Buying a home in the UK is one of the biggest financial decisions you'll ever make. Plenty of people start by scrolling through listings before they've worked out what they can actually afford — and that often ends in disappointment, wasted time, or even real money trouble. A clear budget changes everything: it doesn't just show you the kind of house or flat you can buy, it lets you feel secure throughout the process and long after it. In this guide we set out how much money you'll really need, the costs buyers most often forget, and where to begin.
First step — how much can I afford?
Before you start looking, it's worth answering one question: how much can I realistically afford? Three things shape the answer:
- Income — your monthly salary, or your business income if you're self-employed.
- Commitments — existing loans, finance agreements and credit cards.
- Savings — how much you've put aside for the deposit, the solicitor and the taxes.
The rule of thumb is simple: lenders typically offer around 4 to 4.5 times your gross annual income. For example, if you earn £35,000 a year you can expect roughly £140,000–£160,000 of mortgage. That's only a guide — the final figure also comes down to your commitments and your credit history.
Before you apply for a mortgage, check your credit history (Experian, Equifax, ClearScore). A clean record often means a better rate, and it's worth fixing any errors you spot well in advance.
The deposit — the bigger it is, the better the terms
In the UK market the size of your deposit matters enormously, because it drives not only your choice of homes but also the interest rate you'll be offered:
- 5% deposit — the bare minimum, but fewer deals are available and rates are higher.
- 10% deposit — more options and friendlier terms.
- 15–25% deposit — usually the best deals and the lowest rates.
For example, buying a home at £250,000, a 10% deposit is £25,000 and a 20% deposit is £50,000. One important point: you'll need to show the deposit as genuine savings, because the lender will ask where the money came from.
The deposit is only the start. The true cost of buying is always higher than the number on the listing.
The extra costs people often forget
Most buyers think only about the deposit and the monthly repayments, but in reality there's more to it. Here's a sample table of one-off costs — the figures are approximate and depend on the property and the region:
| Cost | Approximate amount |
|---|---|
| Stamp Duty (SDLT) | from £0 (depending on price and status) |
| Solicitor / conveyancer | £1,000 – £2,000 |
| Property survey | £300 – £700 |
| Lender's valuation | £250 – £500 |
| Moving costs | £500 – £1,500 |
| Home insurance | from £20 / month |
Stamp Duty deserves a mention of its own: first-time buyers get relief (0% up to £300,000), while a second home or investment carries a +5% surcharge. It's worth working out the exact figure in advance — we cover it in detail in our Stamp Duty guide.
If your home budget is £250,000, keep a reserve of at least £5,000–£8,000 on top of the deposit for the extra costs. Your mortgage won't cover these — you need them in cash.
Mortgage in Principle — why you can't do without it
Before you start hunting in earnest, it's worth getting a Mortgage in Principle (MIP) — a statement from a lender or broker confirming that, in principle, you're likely to be offered a loan. It isn't a final guarantee, but it shows sellers you're a serious buyer. Many agents won't even show you homes without one. You can get it free of charge, and an answer usually comes back within a few days. We walk through the whole process in our mortgage and MIP guide.
Finances when you've moved here or work for yourself
A common question is whether banks will lend if your income isn't the "standard" kind:
- Employed — usually three to six months of work history and payslips are enough.
- Self-employed — you'll need at least two years of tax returns (SA302s). Some lenders accept one year of trading history, but there are fewer deals.
- Combined income (for example, part employment, part rental) — a broker can help pull it all together into a single application.
One thing to remember: never overstate your income. Lenders have access to HMRC data and can check it easily.
A worked example
Say a household earns £60,000 a year between them:
- Maximum loan (around 4.5×) ≈ £270,000.
- Savings for the deposit — £30,000.
- Realistic home budget — around £300,000.
The extra costs would add roughly another £6,000, so the budget needs to be planned to leave a reserve — not spent down to the last pound.
The most common budgeting mistakes
- Leaving everything to the last minute. Get your finances in order before you start viewing homes.
- Counting only the mortgage. The deposit and the repayment aren't the only sums involved; the extra costs are very real.
- Overestimating what you can manage. Choose repayments you could still cover if rates rose.
- Ignoring your credit history. Check it well in advance.
- Not speaking to a broker. A broker often finds better terms than going to a bank directly.
A general rule is that your housing costs shouldn't exceed roughly 30% of your monthly income, and it's wise to keep an emergency fund of three to six months' living costs. Bear in mind, too, that it takes around three months on average from offer accepted to getting the keys.
A quick action plan
- List every possible cost — one-off and ongoing.
- Work out a realistic budget with a 10–15% reserve.
- Compare it against your income: will the repayments stay under ~30%?
- Use the online calculators (Stamp Duty, mortgage).
- If in doubt, talk to a broker or an estate agent.
You'll find more advice across our guides — they cover the whole journey of buying a home, from budget to keys.