When preparing to buy a new home, there are generally a lot of budgeting decisions that need to be made. The vast majority of people have to do a good bit of financial structuring and strategizing to afford a new home, and that means making certain preparations and decisions that will allow you to afford your new property. However, it is important to look at these efforts as something more than simply saving money. When budgeting to buy a new house, you have to consider various angles, some of which may seem insignificant at first. Keeping that in mind, here are 4 tips as you go about budgeting.
1. Do Your Research
Before you even start to calculate a budgeting strategy, it is important to do your research regarding the market for homes. Many people make the mistake of starting to budget before they actually pick out a home – and while saving money is always a good idea in advance, specific strategy may vary depending on the financial demands of the new home you choose. Even if you can’t pick out a specific property just yet, do your real estate research to determine a range of prices your eventual purchase is likely to resemble.
2. Eliminate Debts
No matter what your budgeting strategy entails, it will be important to eliminate as many debts as possible leading up to your home purchase. It can be tempting to focus entirely on savings, but debts can only get worse with interest, and must be paid off in order to afford a large investment like a new home. Consider the popular debt snowball strategy as an effective way of eliminating debts in an efficient manner.
3. Consider Add-On Costs
Another common mistake people make when budgeting for new homes is to consider down payments and mortgage costs, and nothing else. However, it is important to remember that a new home comes with a number of “add-on” costs. For example, you will need an Aviva home insurance policy, a home security system, and various other features to go along with your new property. As many of these are virtual necessities, you may as well factor their costs into your budget.
4. Simulate Mortgage Payments
An interesting idea to enhance your budgeting efforts is to start simulating mortgage payments as a means of generating savings. Figure out what your monthly payments might be, and try to put that amount aside, or into a savings account, every month leading up to your purchase. This will help you to grow accustomed to the payments, and will also give you a disciplined means of gathering savings.
5. Buy property privately
Consider buying property from a private house seller or for sale by owner. These types of sellers save huge amounts in estate agents fees and can in many cases be more flexible in reducing their prices.