January 15, 2019
How to budget effectively when moving home
When it comes to moving home, you can get a wide number of costs involved . From upfront costs like a deposit to mortgage repayments and moving day itself. So it pays to be on top of your budget at all times. If you don’t stay within your set budget, this could cause considerable financial issues at a later date.
When buying a new house and moving home, costs are broadly split in half. First, you’ll need the funds required to purchase a property and cover moving day. Secondly, there’s the ongoing costs needed to maintain and run the home once you’ve moved in. Below, we outline the costs involved with a house move that you should be budgeting for…
- The costs upfront
1/ Deposit. Your biggest upfront cost. This is usually 5%-20% of the overall price of the home you’re looking to buy. It could be higher in some cases. The more deposit you can put down, the greater your chances of being accepted for a mortgage. A bigger deposit is also likely to mean lower interest rates. This can help you to cut costs over time. What’s more, you’ll own a bigger share of your home if you can put down a decent-sized deposit. It means you’ll be paying back less in mortgage repayments each month. And potentially for a shorter period of time.
More and more lenders are now offering 95% mortgages. It means you only need a 5% deposit. Some of the government’s affordable housing schemes also require smaller deposits. This improves people’s chances of getting on the housing ladder. Meanwhile, 100% mortgages are now being offered by some lenders, albeit with hefty caveats.
2/ Legal fees, surveyor’s fees, valuation fees and stamp duty too. If you’re a first-time buyer, you are likely to be exempt from paying any stamp duty. In London, however, higher property prices at play. And you may still have to pay a portion of this tax.
3/ Electronic transfer fee – a fairly minor outlay, typically only setting you back £40 or £50. This pays for your lender to transfer the mortgage money across to the seller’s solicitor.
4/ Removals, too, is something you will need to budget for. Whether you take a DIY approach or call in the experts. If you do it yourself, you need to consider the cost of hiring a van. Make sure you hire a big enough van to ferry all your belongings. This will avoid needing to do more than one trip. If you opt for professional help instead, you should expect to pay between £300-£600 for the services of a removals firm. Prices usually increase at peak times and are typically cheaper on weekdays. However, moving home in London on a weekday might prove problematic. As a matter of fact, the city gets busy and traffic congested. So you might want to pay more and move on the weekend instead.To ensure that you’re getting a reliable removals firm, make sure they are a member of the British Association of Removers (BAR) before parting with any cash.
5/ Mortgage. It includes an arrangement fee (<£2,000), a booking fee (<£250) and mortgage valuation fees (>£150).
- The ongoing costs
1/ Mortgage repayments. Once your house move is complete, it will be your biggest outgoing.You need to ensure you can pay these costs each month without any issues. Failure to keep up with mortgage repayments could lead to serious issues. Your home could even be repossessed. Life is never predictable and circumstances can change. For example you can have an unexpected redundancy, illness or a new baby. All this could affect your ability to pay. As such, it’s wise to have a pot of money set aside.
Nowadays, fixed-rate mortgages tend to be most popular. Mostly for the stability and security they provide. Tracker mortgages are also an option. They track the Bank of England’s base rate and rise and fall in price accordingly. When interest rates are low, like now, this type of mortgage can be attractive. However if interest rates rise suddenly, your mortgage payments will go up suddenly too. This could be the case in the event of a no-deal Brexit or a financial crisis. So tracker and variable mortgages are riskier than fixed-rate ones. You can also get an interest-only mortgage. In this case you only pay interest each month, rather than repayments. You pay off what you owe in a lump sum at the end of your mortgage term. These are now much less popular than they once were.
2/ Insurance and maintenance/ repairs. Lenders will make buildings insurance a requirement for borrowers. However, you can cover yourself completely by also getting life and contents insurance. While shelling out for major repairs isn’t likely, there is likely to be smaller costs over time. This is regarding lower-level jobs such as gardening, painting, DIY.
3/ The costs involved with running a home. For example bills for TV, broadband, phone, gas, electricity and water. As well as replacing furniture and white goods.
4/ Parking permits or parking outside your house in certain parts of London.
5/ Council tax once you’ve moved into your new property. The council tax you owe is different across London. It depends on which borough you live in. It depends also on which council tax band your property is bracketed under. You can work out what you have to pay by visiting the government’s council tax page.
There is a lot to get your head around when moving home, and it can be very stressful. We can help you along the way.
For advice on buying or selling a home in the capital, please get in touch with Atkinson McLeod or contact one of our many branches directly.To find out how much your home could be worth in the current market, why not request a free and instant online valuation?
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