How to get your finances ready for buying a home in 2025

Yes it’s a cliché but will 2025 be a case of ‘New Year, new home?’ If you are serious about purchasing a property, almost everything will be dictated by your monetary situation. Here’s how to get your finances in order before you start looking for a new home.

Find out what you can afford first

We strongly recommend you sit down with an adviser for a financial health check. A professional will establish how your income, debts, savings and any equity, if you currently own a property, will impact a purchase. At the end of a consultation, you’ll know how much a mortgage lender will loan you, what size of deposit you’ll need and what value of property you can afford.

Sit down and create a budget

Although the actual property is the biggest expense, there will be other costs. A buyer will need to budget for the deposit (a lump sum that needs paying at exchange of contracts), stamp duty (paid upon completion and changing on 1st April 2025), legal fees, searches, removal costs, a potential mortgage arrangement fee and the cost of a property survey.

Make a concerted effort to save the biggest deposit possible

Buying a property really is the time to cut back and save. The bigger the deposit, the less you have to borrow from a lender and the lower the monthly repayments will be. You may hear this expressed as ‘loan to value’ (LtV): if you have a deposit of £25,000 and the property you are buying is worth £250,000, your loan-to-value is 10%. Those with a higher LtV usually have access to more favourable mortgage rates and will have better protection against negative equity, so cut back on fancy coffees and take-aways to save more.

Start clearing debts

Your credit score will be taken into account when you apply for a mortgage, so it’s best to start improving your position in advance. Reduce or clear credit card balances, try to settle personal loans and if there’s a black mark on your credit history, you can raise a ‘notice of correction’ with the relevant credit reference agency if you think it’s there in error. It’s also important not to miss any payments or bills in the run up to a mortgage application.

Come to the table with a mortgage agreement in principle

With the above resolutions completed, buyers should obtain a mortgage agreement/decision in principle from the lender directly or arranged via a financial adviser. This is essential as one of the first questions an estate agent working for a seller will ask is ‘has the buyer got a mortgage agreement in principle?’. Buyers without one won’t be taken seriously and may be overlooked in favour of those who do.

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Although Labour has long been associated with better rights for renters, it recently showed that it is equally as committed to promoting homeownership. A raft of financial reforms designed to help mortgage borrowers, which will apply across the UK, were announced in July.