I think the first thing most people do when they come to start buying a house is work out how much they can afford. This literally boils down to how much your monthly expenses are, how much of your lifestyle you are willing to give up and how much you have right now.
Rebecca and I both have good jobs, Rebecca is a teacher and I’m a web developer. In living with our parents, we are a little spoiled in that we can afford to spend plenty of money on ourselves. We both understood that this would come to an end when bought a house, but agreed that we didn’t want to stretch ourselves right to our very limits, despite some people recommending we do so.
Budget Planning
Working out your expected monthly expenses can be a little difficult if you are a first time buyer who lives with parents, in that you probably have no idea how much bills and things cost. I countered this by always overestimating and using 20000averages as a guide. To start you are going to need some sort of spreadsheet or at the very least a simple list of incomings and outgoings. Martin Lewis has a comprehensive bludget planner available, although it may be a little over the top.
Insurance
Buildings and contents insurance is a difficult one, it’s something I’ve never had. As a rough guide I’d estimate an annual cost of between £200 and £250, so take £250 as an upper limit. moneysupermarket.com
You’re probably going to want Life protection to go with your mortgage, the cost of which all depends on your, but budget for £20 a month should be way over what the average person will pay.
Utilities and Council Tax
Council Tax. If you know the area you are looking to move to, you can use the Council Tax Valuation List to find out what kind of band you might be in and from there on use Google to find the costs in your area. If you only have a rough idea of which area, take the cost of the middle bands, D or E.
Like most things, your water bill depends on how much you use. Check out the average water rates in your area and add it to your budget.
Again Gas and Electricity all depend on how much you use, but to get a rough idea, run through a quote on energyhelpline.com or moneysupermarket.com. Filling in the form doesn’t take two minutes and as long as you remember to tick (or untick) the option about sending you information, they wont bother you again.
Phone, TV and Broadband
Depending on the area you live, there should be a multitude of options available for Phone, TV and broadband. Selecting a packages that are right for you is never easy, but there are plenty of good sites out there to get you started. Why not try a simple broadband comparison site, or take a look at Sky who offer phone, broadband and satellite TV in one convenient solution. These should give you at least a rough idea of how much the monthly cost will be. Don’t forget the cost of a standard TV licence.
Others
The other new outgoings you might be coming across are that of general household maintenance and food and drink. I can’t tell you how much the maintenance will cost, sometimes that can be just pot luck, but why not try totalling up a shop on one of the online supermarkets, such as asda.com or tesco.com.
How much can you borrow?
At this point you should have a rough estimate of how much money you have left over at the end of the month. I’m assuming you’ve added extra outgoings that make your life interesting such as buying DVDs, books, eating out and the occasional holiday. As a little tip I’d recommend adding a figure or a percentage on to your outgoings, just as a safe guard, maybe £100 or 10%. From what you have left you can decide how much you want to go towards your mortgage. Have a play with a mortgage calculator to see what sort of monies you can borrow, if you’re not sure what interest rates to use, try whacking in 2% above the Bank of England base rate. We’ll discuss thisin more detail later on.