Buying a home can be a long and complex process, but there are certain steps you can follow to make it as smooth as possible. This page provides a range of information about purchasing a home in the open market. You can also download two handy checklists opposite; for use when viewing a potential home and moving home.
If you are a first time buyer and struggling to purchase a home, it is well worth considering the Council's Low Cost Home Ownership Scheme; Homestep. This places additional rungs on the home ownership ladder through shared equity.
Weighing up the facts of Home Ownership...
- Long-term security over where you live
- Greater control over the furniture, decor and upkeep of your home
- It is generally an investment for the future
- It can enable future moves up the housing ladder
- It can be expensive depending on where you want to live
- Ongoing maintenance and repairs take time, can be costly and can cause worry
- Costs are less predictable and unexpected repair costs can be high
- When the market is slow, moving can take longer than anticipated
- In order to keep long term mortgage costs to a minimum, it may be necessary to re-mortgage every few years and this may incur some one-off costs
Working out what you can afford
Buying a property is a big step involving a substantial long-term financial commitment, so think hard about what you can afford. You will need to consider the assets you have - like savings - as well as the money that's coming in and going out.
Although it may reduce your buying options, you don't want to commit to a mortgage and then realise you can't afford some of the nicer things in life! It may sound obvious but take time to think of all the things you spend money on throughout the year, even without a mortgage.
Getting a mortgage
For most people buying a property the biggest ongoing cost is the mortgage - simply a loan secured against a property. You can't sell the property without paying off the mortgage first and if you don't keep up the repayments the lender can repossess the property.
It is vital that you secure a mortgage with a lender before starting the searching process. This way, when you find the right property, you will avoid being beaten to it by another buyer and you will also be in a much stronger negotiating position.
Find out how much you can borrow
Call a mortgage broker to get an idea of how much you can borrow. He or she will be able to search the market for the best available deal and to help you maximise your borrowing power. Generally lenders (2010) will lend up to four times a single salary and four and a half times joint salaries But don't stretch to more than you can comfortably meet in monthly repayments and remember to keep some savings aside to meet stamp duty and other fees, and to furnish your new home. Get information about the different mortgages on offer, and start thinking about whether you want to go for a fixed or variable-rate deal.
Finding a Property
There are a number of different ways of searching for property to buy:
- Obtaining advice from local estate agents
- Local Newspapers
- You can search online on a number of websites such as Right Move or Find a Property
It is important to bear in mind a range of different factors when searching for the right home.
The basic three are:
- What size of property do you need?
- Where would you like to live - what travel considerations are there?
- Any particular features that you need in the property, such as ground floor access, a garage, storage etc.
To view a property, it may be necessary to make an appointment with the seller's solicitor or agent. This can either be arranged through the solicitor directly, or through the estate agent.
Making an offer
When you find somewhere you like, make an offer. Before you do so, try to glean as much information from the estate agent as possible. Ask how long it's been on the market and if the seller wants a quick sale. Many buyers initially make an offer below the asking price, and often this is accepted. You may want to start low and negotiate with the agent to find a price that satisfies both parties. But if you want to be sure you get the property you like - and you think it is worth the asking price - you may want to offer the full amount straight away.
You will need to take out a mortgage to buy a home. You must get advice from a bank, building society or independent financial advisor as some types of mortgage may not be right for you. Below is a quick guide to the main 2 types of mortgage available:
Repayment Mortgage: You pay off the capital (the amount you borrowed) plus interest each month for the term of the mortgage. A standard mortgage term is 25 years. In the early years you will mainly pay off the interest but by the end of the 25 years you will have repaid both the capital and the interest. Most mortgage lenders will allow you to pay the mortgage off earlier but there may be an extra charge (known as an Early Redemption Fee) if you choose to do this. Your mortgage advisor will be able to explain how this works.
Interest Only Mortgage:You only pay interest to your mortgage lender so that the amount you owe (the capital) stays the same for the whole term of your mortgage. You would normally take out one of the following to give you money to pay off the capital at the end of the term:
1. An endowment policy
2. A pension policy
3. An Individual Savings Account (ISA)
This is a quick guide only and there may be other mortgage products available. Your mortgage advisor will explain what type of mortgage is best for you. If you require any further advice about mortgages we would recommend you visit the Financial Services Authority website.
You can either go directly to a bank or building society for a mortgage or ask an Independent Financial Advisor (IFA) to arrange one for you. Many estate agents now employ IFA’s who are able to offer mortgage advice at no extra cost.
Choosing your solicitor
You will need a solicitor when buying a home and preferably one that specialises in the house buying and selling process which is known as conveyancing. A solicitor will protect your interests and check important details such as:
- Whether the seller has the right to sell the property that you wish to buy
- Whether there are any outstanding debts on the home
Your mortgage advisor or estate agent may be able to recommend local solicitors. Solicitors’ costs do vary and therefore you should shop around to find the solicitor that is right for you.
Here is a rough guide of what a solicitor may charge:
1. Solicitor's fee: this is for the basic legal work that they will do on your and your mortgage lenders behalf. Cost – approximately £350 plus VAT.
2. Land Registry fee: this registers you as the owner of the home at the Land Registry.
Cost – approximately £100 - £150.
3. Local Authority Search fee: this shows any planning applications made on the property you are buying and also any planned developments that may affect your home. Cost – approximately £75.
4. Stamp Duty: this is a government tax. Some areas may be exempt from this tax if the home you are buying costs less than £250,000 – your solicitor will be able to advise you.
5. Dispersements: your solicitor will charge for other administrative work such as telegraphic transfer fees. Cost - usually up to £100.
You will not need to pay all the solicitor's costs up front. In most instances you would pay approximately £150 initially and then the balance when you exchange contracts or on completion.
Choosing your survey
Buying a home may be the biggest investment you will ever make. It is important you get the right survey to help decide if the property you want to buy is right for you as you will have to pay for all of the repairs and maintenance it needs. If you are buying a brand new home which has a valid NHBC Guarantee you will only need to instruct a basic Valuation. For all other properties you will need to instruct a Home Buyers Report & Valuation.
Valuation: This is the most basic type of survey. Its for new and nearly new properties with NHBC guarantees. Your mortgage lender will do the valuation (you will have to pay the fee) to check that the property you wish to buy is worth the amount that you are borrowing from them. A valuation only gives a very brief description of the property.Cost: around £200.
Home Buyers Report & Valuation: This is a combined Valuation and Survey. It should pick up all major faults with the home, as well as things that are likely to need repairing in the near future. Cost: around £475.
Full Building Survey: This is similar to a Home Buyers Report but goes into more detail. It is generally wise to have this type of report if the property you wish to buy is very old or you believe it to have structural defects. Cost: around £700.
Your mortgage advisor will be able to arrange the survey for you. A mortgage lender would normally carry out a Valuation as standard procedure and therefore you must specify to your mortgage advisor that you need a Home Buyers Report and Valuation (unless you are buying a brand new home). You will need to pay in advance for your survey as part of your mortgage arrangement fee.
Read the survey when it arrives. If there are a lot of problems with the property and you are not happy to carry on with the purchase, then act quickly to let everyone know, before you incur any other costs. If you do want to pursue the purchase, but the survey advises that you get quotes for work that needs doing, arrange for that to be done. If a lot of work needs doing, you may want to go back to the seller and renegotiate on the price you are paying for the property.
Book a removal van. When you know your moving date you can start organising how to get your possessions to your new home. This could involve hiring a van and doing it yourself, or hiring a professional removal firm. Either way, you should act fast to give yourself the best chance of finding a company to help when you need at a good price.
Buy buildings insurance. Your lender will expect you to have buildings insurance in place for the date of completion. It will quote a rebuild cost in its valuation - this is the amount you need to cover.
Completion: this is when the property finally becomes yours. When your solicitor tells you that the sale is completed you can pick the keys up from the estate agent.