How to Budget for Your First Home Purchase

Start With the Deposit, Not the Property Search

It is tempting to spend your evenings scrolling through listings before you know what you can actually afford. The more sensible order is to work out your cash position first, because the deposit is only part of the money you will need on completion day.

Most lenders want a minimum of 5% down, and a handful of deals go slightly lower, but the interest rates at 95% loan-to-value are noticeably higher than at 90%. If you can stretch to 10%, you will usually get a better rate and a wider choice of products. On a £250,000 home, that is £25,000.

Two practical points sit alongside the deposit figure:

• Source of funds: lenders and solicitors will ask where every pound came from, including any gifted deposit. A gift letter from the donor is normally required.
• Deposit plus costs: never put every last penny into the deposit. You need money left over for the fees below, and a buffer for the first month in the property.

Stamp Duty: Check Your Nation's Rules

Property tax is devolved, so the rules depend on where you are buying, and thresholds do change. Always confirm the current position before you commit.

In England and Northern Ireland, first-time buyers currently pay no stamp duty on the first £425,000 of a property priced up to £625,000. Above that, relief is lost and standard rates apply. Buy a £400,000 home as a first-time buyer and your stamp duty bill is nil; buy at £500,000 and you pay 5% on the £75,000 above the threshold, so £3,750.

• Scotland: Land and Buildings Transaction Tax applies, with a first-time buyer relief that raises the nil-rate band to £175,000.
• Wales: Land Transaction Tax applies, with a nil-rate band of £225,000 and no separate first-time buyer relief.

If you are buying as a couple and one of you has owned property before, you will generally lose first-time buyer relief entirely. That single fact can add thousands to your budget, so check it early.

Legal, Survey and Mortgage Fees

These are the costs that surprise people most, because they arrive in a cluster right when you are also paying a deposit.

• Conveyancing: typically £800 to £1,500 for a freehold purchase, plus disbursements such as searches, bank transfer fees and Land Registry charges, often another £300 to £500.
• Survey: a condition report might cost £300 to £500, a HomeBuyer report £400 to £700, and a full building survey £600 to £1,500 or more for older or larger properties.
• Mortgage fees: product fees range from nothing to around £2,000, and some lenders charge a valuation fee. A broker may charge £300 to £500, or work on commission.
• Leasehold extras: a management pack, notice of transfer and deed of covenant fees can add £300 to £600, and you may need to apportion ground rent and service charges.

Ask your solicitor for a full written estimate before instructing them. If a quote looks unusually cheap, check what is excluded.

Moving Day and the First Few Months

The purchase completes and the spending does not stop. Removals firms typically charge £300 to £800 for a local move, more if you need packing. A self-drive van plus fuel and materials might cost £100 to £200.

Then there is the property itself. Budget for:

• Buildings and contents insurance, which you will need from the day you complete.
• Council tax, water, energy and broadband, plus any connection or setup charges.
• White goods, a bed, curtains and basic furniture if you are starting from scratch. This is easily £1,500 to £3,000 unless you inherit items.
• Service charges and ground rent if the property is leasehold, often payable quarterly or half-yearly in advance.

If the survey throws up an urgent repair, you may also want to negotiate a price reduction rather than absorb it yourself, but keep a reserve in case the seller refuses.

A Realistic Worked Example

Take a £250,000 freehold home in England with a 10% deposit:

• Deposit: £25,000
• Stamp duty: £0
• Conveyancing and disbursements: £1,400
• HomeBuyer survey: £550
• Mortgage product fee: £999
• Removals: £500
• Insurance, council tax and setup: £250
• Contingency: £2,000

That is roughly £30,700 in total, not £25,000. On a £400,000 purchase with a 10% deposit in England, the deposit rises to £40,000 and the non-deposit costs sit somewhere between £5,000 and £6,500, depending on the survey and legal work involved.

A simple rule: set aside 3% to 4% of the purchase price for fees and moving costs, then add a contingency of at least £2,000. If your deposit is 5% rather than 10%, your monthly payment will also be higher, so run the numbers on the whole year, not just the purchase.

Build Your Budget Before You View

Get a mortgage decision in principle so you know your borrowing ceiling, then write down your deposit, your expected fees and your contingency in one place. Subtract the total from your savings and see what is left. If the answer is uncomfortable, you have two options: save for longer or look at a lower price bracket.

Doing this work up front means viewings stay enjoyable. You will know which properties are genuinely within reach, you can move quickly when the right one appears, and you will not be the buyer who discovers a £2,000 shortfall the week before completion.