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Buying and moving into a new home is rarely a simple process, even for the most prepared and financially savvy among us. Alongside the price of the property itself, there are legal fees, surveys, taxes, removal costs and plenty of smaller expenses that can quickly add up.
There is also the mortgage to consider. Your income, existing financial commitments, deposit and general financial circumstances can all influence how much you may be able to borrow and the mortgage products available to you.
Whether you are buying your first home or moving from one property to another, planning your finances well in advance can make the process easier to manage. This guide looks at the financial side of moving house, from preparing your budget and applying for a mortgage to covering moving costs and settling into your new home.
Before you start booking property viewings, it is worth getting a realistic idea of your budget.
Mortgage calculators can provide an initial indication of what you might be able to borrow based on factors such as your income and deposit. However, these figures are only estimates and do not guarantee that a lender will offer you a particular mortgage.
You should also consider affordability from your own perspective. Being able to borrow a particular amount does not necessarily mean that borrowing the maximum available is right for you.
Think about what your monthly mortgage repayments could look like alongside Council Tax, energy bills, insurance, food, transport and your other regular financial commitments. Leaving some room within your budget can also make it easier to deal with unexpected household expenses after you move.
There is plenty of preparation involved in buying a house, but much of the early work revolves around getting your finances organised.
If you are saving towards a deposit, keeping your house fund separate from your everyday spending can make it easier to see how much you have accumulated and avoid accidentally spending money intended for the move.
It is also sensible to review your existing financial commitments before making a mortgage application. Mortgage lenders assess affordability, so credit cards, personal loans, overdrafts, car finance and other regular commitments may be taken into account.
Make sure payments on existing credit agreements and household bills are made on time and review your budget for subscriptions or other spending you no longer need.
You may also want to check that your address details are consistent across your financial accounts and that you are registered to vote at your current address.
Most importantly, avoid making significant changes to your finances simply to make yourself appear more attractive to a mortgage lender. Your aim should be to have a realistic and sustainable financial position that you can maintain after buying your home.
Once you have an idea of your budget, you may decide to obtain an Agreement in Principle (AiP), sometimes called a Mortgage in Principle or Decision in Principle.
An AiP gives you an indication of how much a mortgage lender may be prepared to lend based on the information you provide and the lender's initial checks.
It can help you narrow your property search to homes within a realistic price range and demonstrate to estate agents and sellers that you have started looking seriously at your mortgage options.
However, an Agreement in Principle is not a mortgage offer or a guarantee that your full application will be accepted. The lender will carry out further affordability, credit and property checks before making a formal mortgage offer.
When applying for an AiP, provide information as accurately as possible. Your circumstances can also change between receiving an agreement and making your full mortgage application, so avoid assuming that the amount shown is guaranteed.
The interest rate is an important consideration when choosing a mortgage, but it should not be viewed in isolation.
Different mortgage products can include arrangement fees, valuation fees, incentives, early repayment charges and different rules around overpayments. A mortgage with the lowest advertised interest rate will not necessarily be the cheapest option overall.
You should also consider whether you prefer the predictability of a fixed-rate mortgage or are comfortable with payments that could change under a variable-rate product.
With a fixed-rate mortgage, the interest rate and monthly repayments are usually fixed for an agreed period. Changes to the Bank of England Bank Rate therefore do not normally alter those repayments during the fixed term.
Variable and tracker mortgages can behave differently, with repayments potentially increasing or decreasing as interest rates change.
If you are unsure which mortgage is appropriate for your circumstances, you may want to speak to a regulated mortgage adviser or broker.
For first-time buyers in particular, building a deposit can be one of the biggest financial challenges involved in buying a home.
Once you have an idea of property prices in the area where you would like to live, you can start setting a realistic savings target.
Create a budget covering your income and essential expenditure, including rent, utility bills, food, transport, phone costs and existing financial commitments. You can then see how much disposable income is available to put towards your deposit.
Bonuses, commission and financial gifts can also provide opportunities to increase your savings without changing your normal monthly budget.
The important thing is to avoid stretching your savings so far that you have nothing left for the additional costs associated with buying and moving house.
If you are eligible, a Lifetime ISA can help you save towards your first property.
You can currently contribute up to £4,000 each tax year and receive a 25% government bonus, worth up to £1,000 a year.
To use Lifetime ISA funds towards your first home without paying the standard withdrawal charge, the property must meet the relevant eligibility rules, including the current £450,000 maximum purchase price. The account must also have been open for at least 12 months before it is used towards an eligible property purchase.
If you already have an old Help to Buy ISA, different rules apply. New Help to Buy ISAs can no longer be opened, although existing account holders can continue contributing under the scheme's rules.
Always check the latest government guidance before relying on an ISA towards your house purchase.
Your deposit is only one part of the amount you may need to save.
Depending on your circumstances and the property you buy, moving costs could include:
You may also need money for furniture, appliances and smaller household essentials.
These costs do not all become payable at the same time. Some may need to be paid before completion, while others arise on moving day or shortly afterwards.
Building a dedicated moving fund in addition to your deposit can therefore make the process much easier to manage.
If you buy a property in England or Northern Ireland, you may have to pay Stamp Duty Land Tax (SDLT). Scotland uses Land and Buildings Transaction Tax, while Wales uses Land Transaction Tax.
For England and Northern Ireland, the standard residential SDLT threshold is currently £125,000.
Different rules apply to eligible first-time buyers. First-time buyers purchasing a property for £500,000 or less can currently claim relief, paying no SDLT on the first £300,000 and 5% on the portion between £300,001 and £500,000.
If the property costs more than £500,000, first-time buyer relief is not available and the normal residential rates apply.
Different rates and surcharges may also apply if you already own another residential property or depending on your circumstances.
Because Stamp Duty can represent a significant additional cost, calculate your likely liability before deciding how much of your available savings you can put towards the deposit.
The months leading up to your move provide an opportunity to strengthen your financial position and build a buffer for unexpected costs.
Start with your normal monthly budget and identify your priority expenditure, including your existing rent or mortgage, utilities, food, transport and contractual financial commitments.
You can then look at your discretionary spending to see whether there are temporary savings you could make.
Because this is a short-term adjustment rather than a permanent lifestyle change, you might decide to reduce spending on meals out, entertainment, subscriptions or other non-essential purchases for a few months.
Consider putting the money you save into a separate but accessible account. This reduces the temptation to spend it while still allowing you to access the funds if you suddenly need to pay a survey, legal fee or other moving expense.
Moving house often leads to new expenses. You might need furniture, appliances or money for decorating, and it can be tempting to start buying these things before you have even collected the keys.
However, taking on additional borrowing while going through a mortgage application can change your financial circumstances.
A mortgage lender may reassess affordability before completion, so avoid taking out unnecessary loans, credit cards, finance agreements or significantly increasing existing balances without considering the potential impact on your mortgage.
If an unexpected cost arises before completion, review your savings and current budget first. If the expense creates a more significant financial problem, it may be better to reconsider your plans than stretch your finances beyond an affordable level.
Financial planning should not stop on moving day.
The first few months in a new property can be surprisingly expensive. You may discover small repairs that need completing, realise you need additional furniture or appliances, or find that your new household bills are different from those at your previous property.
Before spending heavily on decorating and furnishing, work out your new regular household budget.
Include your:
Once you understand your new monthly costs, you will have a much clearer idea of how much you can comfortably spend on improving the property.
Buying a house can use a significant proportion of your savings, but ideally you should avoid using every penny you have for the deposit and moving costs.
Home ownership comes with expenses that renters may not previously have needed to cover themselves. A broken boiler, leaking roof, electrical fault or damaged appliance can quickly become an urgent expense.
Keeping some accessible savings after completion gives you a financial buffer and may reduce the need to borrow when something unexpected happens.
The amount you need will depend on your circumstances, but rebuilding your emergency savings should be one of your financial priorities once you have settled into the property.
If you are selling one property and buying another, the financial picture can be slightly different.
You may be relying on equity from your existing home towards the deposit on your next property, but remember that selling also comes with costs. Estate agent fees, conveyancing fees, removals and potentially Stamp Duty on the new property all need to be considered.
There can also be uncertainty around property chains. A delayed or failed transaction may create additional costs, particularly if you have already booked removals, storage or other services.
Avoid committing every available pound to the purchase price. Keeping some flexibility within your moving budget can make delays and unexpected costs easier to absorb.
Once you are settled, review your finances again rather than simply returning to your old budget.
Your mortgage payment and household bills may have changed, and you may have different commuting, insurance and maintenance costs.
Update your monthly budget using actual figures from your new home and consider setting aside money each month for property maintenance as well as rebuilding your emergency fund.
If you have borrowed money towards furniture or other moving expenses, include those repayments within your budget and have a clear plan for paying the borrowing down.
Moving house represents a major change to your finances, so it can take a few months before you have a reliable picture of your new regular expenditure.
Moving house is expensive, and even a carefully prepared budget cannot account for every possible cost.
The best way to protect your finances is to start planning early. Understand what you can realistically afford, build savings for costs beyond your deposit, keep existing financial commitments under control and avoid unnecessary changes to your borrowing while your mortgage application is progressing.
Once you move, continue monitoring your spending until you understand the true cost of running your new home.
A house is likely to be one of the biggest financial commitments you ever make. Giving yourself enough time to prepare can help ensure the excitement of moving into a new property is not overshadowed by unnecessary financial pressure.
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