The Real World

Can I afford to buy a home?

Regardless of the current economic climate, the list of costs and financial considerations when buying a new home remains constant. Most first-time buyers are aware of the need to raise a deposit, cover legal fees, and potentially pay stamp duty land tax. But there are other less obvious costs associated with buying a home that will eat into the deposit savings account. So, can you afford to buy a home?

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Main costs

Currently, it is very difficult to obtain a mortgage with less than 90% loan to value. This means that the first cost of buying a home to consider is saving 10% or more of the value of the home that you intend to search for. This clearly varies with each purchase but as it is likely to be the biggest single cost associated with purchasing, it’s a good place to start. You will also need to budget for legal fees and firms such as Sam Conveyancing will be able to give you an accurate quote for their charges and the tasks they will complete as part of conveyancing Bromley, for example. There are a number of firms offering these services so it should be possible to get an accurate and competitive quote with relative ease. For first-time buyers, the property value at which you have to pay a percentage as stamp duty land tax has been temporarily raised. This will return to previous levels over time but first-time buyers will only start to pay this tax at a higher property value than current homeowners who are moving.

Additional costs

In addition to the costs outlined above, there will be further costs associated with buying a home such as hiring a van, or a removals company, depending on the individual move. Storage and / or the costs of cleaning and removing items from the previous home may also be required. If you’re buying a new build, it is likely that extras and upgrades will be sold to you and so these also need to be budgeted for as well. It is important to establish which items the seller will be leaving behind, as even simply replacing light fittings and curtains (or, if you’re really unlucky, even the curtain poles!) soon adds up.

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Why should I buy, then?

Historically, renting a property was broadly comparable with what you would pay monthly for a mortgage on a similar property. Now it is likely that the rental cost will significantly exceed the value of the mortgage payment that you would be making on a similar property. The risk of a no-fault eviction hangs over even the very best tenants, once they are out of their fixed period, as landlord circumstances can also change.

So, if you know the rough value of the type of property you would like to buy, you can then use the calculator tools available on many lender and financial advice websites to work out the monthly cost and adjust your expectations accordingly. With figures for stamp duty and legal fees to add to a target of 10% or more of the property value, to form the deposit, it is possible to work out if you can afford to buy a home, and whether this would be achievable and preferable to renting.

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