House Buyers Paying £30,000 More Than Intended, Mostly Funded By Debt

House buyers are failing to set realistic budgets when buying their new home and may be paying £30,000 more than they intended on their purchase.

A study by Money.co.uk has found that one in five home buyers paid, on average, £23,000 more for their properties than they intended to. Buyers then went on to spend, on average, another £8,000 on their new home during the first year of ownership.

Twenty three percent of people had failed to budget for these expenses, the research found.

For the average under-budgeted buyer, 60% of the shortfall comes from long term savings, weakening the ability to cope with future ‘rainy days’. That leaves a further £13,400, of which just over half (63%) is funded using credit in the form of personal loans (15%), credit cards (27%) and extended mortgages (21%). For many, these are long term debts, with only a third (35%) paying them off within the first year.

One fifth of home buyers are currently paying off these debts on top of their monthly mortgage payments.

“These findings demonstrate why methodical planning and budgeting are such important first steps to buying a property. It is all too easy to overlook expenses and end up in a precarious financial position. Households with debt piled upon debt are most likely to be at risk during tough economic times.”, advises Chris Morling, MD of Money.co.uk.

Sarah Beeny, of Channel 4′s Property Ladder agrees:

“It amazes me how some buyers are still jumping in feet first without a thought for their budget limitations. House buying and renovation can be a rewarding and lucrative exercise, when done properly and to a budget.

But hasty decisions on must have properties, fixtures or fittings will just result in financial turmoil.”