Frugal Home Buying
Home buying on a budget has become harder and harder over recent years
and is something that most of us have to put off over and over gain.
This is both frustrating and can damage your frugal
living budget in the long run if your goal is to own your own
property. As this is not a specialist mortgage site I will not even
attempt to go into all the ins and outs of the various mortgages on
offer, I will leave that to the experts. However I will attempt to outline
the basic options available and how best to approach it all with your
frugal head on.
As with many things to live within a frugal
budget, planning lies at the heart of ensuring that costs are kept
to the minimum and that you won't be surprised by any unforeseen costs.
Planning your budget and incorporating as many of the costs involved
in the initial purchasing of a home and the running costs etc will help
you decide whether or not you are ready to take the plunge in the home
buying market.
 Home
buying - can you afford to do it?
To find out if you really can afford to buy your own home is to find
out just how much you can afford to borrow.
This will mean shopping around and comparing various different types
of mortgages, this in itself can be a minefield and the types of mortgages
available are constantly changing, at present the main types are:
Repayment - this is where you pay a little bit of the amount
you borrowed and the interest on that amount off every month.
Interest only - as the name suggests you only pay the interest
off and an amount of money that is left to earn interest to pay the
outstanding amount off at the end of the mortgage term.
Mix of the two
You will also have to consider which of the many deals on offer will
offer you and your financial circumstances best. I.e.
- Fixed term interest rate
- A capped rate
- A variable rate
All these things will determine if you will be able to afford the mortgage
payments at present and also what will happen when your offer ends.
Tip: Make your self a table and work out how much your mortgage
will cost you for different interest rates. This will prepare you for
any changes in the rates in the future and will assist you in your final
decision on how much you can borrow.
In recent years there has been a new type of account offered by a few
lenders called offset accounts. I wanted to point them out as in some
cases they may save borrowers either money or reduce the period of their
mortgage. They work by putting all your money in one big pot, savings,
income, credit
card debt, mortgage etc. The interest eared on all your money
is offset against your mortgage.
It can be quite complicated to understand at first but once you become
used to the system it makes managing your money much simpler. I would
say though that these accounts will only really work for those who either
have some existing savings or who are able to save money, as the more
you have left in your account every month helps to reduce your mortgage.
Ask your financial advisor if they may help you save money.
Once you have decided that you can afford to a buy a property and that
your budget can accommodate the costs involved without becoming over
stretched, your first rule in looking for your home is to stick within
your budget.
Never be tempted to stretch your money over your comfort zone. Too
many people have done this in the past only to find that when interest
rates change they are no longer able to afford their mortgage.
Hidden costs of home buying
 There
are often lots of initial costs involved when buying your home. Here
are a few of them to consider:
- Legal charges for your solicitor or conveyencer
- Arrangement fees for your mortgage
- Valuation fees
- Survey costs
- Land registry search charges
- Property insurances
- Removal expenses
- Connection of utility charges
There may be other hidden costs for your area or country so always
ask your estate agent/ realtor from the start.
Once you have chosen your property
Before you commit yourself to home buying, there are some important
things to consider about your new home. We made the mistake of not talking
to our prospective new neighbours before we bought our current home;
luckily for us there were no neighbourhood issues. But many people after
moving into their new home discover that they have noisy neighbours
or other neighbourhood issues that makes their new home less appealing.
So before you sign on the dotted line find out about:
- The cost of the local council tax's in your area (they can be a
shock in some neighbourhoods)
- Find out if there are any local planning applications that may affect
your decision to buy.
- What are the local amenities in the area? The closer the better
as this will reduce the costs of travel.
- Ask the current owner what the utility bills have been for the last
twelve months, this will help you budget.
- Speak to neighbours and ask them about the area, they will know
of any problems in the area which your estate agent will not necessarily
want you to know about.
The best advice for any frugal home buying person is to shop around
and then to shop around some more and compare and compare again. Yes
it takes time but by doing a lot of the checking yourself and not putting
all your trust in others to make the right decision for you such as
financial advisors and mortgage arrangers you are far more likely to
get the best deal for you and your finances.
The sad truth is that a lot of advisors are not necessarily putting
your financial
future first and indeed we used several advisors when we first
started out. It was amazing the difference in the offers we were told
about.
Times may be hard and home buying may not be within your grasp at present,
but by putting your frugal budget into action now, you will be much
better placed in the future to be the proud owner of your own property.
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