Understanding the complex process of buying a house should help a first time buyer through some of the stressful aspects of house buying.
So having made the decision to buy your first home, the excitement can soon be turned in to a nightmare if you are unprepared. Following this guide can help to ensure that the experience brings no unpleasant surprises and that you end up with the house of your choice.
The first consideration is the cost. It is not just about how much the price of the house is but the other associated costs that inevitably come along with it.
First and foremost is the deposit, an optimum deposit, to enable a first time buyer to access the best mortgage rates is 40% of the purchase price. Clearly this is not always available to a first time buyer, though there are ‘Help to buy’ schemes available which make up your deposit to this level.
On top of the deposit a property over a certain price level can be subject to the payment of stamp duty. In England and Wales stamp duty is zero on any property up to £125,000. Thereafter a property of £125,001 up to £925,00 attracts a stamp duty charge. On property priced between £125,001 and £250,000 the level of stamp duty is 2%, thereafter up to £925,000 it rises to 5%.
We can now look at what fees you will be charged along the way. There are several, which all add to the costs of buying your first home.
The first fee that is usually encountered is a valuation fee. Going along to a mortgage company to ask them how much they would be willing to lend, before you begin to look for a house is a great idea. You can say to any vendor that you have a mortgage in place and that will give them confidence that your offer will go through. So when you find the house you want and put in the all important offer, the mortgage company will charge you a valuation fee. This fee is the charge to cover costs of the visit to the property and value it for the purpose for ensuring that the mortgage will be secured as it is covered by the overall value of the property.
The next fee is the surveyor’s fee, again if you are taking out a mortgage, this will be arranged through the mortgage company. The surveyor will look around the property to ascertain its condition. If there are any works that need doing he will raise this in his report and sometimes the mortgage will be a conditional offer on those works being done within a certain time scale. A common condition is that the outside of the property is painted with six months.
Legal fees generally come at the end of the process, and sometimes are offered on a fixed price basis. This helps with overall budgeting and includes all the search fees that will be needed. An additional costs at the end of the process is the electronic transfer fee. This fee is to enable the mortgage company to transfer the money to the vendor via solicitors. This usually costs are around £40-50. This fee is applicable whether you are a first time buyer or not.
Don’t forget once the purchase is complete to budget for removal costs. Try to arrange to move in on a week day as removal firms are keener to offer lower rates at this time. Weekend moves are always higher on cost and also need booking further in advance.
Having secured your mortgage you can now begin looking for that ideal home. We all know that with the restrictions on viewings due to the Covid-19 pandemic, viewings online are the first way to look for a property.
You could become overwhelmed if you begin to just look randomly at properties so here are a few tips and advice on how to save time and effort.
Make a list of what you are looking for, then prioritise the ‘must haves’ at the top to the ‘would likes’ underneath. So for example, if you must live within a 20 minute drive from where you work, look up the post codes or areas within that distance. Alternatively, if you must have a garage then when entering your details on house selling web sites set the details to only see properties with a garage.
If you would really love a south facing garden, this could restrict the number of suitable properties. So leave the ‘would likes’ off the criteria you set.
New builds are often an option and offer a number of benefits including a warranty on the Property which lasts for 10 years. You may be able to ask the developer to change the internal plan to better suit what you would like. A great bonus with a new build is the lack of a property chain which can reduce the time it takes for the purchase to go through. Alongside these benefits many developers offer incentive schemes such as shared ownership and shared equity schemes which reduce the initial costs at the time of purchase.
So you have looked at lots of properties and finally decided you have found you ideal home. What happens next? Take time to be sure that the property is what you want, ask for a second viewing, take someone with you who knows you and whose opinion you trust, they may see things which you have overlooked in your excitement of finding your ideal home.
Making that all important offer, ask the seller what is their position? Have they found a house? have they made an offer on it? How quickly can they move? All of the answers will give an indication on how flexible, or not, they could be on the price. Also find out from the agent how long the property has been on the market and if any offers have been made and then rejected. All of this information builds a picture of the seller’s position and possible attitude to a price reduction.
Thinking about your own position and flexibility. In the eventuality that the seller needs time and you are prepared to wait that could be an area to bargain on the price. Alternatively, if you are in a position to move quickly and that is what the seller wants then again, the opportunity arises to negotiate on the price.
Once the deal is agreed, this is where your legal team comes in. They will check the title deeds and ascertain if there are any concerns to raise against the property.
The mortgage company will instruct a surveyor to look at the property and give their opinion and a valuation to them. This is always something to be aware of, the surveyor is working for the mortgage company and not you. Whilst they are looking to ensure that their loan is safe they only go so far once that is established. If you have any concerns you may wish to appoint a surveyor of your own, you don’t want any surprises after you have moved in.
Another important aspect is listing and confirming any extras that have been agreed. It can be very financially helpful not to have to carpet and curtain a new house, taking into consideration all of the other expenses. Confirming between the two parties what is included in the price can be done between the legal teams, so send your list as quickly as possible so there can be no mistake.
Finally agree a moving date and book the removers as soon as possible, then wait for completion.
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