/ Home & Energy

Would you budge your budget for your dream property?

homebuying budget

According to a new Which? survey, thousands of homebuyers are blowing their budgets in a bid to secure their perfect property. Would you?

You know exactly how much money you’ve got to play with, but then you spot your dream home and it costs more than you had in mind. Would you concede that it’s beyond your means and look for something that’s more in line with your upper limit or blow your budget and hope for the best?

If it’s the latter, you’re not alone. According to our 2017 Which? Home Movers Survey, one in five buyers spend more than their top budget, with a fifth of these overspending by 15% or more.

Why are homebuyers overspending?

Considering the current state of the UK property market, you might not think this is surprising.

On the other hand, it could be argued there are more schemes than ever to help buyers, particularly first-timers, with small or tight budgets.

The government’s Help to Buy schemes are helping record numbers of first-time buyers onto the property ladder.

Meanwhile, first-time buyers who open a lifetime Isa can claim up to £36,000 of government money towards a mortgage deposit.

What’s more, our latest analysis reveals the amount of 95% mortgages available has soared since the financial crisis.

However, it isn’t just the deposit that buyers have to find. Many may not realise how much money they need to cover additional costs, such as stamp duty, conveyancing fees, etc. These costs may well be sending many homebuyers over budget.

See our handy guide for a full list of services you’ll need to pay for, and how much they may set you back.

Homeownership costs

As well as the initial cost of buying a property, it’s important to consider the ongoing costs of homeownership.

Since the introduction of the Mortgage Market Review, lenders have become more stringent when deciding who qualifies for a mortgage.

This means it’s less likely you’ll be saddled with a mortgage you can’t afford to repay. Still, it’s worth making sure you’re clued-up on the best mortgage for your circumstances.

Are you a homeowner? Did you overspend when you bought your current property or did you fall well within your budget? What more can be done to help people onto the property ladder, and to prevent homebuyers from blowing their budgets?

Comments
Profile photo of Lauren Deitz
Admin

I had to be really strict with my budget, I did find my dream house but realised that buying it would have rinsed every penny I had. I ended up buying a property that was under budget and then kept money back to do work on the property to make it more like my dream home. I don’t mind DIY and working on such a big project, but I know others find it off-putting. It’s been tough so far, but I think I feel like my money is working harder and going much further with this under-budget property that we’re remodelling, and having mortgaged on a 5 year fix we have plenty of time to get the work done before we start hunting for the next project 🙂

Admin
Patrick Taylor says:
13 June 2017

Just out of curiosity the survey quoted says ” As part of the 2017 Which? Home Movers Survey, we spoke to 2,000 people who had bought a home in the last two years, and the findings show the difficulties buyers face in sticking to budgets.” Do Which?, or a contractor, really speak to 2000 homeowners or was this an on-line survey that members of Which? Connect normally does

Secondly, we did buy well under budget a property we loved in the right area and are now spending the balance on re-wiring, re-plumbing, and insulating part of the house heavily for winter use and leaving much untouched for the majority of the year when heating is not an issue.

We will leave aside for the moment refurbishing windows and fixing various roofs as in an older property you might aswell have a rolling programme of works to be done.

Lastly, given the hiccups in the housing market it looks as though a re-adjustment downwards may well be on the cards so hanging fire on purchasing may be an attractive option.

P.S. Are we likely to see any comment by Which? on the scandals affecting the major housebuilders and NHBC gagging clauses?

Profile photo of malcolm r
Admin

Your house is your home, and you are likely to spend a fair time living in it so it makes sense to buy a property that you like, in the area you want, that as far as it can fulfills your wishes. So I would spend as much as I could afford if necessary to get this home. The key is what you can afford – bearing in mind possible changes in interest rates, maybe a family coming along, and other expenditure on the horizon. Working out what you can afford – your maximum budget – is requires diligence and honesty with yourself.

Both our houses stretched us to the limit, and also required considerable refurbishment. But they were livable, and we were prepared to sacrifice other spending – new furniture, car, holidays – to invest in improving the houses, and also did a good deal of the work ourselves.

The problem in a world of generally rising house prices is that unless you stretch yourself, the “compromise” house you buy will slip further behind the price of the one you might really like and, barring some good fortune, will be out of reach. If you have to keep trading up you’ll also be spending more on expenses – tax, agents fees, solicitors, surveys and so on. So my advice would be to try your hardest for the home you’d really like – even if, (particularly if perhaps) like Lauren you are prepared to put in the effort to make it what you want.

Profile photo of wavechange
Admin

Different considerations apply when buying a house once you have retired and become dependent on a pension and savings. Needs change throughout our lives and I decided to go for a smaller and more manageable garden. At present I am able to do much of my own maintenance, but I had to allow for the fact that I am likely to have to pay to have jobs done in future. I’m glad I did not overstretch myself in view of what has happened in the last year.

Being retired I had plenty of time to look around and wait for a home that provided what I was looking for and available at a good price. Being vacant, I was able to make numerous inspections and since it was less than 20 years old I decided not to spend a lot on a comprehensive survey. I’ve not regretted this decision and have had no nasty surprises since moving in over a year ago.

Profile photo of John Ward
Admin

I think young people buying their first property should sacrifice as much as they possibly can to buy the best they can afford in their chosen area. This does mean giving up [or reducing] some of life’s luxuries like smart-phone contracts, high speed broadband, satellite TV, magazines, gym, entertainment, car, fashion, and holidays. I don’t mean complete abstention but prudent scaling-back – these things can be gradually brought back into the lifestyle as the monthly outgoings on the property normalise and careers advance. Some compromise on travel-to-work times can sometimes be advantageous in getting a better-value property further out so long as extra costs do not cross out the benefit. Unless people are particularly wealthy I don’t think it is wise go for a big property just for the sake of some space. It is better to look at its potential and future desirability. It is unlikely that the first home will be the ‘forever home’ but can become a good financial springboard to a home in that position in a few years time.

Allowance should certainly be made for increases in interest rates because it will be some time before cost-of-living wage rises catch up. Bear in mind that if rates were to go up from 4% to 5% that will be a 25% increase in the monthly interest repayment – this is particularly significant on an interest-only mortgage. Many people can justifiably anticipate, and factor into their budget, a future pay award and career progression but this should be based on realism and not dreams. The important thing is not to get into unaffordable debt on top of the mortgage repayments and other household outgoings. Money spent on the property will usually ensure appreciation; money spent on its contents will not.

I think there is a lot of mileage in the adage “Buy the worst house in the best street and do it up” as this should lead to maximum potential capital appreciation providing a healthy level of equity to invest in a better property when lifestyle and family circumstances change. I think that young people should be prepared to put some real effort of their own into their first home so long as they take sound advice and don’t go beyond the limits of their competency. Some of the skills and lessons learned at that stage will pay dividends throughout the rest of their lives. There is no better time to endure the hardships, do the hard work, and build up the resources than in the twenties when life is usually less encumbered, family pressures are less, mum & dad might still be able to lend a hand, and career demands are not oppressive.

Profile photo of wavechange
Admin

A friend moved to the University of Oxford and bought a property in an improving area. It was sound but in need of redecoration, which took little effort. He installed a new kitchen and bathroom, doing most of the work himself. Several years later, he sold the house for a great deal more than he had paid for it.

Mobile phones and a decent broadband service are fairly essential these days, though I fully agree about the value of being frugal.

Profile photo of John Ward
Admin

I agree that mobile phones and decent broadband are fairly essential but money can be saved by not having all-singing all-dancing devices and using only when necessary on a sensible contract or even pay-as-you-go. I am not suggesting that people give up all their pleasures, just choose the free or cheaper ones!

Profile photo of wavechange
Admin

I will agree there, John. It’s not necessary to replace your phone when the contract ends. I’m keen on separating the cost of a handset from the service though in my case it would have worked out cheaper if I had opted for a contract with a phone and moved to SIM-only at the end of the two years. Phones can be very useful tools to keep down other prices, especially since insurance companies are fond of hiking prices for existing customers who have not made a claim. I would like to see broadband services charged according to use, which would offer savings for those who are not heavy users.

Profile photo of John Ward
Admin

If the priority is to get the best house you can afford all items of expenditure have to be scrutinised and curbed wherever practical. Aggressive saving is necessary. The bigger the deposit put down the less will be the monthly payments. Once the objective is secured it might be possible to restore the indulgences! Since so many people have to make do in reduced circumstances as an everyday fact of life, people wishing to buy a house should not complain so much about temporary inconveniences.