You’ve decided that you’d like to enter the slightly daunting and very exciting world of homeownership and find a place to call your own. Before making your decision however, you’ll be happy to know that there are a few things to help make the process easier. Whether you’re looking for advice on securing a mortgage or choosing an ideal location, this guide will give you everything you need to know:
● Finding a property you can afford
● Dealing with the deposit
● Setting up a budget for other costs you might encounter
● Making an offer
● Finding a solicitor and surveying the property
● Completion and final steps
Finding a property you can afford
Before you start dreaming of your ideal home, it’s a good idea to taper your expectations and find a property that can work around you. Your finances are the deciding factor on whether or not you will move for a property, so be sure that you can afford to buy and keep on top of your monthly mortgage payments.
The general rule of thumb when looking at properties is to make sure you have enough for the deposit, with most requiring you to have at 5% to 20% of the cost of the home you would like. So if you are looking at buying a home that is valued at £100,000, then you should be looking to save at least £5,000.
TIP: The more deposit you place down on a property, the better your mortgage rate will be.
Dealing with the deposit
The trick with mortgages is to save as large a deposit as possible, because the more you have down, the cheaper your mortgage rate will be. This is because all mortgages are placed into certain categories in relation to their Loan-To-Value (LTV), so if you pay a 10% deposit you will a 90% LTV mortgage and so on.
Banks usually have bands where mortgage rates become cheaper. This is done in relation to have secure they value your investment, so the more equity you have, the less risk you are to the bank if your property loses value. For instance:
● Those with a 10% deposit (90% LTV) will be charged the most
● Those with 25% (75% LTV) will be charged less
● Those with 40% (60% LTV) will be charged the least
Setting up a budget for other costs you might encounter
Buying a new property can be a costly venture, but aside from your monthly mortgage payments there are also other costs to deal with that you may not have been aware of or considered. These include:
● Mortgage arrangement and valuation fees
● Stamp Duty (or Land and Buildings Transaction Tax in Scotland)
● Solicitor’s fee
● Survey cost
● Removal costs
● Initial furnishing and decorating costs
● Buildings insurance.
Setting up a budget to deal with these payments and other household costs is an absolute must, particularly if you want to protect your investment.
Making an offer
Once you have gone through the long and arduous process of finding a home you want to buy, the next step is to make an offer. This process is usually done with the help of an estate agent, who will be able to guide you through the process and act as a middleman between you and the seller.
Questions to ask:
● How long has the property been on the market?
● What will be included in the sale? (i.e will the property be furnished?)
● Are there any future works expected?
Finding a solicitor and surveying the property
Once you have made an opening offer the next step is to arrange a solicitor and surveyor to check for any problems that could impact the cost of the property. A solicitor will handle the legal work and check for any planning or local issues that could affect the value of your home, as well researching an appropriate value.
You should commission a survey at the earliest possible time in order to find any hidden problems that could cost you in the future. If the surveyor comes back to you and finds the property needs thousands of pounds worth of repairs, you could ask the seller to lower the price to the equivalent.
Types of survey:
● Home condition survey – this is the entry-level survey and the cheapest too at a price of £250.
● Homebuyer’s report – this is a more in-depth survey that assess the property both inside and out. A typical cost for this would be around £400+
● Building or structural survey – this option is the most thorough and will cost you in excess of £600.
Completion and final steps
After you have concluded the survey and renegotiated a price, you will need to exchange contracts with the seller to confirm the purchase. Before signing though, have your solicitor look over it to check all the details are correct and that you are happy with the changes. Once everything has been agreed upon you can now move towards the final steps and completion, which usually takes around four weeks and a number of charges:
● Any remaining money owed to buy the property is now transferred from your solicitor’s account to the seller’s solicitor’s account. This involves a Telegraphic Transfer fee at a cost of £25
● You may also have to pay a mortgage account fee to the lender for setting up your account. This varies between £100-£300
● In addition to this you will be required to pay a solicitor’s bill at a typical cost of between £500-£1,500 plus 20% VAT
● If the property cost over £125,000 you will have 30 days from completion to pay Stamp Duty.
Buying your first house is never simple, but with the right help you could be on your way to making the next big step in your life. The team at Pearson Ferrier know what it takes to get you on the property ladder without complications, as they are one of the leading property experts in the industry with a wealth of experience. So whether you’re buying, selling or renting, their highly-skilled team are on hand to deal with your inquiries throughout the UK.