First-time buyers – getting clear on your monthly outgoings
This is the second instalment of our mini-blog series called “Getting Mortgage Fit” where we explore different ways to whip your finances into shape before applying for a mortgage.
Here are the links to the full series of blogs:
Topic 1 – Knowing your credit score
Topic 2 – Getting clear on your monthly outgoings
Topic 3 – Building up your savings
Topic 4 – Working with a mortgage broker
This blog is all about getting familiar with your monthly outgoings before applying for a mortgage.
Why is it important to get clear on your monthly outgoings?
A friend recently totted up how much she spends each month on visits to the coffee shop with her toddler. It had become part of their routine on their trips to the library and after pre-school pick-ups. She was amazed to discover she spent over £300 on these little excursions each month.
Getting familiar with your monthly outgoings gives you a sense of control. Even if you don’t like what you see, you instantly gain more knowledge and awareness, giving you the power to make changes.
Knowing how money flows in and out of your current account is an important step when applying for a mortgage. It allows you to see the level of mortgage repayments you might be able to afford, and it also helps to identify any surplus that could be regularly saved to boost your deposit.
Monthly expenditure and affordability are some of the first things I ask for when I start working with a new client. I have an easy-to-complete form that breaks down all your expenditure. We then take time to discuss anything that might influence your application.
If you’ve decided not to work with a mortgage broker for your first mortgage, here are some easy ways to approach this task.
How can I get clear on my monthly outgoings?
Even if your think your financial administration is a complete disaster, and you’ve never looked at your spending in much detail, I guarantee you’ll have better financial clarity if you follow these steps:
- Print off the last 3 months of account statements. Log in to your online banking account and get access to your bank statements. If you have a credit card(s) then print these too. If you don’t have a printer, just download them to your phone or laptop.
- List out different spending categories. You can be as detailed as you like about this, but here are some ideas: rent, bills (electric, water, mobile phone, WiFi, TV etc), insurance (personal, pet, car, house), loans/overdraft, car hire purchase, school fees, childcare costs, council tax, food, cigarettes, alcohol, petrol, commuting to work, clothes, hobbies, holidays, gifts, eating out, membership fees, etc.
- Count up your monthly spending for each category. It might be easier to create a simple spreadsheet to do the maths for you. Using the past 3 months as a guide, write down what you think your average spend is for each category.
- Deduct all your expenses from your income to see how much surplus/deficit there is at the end of the month.
- Be realistic if you think you’re likely to have more costs in the near future then capture these too. If you don’t feel the last 3 months are representative of your usual spending behaviour then make a good estimate.
- Reflect on what you’ve discovered. Are you shocked by your spending on any categories? Are you pleasantly surprised and reassured that you are spending within your means? Can you think of any actions you can take to improve your spending?
Now you’re clear on your monthly outgoings, we’ll take a look at the importance of building up your savings in our next mini-blog.
How can Downton Mortgages & Financial Services help first-time buyers?
Here’s what you can expect from us if you decide to use a mortgage broker to find your first mortgage:
- We’ll take care of researching a comprehensive range of mortgage lenders and will come back to you with a list of options which we’ll chat through together.
- Once we’ve decided on your mortgage lender, we’ll take care of the application for you right through to completion and liaise with them on your behalf.
- We’ll also give you advice on buildings insurance and any personal insurance you might need, taking care of the applications for those too.
- We’re on hand to answer any questions, however small, to make sure you’re confident and happy with the decisions you’re making.
If you want to find out a bit more about us, then take a look at our website and get in touch for a no obligation chat.
Other blogs in the “Get Mortgage Fit” series
Topic 1 – Knowing your credit score
Topic 4 – Working with a mortgage broker
Other blogs we’ve written on related topics
5 essential questions for first time buyers
Important Information
The information contained within was correct at the time of publication but is subject to change (January 2024).
Please note for all mortgage products, terms and conditions apply. This information is a summary only. You will receive full documentation upon application which sets out the terms, conditions and limitations of lending provided.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.