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Should you stretch your budget when buying a home?

When making an offer on a property it can be tempting to throw everything at it. Here’s what to weigh up before you do.

Guest Author
Words by: Matilda Battersby


Buying a home is a massive achievement. But it will feel even better if you’re confident you got a good deal.

Saving for a deposit, getting a mortgage and finding somewhere you like in your price bracket all take time.

Once you’re in a position to start making offers, it can be tempting to throw every penny at a home you fall in love with. 

But remember to keep some cash back to cover the costs of moving, which can run into tens of thousands of pounds with stamp duty.

Find out more about the costs of buying a home.

Most importantly of all, make sure you can comfortably afford your monthly mortgage repayments, so you can still enjoy life from your new base.

Here’s what to consider before making an offer:

1. Should I borrow the maximum mortgage available to me?

Mortgage lenders typically lend up to four or four-and-a-half times your salary. 

A couple who each earn the national average wage of approximately £25,000, would have a combined borrowing power of up to £230,000.

But with a modest deposit, the couple could buy a house worth more.

If you're offered a 95% mortgage of £230,000 with a repayment term of 30 years, at an interest rate of 4.5%, it will cost you around £1,100 a month. 

Other factors, such as how high interest rates are and how big or small your deposit is, can make this monthly repayment number go up or down. 

It can be tempting to borrow the maximum amount available without considering how much the rest of your life costs.

Your mortgage lender will ask you about your monthly outgoings, like childcare and commuter costs.

It’s worth doing this yourself first. Work out what you can comfortably repay each month while still forking out for what you need and enjoy.

If you think you might be in a pickle should an unforeseen bill turn up, consider your budget again. Work out what you can buy when borrowing a smaller sum of money.

Find out more about mortgage affordability here.

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Work out what your monthly mortgage payments could be with our mortgage calculator.

2. How much should my mortgage repayments be?

It’s not an exact science, but it‘s worth considering the ‘28% rule’. By this measure, you should spend 28% or less of your salary on your mortgage.

For example, someone earning £25,000 a year, would need to spend roughly £500 a month on their mortgage to meet the 28% rule.

If your payments exceed the 28% rule, it’s going to be harder to find a mortgage lender. And more of a struggle to repay the sum each month.

Consider if it would be worth waiting and saving a bigger deposit, which should help to get your monthly repayments down.

Chances are your income will go up as your career progresses. If you can get a mortgage with repayments above 28%, you might decide it’s worth it for a few years.

Remember, it’s always useful to work out the affordability if one of you loses your job or takes time out to care for children. 

You’ll need to have secured a Mortgage Agreement in Principle from a lender before you make an offer on a home. It shows the sellers you are serious and able to buy.

10. Three-bedroom terraced house with detached annexe, Raglan, Wales, £500,000

3. Should I offer the asking price on the home I want?

When it comes to making an offer, it’s worth remembering that if you like a property that’s for sale, it’s almost certain someone else will also be keen. 

In fact, there could be several would-be buyers jostling to get their hands on it.

Just remember that it needs to be the right price for you to live happily in it. 

So don’t be tempted to reach the ceiling of your budget, simply because there are others interested. The right house will turn up and this one might not be it. 

Only offer the asking price if you feel certain you can manage the repayments and know you’re getting a solid deal.

4. How do I work out what my offer should be?

The best place to start is with our house price research tool

Enter the address of the property you like. We’ll estimate what it's worth along with information on prices for other properties in the same street.

If the data exists, we can also tell you how much your target property fetched last time it was sold.

Armed with this information, you should begin to get a sense of how close your offer needs to be to the listed asking price.

Talking to the estate agent will also help. They represent the seller, of course, and they want to get the best price they can. 

But estate agents are professionals who understand the local market better than anyone and who know what a realistic price would be.

Read more advice about how to work out what to offer.

5. Should I expect to negotiate on the price of a home?

Once you’ve made your offer, it might take a day or so to hear whether your offer has been accepted or not.

If it hasn’t, you can decide whether or not to increase it – provided, of course, you’ve got the funds available to pay a higher asking price.

If you don’t want to or can’t increase your offer, you can try to negotiate with the estate agent.

The main bargaining chip at your disposal is if you’re a first-time buyer or have already sold a property.

If you're not in a property chain, this can be very attractive to a seller. They're trying to secure their next property and want to sell their existing one quickly.

This might be enough for the seller to accept a lower offer than one from another buyer who's in a chain.

It’s certainly worth pushing this point if you are at or close to the upper limit of what  you can afford.

If the seller accepts your offer, you can then set about securing your mortgage, beginning the conveyancing process. 

How does a solicitor help you to buy a home?

Congratulations, you’re one step closer to your new home!

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We try to make sure that the information here is accurate at the time of publishing. But the property market moves fast and some information may now be out of date. Zoopla Property Group accepts no responsibility or liability for any decisions you make based on the information provided.