Buying first house, is our budget realistic?

aled123

sourpuss2021 said:

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.   

Haha no problem. I used to run another business alongside work that’s seen an incredible reduction in demand since Covid - the extra savings came from there. And as the income from my current LTD isn’t as guaranteed as the salary, I’ve not included it in my budget calculations. 

Fortunately, I haven’t received any inheritance yet as my family are all still around!

I also give 10% to my pension hence the relatively low salary. 

aled123

RHemmings said:

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? 

Tbh I think it’s more that I’m paranoid (for lack of better word) about not having a decent chunk of savings after purchasing the house. 

I’ve no idea what a “sensible” amount to keep aside post-purchase is. 

Bluebell1000

I think you are being quite cautious, we've bought on a much tighter budget than that! Based on your spending I think you could trim it down in some areas if you want. Food, entertainment are reasonably generous, as are phones, and the boiler care is not worth buying in my opinion. Use a cashback site for home and contents insurance, ours is about £10 a month after cashback.

Local charities/ eBay ) Facebook marketplace often have lovely furniture available which saves a huge amount (and is more sustainable too). 

Overall though budget is a personal thing. It doesn't matter that I think you have plenty, the question is whether you feel comfortable and getting to the point where you don't feel really stressed about it. Looking at your surplus my approach would be that you have the ability to rebuild savings quite quickly, or cover emergency maintenance type problems, so going a bit lower for savings would be less scary than if you had say 50p left over each month.

EssexHebridean

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 You're probably overestimating this
• 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 Don't pay this monthly! See comment below.
• Gas & Electricity = £230.00
• Water = £50.00 This is high for a metered supply, which yours will be. 
• Council tax = £150.00
• Broadband = £40.00
• Boiler Cover = £22.00 I would think about self-insuring for this allowing that you have a decent emergency fund already in place - so set aside your budgeted £22 a month into savings, so it is ready for as and when it is needed, and just budget from there for the annual service.
• Groceries = £475.00 This is really high for effectively 2 people (allowing that your small person is still VERY small!) - is there a reason for spending so much or has it just crept to there without you realising its high?
• Mobile Phone = £35.00
• TV Licence = £13.25
• Netflix = £10.99
• Car insurance = £225.00 Don't pay this monthly! and also - that's a HUGE amount - why so high?
• Car Tax = £31.50 Don't pay this monthly!
• Fuel = 265.00
• Going out = £250.00
• LISA = £200.00 
• Child ISA = £150.00
• Cash savings account (holidays, car maintenance etc.) = £125.00 This seems a bit low, depending on how many cars you have and what sort of holidays you like.

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!

See above - comments in bold.

On the insurances and car tax - there are premiums charges for monthly payments, so allowing that you have savings, in the first instance pay a year upfront out of those, then work to set aside the correct amount monthly ready for the following years renewal. The number of people that don't realise that proportionately, the charge for monthly payments for car tax is really quite high is astonishing! 

You are currently missing life insurance.

If I were you I would use the Statement of Affairs that we routinely point people to on the DFW boards here to go through everything as this will help to ensure that nothing gets missed - currently for example your list above misses clothing, any medical costs (dental etc), haircuts, presents, ongoing additions to emergency fund savings and probably a few more bits too! The link to the calculator is in my signature. 

aled123

EssexHebridean said:

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 You're probably overestimating this
• 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 Don't pay this monthly! See comment below.
• Gas & Electricity = £230.00
• Water = £50.00 This is high for a metered supply, which yours will be. 
• Council tax = £150.00
• Broadband = £40.00
• Boiler Cover = £22.00 I would think about self-insuring for this allowing that you have a decent emergency fund already in place - so set aside your budgeted £22 a month into savings, so it is ready for as and when it is needed, and just budget from there for the annual service.
• Groceries = £475.00 This is really high for effectively 2 people (allowing that your small person is still VERY small!) - is there a reason for spending so much or has it just crept to there without you realising its high?
• Mobile Phone = £35.00
• TV Licence = £13.25
• Netflix = £10.99
• Car insurance = £225.00 Don't pay this monthly! and also - that's a HUGE amount - why so high?
• Car Tax = £31.50 Don't pay this monthly!
• Fuel = 265.00
• Going out = £250.00
• LISA = £200.00 
• Child ISA = £150.00
• Cash savings account (holidays, car maintenance etc.) = £125.00 This seems a bit low, depending on how many cars you have and what sort of holidays you like.

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!

See above - comments in bold.

On the insurances and car tax - there are premiums charges for monthly payments, so allowing that you have savings, in the first instance pay a year upfront out of those, then work to set aside the correct amount monthly ready for the following years renewal. The number of people that don't realise that proportionately, the charge for monthly payments for car tax is really quite high is astonishing! 

You are currently missing life insurance.

If I were you I would use the Statement of Affairs that we routinely point people to on the DFW boards here to go through everything as this will help to ensure that nothing gets missed - currently for example your list above misses clothing, any medical costs (dental etc), haircuts, presents, ongoing additions to emergency fund savings and probably a few more bits too! The link to the calculator is in my signature. 

That's amazing, thank you! 

And sorry, I should have added, we currently pay for car insurance annually but for the sake of this budget I have taken the annual payments and divided by 12. 

I didn't realise re car tax so I will make sure to keep that in mind. Thank you!

Albermarle

Cash savings account (holidays, car maintenance etc.) = £125.00 This seems a bit low, depending on how many cars you have and what sort of holidays you like.

Agreed, the cost of car repairs and holidays are two things that have gone up significantly more than inflation recently. In any case £125 a month to cover both ( unless the holiday is one weekend a year in Skegness) seems unrealistic even before inflation.

aled123

Albermarle said:

Cash savings account (holidays, car maintenance etc.) = £125.00 This seems a bit low, depending on how many cars you have and what sort of holidays you like.

Agreed, the cost of car repairs and holidays are two things that have gone up significantly more than inflation recently. In any case £125 a month to cover both ( unless the holiday is one weekend a year in Skegness) seems unrealistic even before inflation.

Haha yes I'm not sure where that came from.

Although we have now amended (following advice about some high allocations etc.) to allow for;

Car maintenance: £76.00
New car savings: £245 (will amend this depending on expected depreciation rate of whatever we buy next)
Holiday savings £170.00

dimbo61

Have you looked at Offset mortgages !
Put down a normal deposit of 25% or even 40% and keep any spare cash in offset accounts