Buying a home is one of the best things you can do. There’s no doubt having a space in which you can live exactly how you want brings immeasurable joy, but there is a more serious financial side.
Owning and running a property is the biggest financial commitment most of us will ever make, so it’s extremely important to understand and properly manage your costs.
In this article we’re going to offer some budgeting advice for home owners, providing tips on what to budget for, pointers on how to manage your outgoings, and suggestions of where you could save money.
How to draw up a budget
Drawing up a budget always works better when written down in black and white, so you’ll need a pen, paper and calculator (or a smart device will do!).
Mortgage payments and the majority of bills are paid on a monthly basis, so as a starting point, you need to write down your guaranteed monthly income.
This should be the total net amount of money that you receive every month and should not include savings or borrowed money available through things like credit cards.
Next, compile a list of monthly outgoings. This should include all the regular payments that leave your bank account, like mortgage, council tax, utility bills, insurance etc.
You may also have annual payments that need to be considered here. In such cases, divide the payment by 12 to get the monthly cost and add that to the list.
Below is a list of common outgoings that you can expect to pay as a Shared Ownership homeowner.
Mortgage repayments – You will pay monthly mortgage payments on the share of the home you own. The exact amount you’ll pay depends on the size of your share, the size of your deposit and the mortgage product you have chosen.
Rent – While exact figures can vary, annual Shared Ownership rent is typically around 3% of the portion of your home you do not own. Divide this figure by 12 and you should have an approximate monthly amount.
Home insurance – If you have rented your home in the past, you may already be familiar with contents insurance. This cover is still required for Shared Ownership homeowners, however, if you’re buying a house, you will also need buildings insurance to cover the actual structure.
Service charges – If you’re buying a share of an apartment within a larger building, or a house on a private estate, it’s likely you’ll need to pay service charges to cover the upkeep of communal areas such as shared stairwells and gardens.
Utilities – Water and electricity are a given, but it’s worth remembering that some properties may also use oil or gas. Prices can vary considerably between fuels, so it’s worth doing your homework beforehand to avoid any surprises.
Media – In this ever-connected digital world, where would we be without a phone and internet connection? Make sure you factor in this additional cost, but also remember that if you watch live TV or streaming services, you’ll also need a TV licence.
Maintenance – Unlike renting, as a Shared Ownership homeowner, it’s your responsibility to look after your home, much the same as it would be if you purchased the property outright. You can read more about what support The Guinness Partnership provides here
Once you have calculated these two figures, it’s time to compare them. Subtract the total outgoings from the total income and the result is what you have left over to spend each month on non-essentials such as shopping, socialising or saving.
If the number is positive, you need to make a decision as to whether this figure can comfortably sustain the lifestyle you want to live. If so, great!
If, on the other hand, the number is a minus figure, it means your outgoings are more than your income and you need to make some urgent changes. Read on for some ideas of how to streamline your outgoings.
Things to consider
Essentials – Don’t forget to include the average amount you spend on things like food shopping, public transport and petrol each month.
Insurance – Buying a home is a significant financial commitment, so it’s worth considering a life insurance policy or expanding existing cover to include the cost of your home.
Pension payments – When budgeting for a new home, if you have a pension or salary contribution plan, try to regard your pension payments as essential outgoings. We wouldn’t advise We would not recommend stopping these payments to pay for your home.
Tips for streamlining your outgoings
Shop around for suppliers
From insurance to energy, it’s often the case that new customers get better deals than existing customers looking to renew.
With this in mind, keep a close eye on the expiry date of all of your accounts and be ready to shop around for the best price when it’s time to renew – it could save you hundreds.
Pay up front where you can
While monthly direct debits are very convenient, this convenience comes at a price. If you have the cash to do it, it’s always a better idea to pay annually as the difference in price can be quite significant.
Let go of lockdown luxuries
The global pandemic put our social lives on hold and in doing so fuelled a huge market for online entertainment and subscription services.
At the time they provided a much-needed lifeline, but now the world is back to relative normality, it’s time to ask yourself whether you really need to be subscribed to 10 different streaming services or receive those expensive recipe boxes each week.
While they may seem cheap individually, when added together they can become quite a burden.
Review your budget regularly
The recent energy price cap increase, surge in fuel prices and rise in inflation that the UK faces is proof that things can change quickly and dramatically. For this reason, it is important to continually review your budget to ensure there are no surprises.
Keep a close eye out for changes to your bills and try to stay abreast of the news headlines as much as possible. This means if there is a drastic change ahead, you should have enough warning to make the necessary adjustments.
Discover homes at Leaside Lock
Guinness Homes is proud of its Leaside Lock development, which offers stylish homes that come with energy efficient appliances, double glazing, and supports an eco-friendly lifestyle. Find out more about the lifestyle and location on offer.
The information contained in this article is intended to be used and must be used for informational purposes only and does not in any way constitute professional financial advice. If you need assistance with your finances, always take independent advice from a finance professional.