When getting on the housing ladder, the most overwhelming headache many prospective buyers face is getting a deposit together.
Now, one property expert has warned that paying this initial fee isn’t the only financial shock wannabe homeowners face: the first few months of homeownership can unlock a tidal wave of initial costs.
Jen Lloyd, head of mortgages at Skipton Building Society, says: ‘People budget meticulously for the purchase price but are often caught off guard by everything that comes with actually moving in.
‘Rent overlap, stamp duty, removals, council tax, furnishings and set-up costs can all land at once.’
According to a new study commissioned by the bank, facing multiple upfront costs in a short period of time is the number one part of the process that new homeowners want to avoid when getting on the ladder.
Other lamentations include the actual process of moving, the gap between exchange and completion, and overlapping on rent and mortgage payments. Goodbye, monthly paycheck.
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One in three (35%) ended up paying for their final month of rent and their first mortgage payment at the same time, and 30% felt financially strained by this by-product of being property owners.
35% succumbed to the power of property apps, and ended up refreshing them like it was their full-time job, with an extra 32% spending too long on listings for homes they couldn’t actually afford. Dream big, we suppose?
Along these lines, Jen has issued some advice on avoiding any costly expenses, both early on in the process and once you’ve moved in.
How to avoid costly homebuying mistakes
Build a moving buffer, and don’t underestimate early costs
Jen suggests new homeowners can transform expenses often referred to as ‘unexpected’ into ones that have already been budgeted for by building what she calls a ‘realistic move-in buffer.’
This effectively works to create some breathing room, so that you’re not left scraping around at the bottom of your purse for a few extra pennies at the end of the month.
Don’t try to do everything immediately
Next, you’ll want to avoid that tempting dash to do everything at once. You’ve barely unpacked your moving boxes; you don’t already need to be chasing the next big thing on your to-do list. Create some mental space.
‘From surveys to furnishing a home from scratch to removals and renovations, it’s easy to feel like every decision has to be made immediately – and rushing often leads to unnecessary spending and avoidable stress,’ Jen says.
‘Buying your first home is exciting, so it’s natural to want everything done as quickly as possible. But slowing things down where you can, and prioritising what genuinely needs doing now versus what can wait, usually saves money, time and a lot of anxiety.’
This was another common bug-bear reflected by the study, as 64% of those on the cusp of becoming a homeowner have found this temptation challenging. Chill, though; you’ve got time.
Look beyond the mortgage repayment
Next, Jen says it’s important to consider the other monthly costs that moving into your new home will involve. Yes, it might be surrounded by lovely coffee shops and plenty of green space, but will the council tax leave you penniless every single month?
How do you expect to budget for the monthly utilities and the home insurance?
Think about any ongoing maintenance, too, so you can paint a more realistic picture of the financial commitments the house will involve.
Protect your credit score before you move home
As Jen adds, it’s important to avoid taking on any new credit in the months before you actually apply for a mortgage. If you’ve got outstanding debts, clear them; if you’re relying on a credit card more than you should, then it could be time to rebalance the books a little bit.
When you go through the necessary checks that applying for a mortgage entails, any credit applications will flag. And remember: taking out a new phone contract technically counts as a credit agreement, so, if you can, it’s best to delay this until you’ve completed and moved into your new digs.
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