Should you buy a house before you have a baby or after? That is a difficult choice to make. Here at babybudgeting.co.uk we are happy to help with a few questions and answers.
Are House Prices Rising Fast?
Low unemployment, generous mortgage rates and a shortage of house for sale does fuel increases in the cost of a home.
In March 2018, the average price of a home rose by 1.5% to £227,871 and prices were 2.7% higher than at the same time the previous.
The view from forecasters is the increase would stabilize for the year at around 2%. On the price of an average home, 2% is just over £2,500.
Are you financially stable?
Do you have a lifestyle that you are content with and a regular income that can not only sustain it, but leave you with additional money at the end of each pay cycle?
The following are signs that you are financially stable:
- Meeting your housing cost commitments each month:
- Paying your utility bills with ease;
- Having life insurance, home insurance, motor insurance and possibly health insurance;
- Saving a certain percentage of your income (say 10%) each month to pay for major life events, such as having a baby, your children’s’ education, retirement; and
- Saving an emergency fund equivalent to at least three months salary.
How Much Can You Save?
To buy a house today you must have a large deposit, with some lenders asking as much as 25%.
Mortgage broker Habito is fast, easy and free to use and there is a useful mortgage calculator on their website.
To better manage your household budget, make a list of your monthly income and expenditure and make sacrifices, especially if you are also planning to have a baby.
The amount you have left each month is the amount you can save. You can now work out how long it will take you to put together the deposit you need.
What is Your Repayment Capacity?
The standard advice is not to allow your mortgage repayments to exceed 28% of your pre-tax salary.
The important decisions rest in the hands of the lender who calculates how much they will lend based on certain multiples of income (figures differ with each lender). They will then expect you to provide a percentage of the cost of the house as a deposit and will scrutinize your spending and savings patterns to make sure that you are not taking on mortgage repayments you cannot afford to service.
How Young are You? Do You Want to Wait?
You must be in a good financial position to be able to sustain the financial upheaval the buying a house, having a baby or both may cause.
Mortgages usually run for a period of 25 years. If you plan to retire when you are 60, you can wait until you are 35.
Similarly, if you are a couple in your 20s, you have plenty of time in which to start a family.
What are your priorities?
Only you and your partner can determine the things most important to you. If having a baby is at the top of your list, you are going to have to accept that the cost of having a baby and raising a child, is going to limit how much you can save.
If it’s a house you want, getting financially stable and saving the deposit may mean that you will have to postpone having a child.