As a general rule, you want to spend no more than 30 percent of your monthly gross income on housing. You will need to pay annual real estate taxes, insurance costs, heating and other utilities, and much more. Compared to 2018, expenditures on household bills increased 2.3% in 2019. You can spread the cost of gifting with a 0% interest credit card, or earn money when you spend with a cashback credit card. While it’s an easy decision to make when choosing what to renovate, how much to spend on it is a different ball game. When you buy a home you need to pay for a percentage of the price yourself either from your savings or your equity in your current home. After all, a family could dine on spaghetti with a touch of homemade bolognese, for a low cost meal. How much to spend on Valentine's Day. Advertiser Disclosure: NimbleFins is authorised and regulated by the Financial Conduct Authority (FCA), FCA FRN 797621. In fact, according to comparison site UK Power, while a one or two-bedroom flat costs £66 per month for gas and electricity, a five-bedroom house costs £137 per month. The total debt that you pay each month should not be more than 36% of your income before taxes. How much house can you afford? The average amount spent on public transport is around £1,097 year (£91 a month), which is primarily spent on bus, train and tube rides and international airfare (£359 per year/£29.90 a month spent across each category). Don’t ever make the mistake of taking out a huge mortgage that will be a struggle for you to maintain. Of those renting, the average monthly rent in the UK is actually £868 for private renters and £442 for social renters. Housing costs of £750 a month would mean you would need to make a minimum take home pay of £2,300 a month after tax to keep these costs below a third of your take-home pay. Do NOT take advice from a realtor or a bank on what you should spend as their estimates are almost always too high. Paying this off could cost £288,054 with a 25 year mortgage at 4%. In fact, 14% of our household budgets goes towards transportation, 11% to rent or mortgage interest (that's on average, across renters, mortgage holders and households owning their home) and 11% to feed ourselves. To gauge a basic minimum for food costs, we can look at the budgets of our poorest households, who are presumably eating as cheaply as they can. We could really do with knowing where to work to earn the most, we reckon. How Much Can You Afford to Spend on a House? ), Money transfers and credit (e.g., cash gifts), Licences, fines and transfers (e.g., stamp duty, road tax), Rent for Households Renting from Housing Association/Local Authority, Mortgage Payments for Households with a Mortgage, Utilities (water, gas & electric, internet, landline, TV subscriptions, etc. So how much should you be spending? While the largest component of housing costs is rent or mortgage interest, a close second is the cost of utilities. If you… The larger the down payment, the more home you can afford. If you don’t plan to hang on to the property for longer than five to ten years, you shouldn’t renovate beyond what you can make back in that time. Housing costs of £750 a month would mean you would need to make a minimum take home pay of £2,300 a month after tax to keep these costs below a third of your take-home pay. The first step to making a household budget stretch further is arguably understanding where your money is currently going. Some links in this article may be affiliate links. To understand your finances you can sit down with pen and paper and go through your bank statements and credit card bills once a month. We may have bitten off more than we can chew here, because this question is pretty tricky to answer! The average UK household spends £3,220 a year on groceries and non-alcoholic drinks at home. This includes interest, real estate taxes and insurance. My suggestion is to do the math and see what you can afford and spend that amount or less. Taxes, food, and household necessities make up the remaining amount of costs. It is not recommended to spend less than 10-20% on a down payment, for a few reasons. Step 4: Calculate your stamp duty. When buying a home, you should be able to pay at least 10-20% of the value of the home up front. So, before you start scouring the listings, take a cold hard look at your finances and decide how much you can realistically pay. If you earn £10,000 after tax and benefits you should be spending £291.60 a month on rent for yourself. Needless to say, the most important thing you'll be telling them is the amount you're offering, but you should also emphasise all the other factors in your favour. The average UK household spends £6,000 on utilities and other household operational and maintenance expenses and equipment, as well as household goods & services. ... We also spent a fair amount on structural problems flagged in the structural survey which may not be something you experience with a property you are renovating, but definitely should be factored into your budgets just in case unforeseen issues unveil themselves. If your home is worth £75,000 and you spend £20,000 on a kitchen refit, you are extremely unlikely to recoup that money in added value. The third largest household budget category is food. When it comes to how much you should spend, NerdWallet advocates the 50/30/20 budget. That could range as low as 25% below asking up to full price. The largest component of our travel budget is operating our personal vehicles. Five tips to help determine how much you should spend on a house 1. In this article, we’ve explored a few case studies of individuals with different approaches to home investment. Whether you're the father of the bride, a bridesmaid or a family friend, working out how much you should spend on a wedding gift is hard. The prices are based on averages for a terraced, semi-detached and detached house. All in, food and drink consume 19.1% of our total annual budgets, and food prices in the UK have been rising around +2% a year. We produce in-depth research on all areas of personal finance, such as energy bills, pensions and budgeting. 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