saving on Household Essentials
A guide to managing your money: Agreements in Principle
For more helpful information about how to manage your money, different financial products or what we do at Polar Credit, take a look at our Info Hub.