Buying first house, is our budget realistic?

aled123

Hello!

My partner (22) and I (27) are looking to purchase our first property soon and I want to know whether our budget is realistic. Neither of us are massive spenders currently and I'm confident that we could stick to this budget, but I'm unsure if it's a fair reflection of real-world home ownership costs.

My income (net): £2,445.15 /month
Partner income (net) £1,634.38 /month

My LISA: £25,888.41
My emegency fund: £8,688.57
My other savings (across bank savings and current account): £49,171.93

I've also got £3,200 in stocks and shares but intend to move this into the LISA once I buy a house, and switch the LISA invest in stocks and shares.

I'm also owed c.£10.5k by my limited company that we both run on the side for a few hours a week. There's around £25k in there but I don't feel as if I'm in great need to withdraw my loan just yet so I'm happy for it to remain there and generate profit. But, we're planning to withdraw £500 /month between us when we purchase the property (although this £500 doesn't feature in our income above, nor does it feature in the budget we've put together). 

We also have a 1-year-old son!

We're planning to spend the following on the actual purchase;

• Deposit = £35k (c.210k house)
• Conveyancing = £5k
• Furniture etc. = £10k

And here are the monthly costs that we're budgeting, this is where I'm most unsure as it's our first house;

• Mortgage = £1042.50
• Home ins. =£21.00
• Gas & Electricity = £230.00
• Water = £50.00
• Council tax = £150.00
• Broadband = £40.00
• Boiler Cover = £22.00
• Groceries = £475.00
• Mobile Phone = £35.00
• TV Licence = £13.25
• Netflix = £10.99
• Car insurance = £225.00
• Car Tax = £31.50
• Fuel = 265.00
• Going out = £250.00
• LISA = £200.00
• Child ISA = £150.00
• Cash savings account (holidays, car maintenance etc.) = £125.00

In theory this should leave me with £443.41 and my partner with £299.88.

Sorry for such a long post but I wanted to get as much info down as I could, so thank you for taking the time to have a read. We'd be really grateful for any advice from current home-owners!

london21

Personally, will try to get slightly more income so won't be tight but still a good idea to buy.

Do you pay childcare cost, might come up with mortgage application. 

• Conveyancing = £5k seems high as if you are both first time buyers there would not be any stamp duty to pay. Get a few quotes and read their reviews. 

aled123 said:

Hello!

My partner (22) and I (27) are looking to purchase our first property soon and I want to know whether our budget is realistic. Neither of us are massive spenders currently and I'm confident that we could stick to this budget, but I'm unsure if it's a fair reflection of real-world home ownership costs.

My income (net): £2,445.15 /month
Partner income (net) £1,634.38 /month

My LISA: £25,888.41
My emegency fund: £8,688.57
My other savings (across bank savings and current account): £49,171.93

I've also got £3,200 in stocks and shares but intend to move this into the LISA once I buy a house, and switch the LISA invest in stocks and shares.

I'm also owed c.£10.5k by my limited company that we both run on the side for a few hours a week. There's around £25k in there but I don't feel as if I'm in great need to withdraw my loan just yet so I'm happy for it to remain there and generate profit. But, we're planning to withdraw £500 /month between us when we purchase the property (although this £500 doesn't feature in our income above, nor does it feature in the budget we've put together). 

We also have a 1-year-old son!

We're planning to spend the following on the actual purchase;

• Deposit = £35k (c.210k house)
• Conveyancing = £5k
• Furniture etc. = £10k

And here are the monthly costs that we're budgeting, this is where I'm most unsure as it's our first house;

• Mortgage = £1042.50
• Home ins. =£21.00
• Gas & Electricity = £230.00
• Water = £50.00
• Council tax = £150.00
• Broadband = £40.00
• Boiler Cover = £22.00
• Groceries = £475.00
• Mobile Phone = £35.00
• TV Licence = £13.25
• Netflix = £10.99
• Car insurance = £225.00
• Car Tax = £31.50
• Fuel = 265.00
• Going out = £250.00
• LISA = £200.00
• Child ISA = £150.00
• Cash savings account (holidays, car maintenance etc.) = £125.00

In theory this should leave me with £443.41 and my partner with £299.88.

Sorry for such a long post but I wanted to get as much info down as I could, so thank you for taking the time to have a read. We'd be really grateful for any advice from current home-owners!

FreeBear

aled123 said

• Gas & Electricity = £230.00
• Water = £50.00
• Boiler Cover = £22.0

Depending on how fuel efficient your new home is, £230 might be a bit on the high side - I'm currently paying £100 per month in a 3 bed late 1920s semi. But I don't heat it as high as some people (currently around 19°C during the day and 17°C overnight), and I also have a solid fuel stove to supplement the central heating. With a large fuel hungry house, you may well find the heating bill to be much higher - Pay attention to the EPC rating, and avoid the poor performing ones.

Average water bill in England is £448 which works out at £37.33 a month - Whilst not far off your estimate, that extra £12.77 could come in handy for other things. e.g. The rainy day savings account.

£22 per month boiler cover is a lot - Most suggest "self insuring" and just paying for an annual service. Modern boilers are fairly reliable and many come with a 10 year warranty (check to make sure that any warranty can be transferred to you). A long warranty combined with regular servicing means that you shouldn't need many repairs during the lifetime of the boiler. The £264 saved each year (probably £200 after a service) will comfortably cover most repairs and may even fund a new boiler.

If you want to shave even more off the monthly expenditure, TV/Netflix and broadband could all be candidates, as can the "going out" - Plenty of free entertainment can be had in just about any town, even if it is just a stroll in the local park.

£10K to furnish a home may not be enough if you plan on buying everything new. Plenty of good quality used furniture is available, so if you are willing to compromise, significant savings to be had on that front.

Albermarle

My LISA: £25,888.41
My emegency fund: £8,688.57
My other savings (across bank savings and current account): £49,171.93
I've also got £3,200 in stocks and shares but intend to move this into the LISA once I buy a house, and switch the LISA invest in stocks and shares.

Is there a reason you are not using your LISA towards the first time house purchase?

No mention of pension provision anywhere, unless you are using the LISA as an alternative?

Grumpy_chap

aled123 said:

My income (net): £2,445.15 /month
Partner income (net) £1,634.38 /month

My LISA: £25,888.41
My emegency fund: £8,688.57
My other savings (across bank savings and current account): £49,171.93

I've also got £3,200 in stocks and shares but intend to move this into the LISA once I buy a house, and switch the LISA invest in stocks and shares.

I'm also owed c.£10.5k by my limited company that we both run on the side for a few hours a week. There's around £25k in there but I don't feel as if I'm in great need to withdraw my loan just yet 

You both have a monthly income but all the savings are expressed as "my" and "I" - even the Ltd Co that you both work to make a success.
To make this life change a success, you both need to be consistently, and by default, thinking as "we" and "our".

For fuller comment on the budget, you could prepare a Statement of Affairs and ask for comment in the DfW area of the boards.  It does not matter that you are not at risk of a near-term debt crisis - the tool and approach is a useful one for optimising your budgets.

It is good that you still show some savings in the budget and there are some areas where you cold optimise, Netflix being the most obvious.  I think you will make this work if you keep everything about finances open with your partner (which I assume you do).  Some months you might spend more on a longer-term cost and just balance that by staying in or doing cheaper activities.

The budget for furniture is probably on the light side but you don't mention whether you already have any furniture and, assuming you don't go for everything new, that budget will stretch a very long way.  When I got my first house, I think I furnished it (initially) on the back of some freebies, favours, trades, two pints of lager and a packet of crisps.  Then, over time, worked through the rooms and equipped to a better standard.  Even now, the spare bedroom still has the second hand first bed still limping along...

aled123

Albermarle said:

My LISA: £25,888.41
My emegency fund: £8,688.57
My other savings (across bank savings and current account): £49,171.93
I've also got £3,200 in stocks and shares but intend to move this into the LISA once I buy a house, and switch the LISA invest in stocks and shares.

Is there a reason you are not using your LISA towards the first time house purchase?

No mention of pension provision anywhere, unless you are using the LISA as an alternative?

My LISA, will be used to fund the deposit along with some of the “other savings”. We’re then looking to convert the LISA to stocks and shares for retirement. 

I’ve currently got £31k in 3x pensions and contribute £358.58 monthly (with my employer matching). 

sew_what

Ouch to the car insurance and nothing in the budget for car payments or savings towards your next car?

Emily_Joy

1. Regarding the furniture - do you need everything new? We moved from 2 bed semi which we were renting unfurnished to 3 bed semi. We got rid of almost all our downstairs furniture but kept the bedroom furniture. The cost of "replacement" downstairs furniture, including delivery, was around £500, we got it from eBay and the quality is amazing (solid wood).

2. What you really need to budget for are small repairs, even if you are good with DIY you will need consumables. Inevitably small things will come up - leaking taps, broken doors/locks, fence in need of replacement, blocked/leaking gutters;  you may also wish to arrange boiler service, electricity survey, chimney sweeper, etc.

3. Does your furniture budget includes white goods? 

4. Does the house come with the garden that you need to budget for?

5. Is the house well insulated? what does EPC certificate say?

6. Is the house you are buying lived-in or empty? If it is lived it, you also need to budget for surprises hidden by furniture.

7. Home insurance is a bit low. Is it comprehensive?

P.S. I am not commenting on lifestyle items, but my mobile phone bill is roughly 20GBP/year; we have neither netflix nor TV license; our broadband (sky) after cashback from Lloyds and cashback from Sky for new subscribers comes under £20 per month.

housebuyer143

I'm not sure all the negative comments. You have plenty of money for your plan in my opinion and you don't have to put money into those savings. 
Have gote considered putting a little more in the house to bring down the payments, rather than having so many savings? 

RHemmings

aled123 said:

Albermarle said:

My LISA: £25,888.41
My emegency fund: £8,688.57
My other savings (across bank savings and current account): £49,171.93
I've also got £3,200 in stocks and shares but intend to move this into the LISA once I buy a house, and switch the LISA invest in stocks and shares.

Is there a reason you are not using your LISA towards the first time house purchase?

No mention of pension provision anywhere, unless you are using the LISA as an alternative?

My LISA, will be used to fund the deposit along with some of the “other savings”. We’re then looking to convert the LISA to stocks and shares for retirement. 

I’ve currently got £31k in 3x pensions and contribute £358.58 monthly (with my employer matching). 

This is a genuine question - not a rhetorical one. 

Why don't you use more of your wealth to have a much bigger deposit and then have a smaller mortgage? Are you generating enough income from that wealth to out-weigh mortgage interest? What are the calculations that gave you a deposit of £35K? 

sourpuss2021

Your savings are high considering your salary.   Did you used to be in a much better-paid job, or this money comes from inheritance?  Sorry that I’m just being nosey here.