Budgeting for New Homeowners

Owning your home brings a lot of freedom. You can pull up the carpets, get a new shower, and create that kitchen-diner of dreams. Of course, this freedom comes with responsibility – you can’t just ring your landlord when things go wrong. But what are our top budgeting tip for first time homebuyers? Get familiar with your household expenses. And budget for them, so you’re financially prepared.

As a homeowner, you’ll probably be responsible for a lot more household expenses than if you were renting. Let’s look at the key costs you’ll need to cover:

• Buildings insurance. This covers repairs if the structure of your property is damaged. You must have this in place to even secure a mortgage, from the date you exchange contracts, so it’s certainly one to account for from the word go.

• Contents insurance. It isn’t a requirement of your mortgage, like buildings insurance is, but it covers the cost of replacing your household belongings if they’re damaged or stolen. You can usually buy buildings and contents insurance together to keep costs down.

• Life insurance. Many homeowners purchase this to pay off the mortgage if they die. Again, it isn’t a must-have, though some mortgage lenders do require it.

• Contingency budget. Consider putting some funds aside in case something costly goes wrong that isn’t covered by your insurance, so you won’t be caught short. Like if your boiler breaks down, for example.

• Mortgage repayments. This is likely to be your most expensive monthly outgoing. It should be simple to budget for if you’re on a fixed-term mortgage, as you know how much you owe each month.

• Bills. Chances are you had to pay these as a tenant too, but factor in monthly payments for electricity, gas, water, broadband, TV licence and council tax.

• Service charge and ground rent for leasehold properties. If you’ve bought a leasehold flat, it may incur a service charge to cover the cost of maintaining communal areas and looking after the building. And ground rent for the land the property sits on, although this shouldn’t be too expensive since recent government changes.

Now you know more about the costs you’ll need to cover, it’s time to start costing them up. Work out the amount of each expenditure using online comparison sites for insurance and bill calculators for utilities.

You can find out how much Council Tax your home will owe, for example, on the government website.

Chat to friends and family who own their own homes and see how much they put aside for contingency purposes.

Next, put together a simple spreadsheet so you can clearly see your outgoings. Or try a budgeting app like Emma, Plum or Snoop.

Once you know your monthly expenses, you can work out whether you need to start saving in other areas. Read our full guide to creating a monthly budget for advice.