I wanted to write a post about the home buying process in the UK as one tends to forget all the details and the whole process you have to follow. My husband and I went through this process 2 years ago. I remember feeling a little overwhelmed and unsure of all the jargon, steps and things to consider.
The first step is to calculate what you can afford and how much money you need to start saving for the deposit and additional home buying costs. There is no set amount for a deposit but you’re more likely to get a better mortgage deal where you are paying 10% or more of the property price. You could use an online calculator to get a rough estimate:
http://www.rightmove.co.uk/resources/property-guides/buying-guide/what-you-can-afford.html. Or you could also talk to a mortgage broker or go to the bank to get a more realistic idea of affordability.
Find a reputable independent mortgage advisor that has been recommended to you by family and friends or estate agencies. Independent mortgage brokers are preferable as they will be able to advise on and have access to all the available mortgages from any provider. Speaking to a mortgage broker will also help to establish your property price range. When you are ready to start house hunting, ask your mortgage broker for an agreement in principle (AIP) or mortgage in principle. This is a certificate or statement from a lender to say that “in principle” they would lend a certain amount to a particular prospective borrower or borrowers based on some basic affordability information. As a full credit check is run on you, it’s best not to do too many as it can hurt your credit rating. Each check leaves a “footprint” on your credit file. An AIP can also help when making an offer on a property as this will show the agents and owners that you are a serious buyer.
Besides for the deposit, the other costs to consider are:
- Transfer of Money Fee – this is usually a flat fee charged by the lender when paying the seller of the property.
- Leasehold charges – if you are buying a flat, expect to pay at least another £100 in costs, to cover the cost of checking the lease.
- Conveyancer’s Fees – the fee you pay the solicitor or conveyancer for working for you. For a £150,000 property, expect to pay at least £325 + VAT. Shop around for quotes: https://www.reallymoving.com/conveyancing
- Stamp Duty Land Tax – this is the tax paid to the government and the biggest cost you will have to pay. Find out more about current Stamp Duty thresholds on the DirectGov website: https://www.gov.uk/stamp-duty-land-tax/residential-property-rates
- Land Registry Fee – payable to register the property in your name. This starts from £100 based on the property value.
- Mortgage Broker Fee – this can vary. Our mortgage broker charged us £249.
- Read this article for a more comprehensive list of all the costs involved: http://www.thisismoney.co.uk/money/mortgageshome/article-2271992/First-time-buyers-fees-checklist–costs-need-think-buying-property.html
Finding the ideal property can be a lengthy and time consuming process especially if you are limited by a budget. Start by deciding on what your must haves are for your ideal property as in the number of rooms, a garden, available parking areas, close to amenities etc. Register your details with local estate agencies in your chosen areas and sign up for new property alerts on property websites. The process of elimination becomes easier when you have viewed a good number of properties and you know what you are looking for. If you are still struggling to find a property then you may have to think about what you’re willing to compromise on. This could be the area you are looking at, the size of the property or whether you are willing to take on a project. It is also worth finding out if the property is in a chain, and if you’re willing to wait.
If you are unfamiliar with an area, you may want to do some research to see if it would suit your lifestyle. I found some of these sites useful:
Once you have found your ideal property, you will need to decide how determined you are to get the place and how much you are willing to negotiate based on your budget before you make an offer. You could also look at house sold prices in the same area to gauge what sort of offer to make. When you make an offer make it clear that it’s subject to contract and a satisfactory survey.
A survey is an essential part of the home buying process. Most surveys are carried out as “drive by” surveys by the mortgage lender. I would recommend paying the extra money for a full building survey if you are unsure of the condition of the property. Read this article for more details on the different types of surveys: http://www.which.co.uk/money/mortgages-and-property/guides/buying-a-house/house-surveys-explained/
Once your offer has been accepted, ask the seller to take the property off the market. This will reduce the possibility of gazumping. Gazumping is a term used to describe a legal situation where the seller has accepted an offer but subsequently accepts a higher offer from another purchaser. Try to move as quickly as possible on your mortgage application by providing all the required documentation to your mortgage broker. If you are self-employed, have 2 years of company accounts stamped and signed by your accountant ready to be submitted with your mortgage application. You will also need to contact HMRC for an SA302 form which displays your income and tax details.
Hopefully you will have already decided on a solicitor or conveyancer to proceed with the process of transferring the legal ownership of the property from the seller to you. It can take anywhere between 6 and 12 weeks from the day your offer is accepted to getting all the paperwork completed and queries answered. I would suggest continuously following up with your mortgage broker and solicitor/conveyancer to keep things progressing. On the day of our exchange, our solicitor totally forgot it was meant to happen until I phoned to find out what was happening!?!?
Exchange of Contracts is the last stage of the legal process after which you cannot pull out (without losing your deposit and any legal costs you may have incurred). Once everything is ready you will then need to pay the deposit. You will also need to make sure that you have buildings insurance in place. A date for completion is usually set for at least two weeks after contracts are exchanged. This should give you enough time to arrange moving in and you will soon be on your way to becoming a new homeowner!