Knowing what you can afford is only the first step, however; in addition to determining how much house your budget will buy is part of setting more realistic home buying expectations.
Start with the Hard Facts
It starts with determining your borrowing power. Lenders can stretch to 4.5 times your annual income, but it is prudent not to max this out. How often do you spend on leasing service fees, debts and lifestyle costs every month? A good rule of thumb? Mortgage payment should not be greater than 30% of your income. For advice from Gloucester Estate Agents, visit Murdock & Wasley, a leading Gloucester Estate Agents.
Don’t Forget the Hidden Costs
Price tags are only the beginning of your budget. Account for stamp duty, legal fees, surveys and moving – likely another £5-£15k. After that, you have the bills to keep it running: council tax, insurance, maintenance and potentially doing some renovations.
Build in a Buffer
Life happens. It can often affect your financial situation in a negative way with an unexpected job change, repairs or economic shifts. Establish a budget of 10-15% below your max borrowing to leave little wiggle room.
Trade-offs between Location and Property
In the worst possible case, you might need to consider giving up a lot of property size to get that perfect location, or vice versa. Here, you need to determine what your priorities are and adapt your budget accordingly. Worth remembering because you can renovate a house but not change its postcode!
Stay Disciplined
Stick with your budget once you’ve set it—even when things get a little crazy. Over emotional decision making in property viewings can lead to a lot of financial strain later. Keeping it real from the start is something your future self will thank you for.
