Searching the property portals definitely isn’t all you need to be doing if you want to be a savvy buyer. Discover all you need to know about the homebuying process. I would like to thank Andrew Taylor from the latest law jobs UK for his support and contribution on the conveyancing laws in England and Wales and James Radford from wowitloveithaveit marketing agency for all the help on the UK house market statistics.
Buying a home for the first time is exciting. However, investing in property also a huge financial commitment that you’ll want to take on armed with plenty of know how about the process, the possible pitfalls and the professionals you’re going to need to work with.
FIND OUT ABOUT MORTGAGES
When you’re taking out a mortgage to buy a home be aware that you need to begin the process before you start house-hunting. This way, you’ll know how much you can borrow so you’re not wasting time on flats and houses on which you wouldn’t be able to afford the monthly repayments.
You may have been able to save money towards a deposit, which will mean a larger choice of mortgage deals, and contribute to the total available.
CAN I GET A MORTGAGE WITH BAD CREDIT HISTORY?
If you are currently experiencing financial difficulty it is not the right time to buy a house. There is a new tenant-to-landlord payment system that allows you to build your credit rating back up by making your rent on time each month.
However, if money-worries are a thing of the past then your first port of call is the mortgage broker who can help you take out a mortgage. If you have a poor score but a good record over the last 12 to 24 months a bank may lend.
If you have a big deposit and can therefore afford a low loan-to-value mortgage it will be easier to get a mortgage agreed. There are specialist mortgage lenders (known as the sub-prime sector) but the interest rate repayments are far higher.
2. INVESTIGATE SCHEMES TO HELP YOU BUY A FIRST HOME
There are government schemes designed to help get you on the housing ladder.
Help to Buy ISAs are offered UK wide to first-time buyers. The government will top up your savings by 25 per cent (up to £3,000). If there are two of you buying, the other person can also get a Help to Buy ISA. You don’t have to pay the money back.
There are some conditions. The home must have a purchase price of up to £250,000 or £450,000 in London, be your only home, and be where you intend to live. You’ll need to save into the ISA (up to £1,200 the first time, and then up to £200 each month with a maximum of £12,000). When you buy, your solicitor or conveyancer applies for the 25 per cent top up.
There are a number of providers of the Help to Buy ISA
Help to Buy equity loans are designed to provide you with a low interest loan towards your deposit in England and Wales. However, to be eligible you have to buy a new-build home from a registered Help to Buy builder with a purchase price up to £600,000 in England or £300,000 in Wales. It also has to be your only home, and you can’t sub-let or rent it out when you buy. If you’re in Wales, you’ll need to show you can’t afford the property.
You need a 5 per cent deposit, and the government will lend you up to 20 per cent (or 40 per cent in London). You’ll require a mortgage of up to 75 per cent (or up to 55 per cent in London). The loan has be paid back after 25 years or when you sell the property, whichever comes first, and what you pay back depends on the market value of the home.
Apply through a Help to Buy agent in the area in which you want to live in England or, in Wales, follow the government’s Help to Buy application steps.
You can use both a Help to Buy ISA and an equity loan, if necessary.
Shared ownership is another UK-wide scheme where you buy a share of between 25 and 75 percent of your home through a housing association and pay rent on the rest.
Different rules apply in Northern Ireland and Scotland, and in Wales you must contact your local authority. In England, to be eligible your household needs to be earning £80,000 per year or less (or £90,000 a year or less in London). Check out the government’s information and find a home to buy through the shared ownership scheme via the Help to Buy agent in the area in which you want to live.
3. GET IN THE KNOW ABOUT LEASEHOLD AND FREEHOLD
It’s important to understand the difference between leasehold and freehold when you’re buying a property.
If you buy a leasehold property, you own the building but not the land. With a freehold property, you own both building and land. Most frequently, in England and Wales flats are leasehold and houses are freehold – but there is a trend for new-build houses to be sold as leasehold properties.
Why does it matter whether you own the land? Buy a leasehold property and you will probably have to pay an annual fee called a ground rent to the freeholder (also called the landlord). You will usually also have to pay service charges. You may also be called on to contribute to major works on the building although the landlord will have to consult you if this will cost each leaseholder more than £250.
If you are interested in a leasehold property, find out how long is left on the lease, which has a fixed term. A lease can last for up to 999 years or periods such as 125 years, but they can be short. A mortgage lender will probably require 80 years of the lease remaining when you buy. Be aware, too, that the property’s value will fall and it can be hard to sell when there are fewer than around 90 to 80 years left on the lease.
The other factors to consider if you’re buying leasehold are that you may not be able to own a pet or sub-let, or you may be able to only with permission. You’ll also have to get the OK from the freeholder for some (usually structural) alterations to your home.
Freehold properties allow you to own both building and land until you choose to sell. You won’t be paying ground rent or service charges. You’ll be the one looking after the building, so you can get your own quotations for work when it’s needed. Equally, you won’t have the concerns that some leaseholders have that the building is not being sufficiently maintained as this is up to you.
New-build houses are increasingly being sold as leasehold properties. This brings the same cost issues with as a leasehold flat including ground rent, fees for permission for changes and service charges.
Recent media reports have revealed ground rent charges that increase steeply over time and large fees being demanded for minor alterations to a house. Owners have also found that when they try to exercise the right to buy the freehold, it has been sold on by the developer, and the process is both difficult and extremely expensive. These issues can also cause major problems if an owner wants to sell.
Always check whether a new-build home is freehold or leasehold, and appoint an independent solicitor and ask them to confirm what you’ve been told. We found our affordable solicitor via https://latestlawjobs.com which has a directory of all the solicitors in the UK.
4. SEARCH FOR A HOME
The major portals Rightmove, Zoopla and Onthemarket will show you what’s out there, but it’s worth taking the old-fashioned approach and talking to the agents who cover the area in which you’re looking as they’ll be able to let you know about properties they are about to list. Here are the rules to follow when you’re looking:
Do know the price bracket you’re looking in following your discussions with mortgage lenders, but don’t dismiss properties that are under your maximum in case there’s competition from other buyers. Equally, you can look above in case a seller is desperate to move and open to an offer. However, beware of wasting time with properties that are always going to be out of your reach.
Do draw up a list of must-have features, but don’t be too rigid. Some will be non-negotiable – for example the maximum distance of a commute – but be open to different possibilities and the fact that over time you may be able to improve both exterior and interior.
Do check out the local area online with Street View, which can save you a journey to a home in a location that’s definitely out of the question.
Don’t spend your life looking online. Until you actually arrange viewings you won’t get a true feel for what you can buy.
5. ARRANGE A SOLICITOR OR CONVEYANCER
It’s worth finding the professional you’re going to work with before you make an offer as you’ll be asked for these details when you do.
Both solicitors and conveyancers can undertake the legal work involved in your house purchase – such as drawing up contracts, providing advice and recommendations, and dealing with the money side of the purchase.
Personal recommendation is always valuable, and appointing someone in the local area can be a good idea. Don’t just choose on price – a dedicated professional with time to spend on your conveyancing is vital.
6. MAKE AN OFFER
Once you’ve found the property you want, you can put in an offer.
Bear in mind how long it’s been on the market – a buyer may be more open to offers if the home has been up for sale for a while. Pay attention to similar properties in the area as well, and how long they’re taking to sell.
You can check out the price history of the property using Rightmove and Zoopla. Take a look, too, at local prices per square foot on the latter, which can help guide you.
Find information on sold prices in the area via the Land Registry’s UK house price index.
Online estimates can be a guide, but don’t rely on them – instead think of them as ranges of value because they can under or over price by some margin.
Don’t be surprised if a low offer is rejected at once. It is most likely to be successful if the property has been on the market for a while, or if the seller needs to move quickly. An offer of 5 or 10 per cent lower than the asking price can be a good place to start.
Be prepared to negotiate if a first offer is rejected. As a first-time buyer you are in a strong position without a chain behind you, which can help. Flexibility over completion date to suit the seller may also assist your bid.
Once the offer has been accepted ask that the property is taken off the market. If this is refused, be very wary of spending out on a survey and conveyancing as another buyer could come along and offer more, so-called gazumping. In England and Wales an accepted offer is not legally binding until exchange of contracts.
DON’T GET GAZUMPED
So your offer has been accepted but it’s not legally binding yet. Both parties can still pull out. To avoid getting gazumped (another buyer coming in after your offer has been accepted and bidding higher) ask the estate agent (firmly and repeatedly) to take the property off the market and change the sign outside to ‘sold.’ Gazumping is deemed unethical by some agents but it is not illegal. You can read more about the law on gazumping on the latest law jobs blog which has a detailed home buying section.
7. SEE THE BUYING PROCESS THROUGH
Your solicitor or conveyancer will now act as an intermediary between you and the seller via his or her legal professional. A good estate agent will also liaise with both you and the seller to ensure things are moving forward.
The conveyancer examines the draft contract, raises enquiries with the seller’s solicitor, and does the legal searches.
You will need to apply for the mortgage and have the property valued meeting the lender’s criteria. You will also need to decide on the type of survey you wish to have.
Keep in regular contact with your conveyancer to ensure things are moving forward.
INVENTORIES: WHITE GOODS WARS
There is a reason to keep things friendly between buyer and vendor: the inevitable quibble over white goods. There is no firm set of rules here, but a fixed item they cannot take with them should be included in the price of the property.
If it would benefit them to take the washing machine to their next home but they offer to leave it for a sensible cost, bite their hand off. The convenience of having decent white goods in place on moving day is invaluable. However, they must be well within the warranty period or do not part with any cash. Also, insist all warranties and manuals are left.
8. EXCHANGE CONTRACTS ON A HOUSE PURCHASE
Once you’ve got the surveyor’s report, have a mortgage offer, and all the searches and enquiries have been received and everything is satisfactory, you can exchange contracts with the seller. Your deposit – normally 10 per cent – needs to be with the solicitor in time for exchange.
A date and time will be arranged for exchange of contracts. At exchange the deal becomes legally binding and if you pulled out of the purchase, you would lose the deposit. The seller is also legally committed and cannot sell to someone else.
Make sure you have insurance in place from this point.
9. HOW TO COMPLETE A HOUSE PURCHASE
The date of completion will have been agreed between you and the seller before exchange. It’s frequently two to four weeks after exchange.
You will be given the keys once the seller’s solicitor has confirmed they’ve received the money due.
After completion, your conveyancer will also pay the stamp duty, and send documents to the Land Registry on your behalf.