The house-buying process is an exciting journey to undertake, but can also be a long and sometimes complicated process. Here’s Financial Advisor UK’s guide on what to expect and how to be as prepared as possible. Do you require help and advice on first-time buying? Financial Advisor UK offers a national network of fully FCA-registered and approved professionals, ensuring that you are matched with the best professional advice along with the best deals available.
House-buying costs
There are several costs that you need to think about when buying your first home. The first cost is the deposit. As a rule of thumb, the more deposit you can put down on a property, the better, as you’ll then have to take out less money in the form of a mortgage from a lender. To get a great choice of mortgage deals, having a healthy deposit is important, as this will make you highly attractive to a lender. 40% is the ideal deposit amount. Create a budget and figure out how much you can afford to pay in mortgage payments per month, and the maximum amount you can afford to put down as a deposit.
Stamp duty is another cost you’ll need to think about. In England and Wales, buyers don’t have to pay stamp duty on the first £125,000. For properties with a value between £250,001 and £925,000 buyers have to pay 2% on the portion of the price between £125,001 and £250,000, then 5% on everything over £250,001. It is always worth checking the government’s advice on stamp duty and land tax. You’ll also need to pay valuation fees, which will be charged by your mortgage lender to assess how much the property you intend to buy is actually worth. Costs for valuation fees can vary from £150 to £1,500.
Finally, you’ll need to pay legal fees for a solicitor or conveyancer to do local searches and carry out all of the legal paperwork, as you cannot do this yourself. You may also want to pay to have a survey conducted on the property you are thinking of buying, as this will highlight any defects and issues with the structural integrity of the property, which can affect the price you pay for it and give you room to haggle the price down. Also, don’t forget your removal costs to move your belongings into your new property!
Finding a mortgage
The world of mortgages can be tricky to navigate. It is sometimes worth seeking professional advice from a mortgage advisor who can discuss your financial circumstances with you and search the market on your behalf, so that you can find the best deal. The mortgage advisor can also start the application process for you. Always make sure that your mortgage advisor is impartial, so that they search the whole of the market and do not offer products from a particular company they are working for. Also check with them that they are regulated by the Financial Conduct Authority (FCA). Financial Advisor UK can help you find the right advisor for your needs.
If you’d rather do this on your own, you will need to search the market (using comparison websites), and also visit various high street lenders to ask about the types of mortgage available to you. Allow a couple of hours for any mortgage appointments you have. If you have a mortgage advisor, they will help you to obtain an ‘agreement in principle’ from a suitable lender, showing that you are serious about purchasing a property. It’s then time to start searching for a home to buy.
There are different types of mortgages on offer that are available for first-time buyers.
Fixed-rate mortgages
A fixed rate mortgage locks in the interest rate for a particular length of time. After this term comes to an end, you’ll be transferred onto a lender’s Standard Variable Rate (SVR). This type of mortgage is ideal if you want more financial stability and do not want the uncertainty of fluctuating interest rates.
Tracker mortgages
A tracker mortgage tracks the base rate of the Bank of England, so interest rates (and monthly repayments), can rise or fall depending on whether the base rate increases or now. After this type of mortgage comes to an end, you’ll be put on a lender’s Standard Variable Rate (SVR).
Standard variable rate (SVR) mortgage
An SVR doesn’t include any special deals or discounts and is the standard mortgage offered by a lender. Interest rates can go up or down, depending on the base rate of the Bank of England.
Guarantor mortgage
This type of mortgage is ideal for first-time buyers with a very small deposit. Parents or family members agree to be a guarantor for the mortgage, enabling them to cover repayments if the mortgage holder is unable to. At the same time, if the family members struggle to make repayments, this could also put them in financial difficulty.
Offset mortgage
An offset mortgage enables you to offset the amount you owe on your mortgage against your savings accounts held with the same lender. The more savings you have, the less interest you pay.
Finding a property
When you’re looking for a property, it is important to consider what you need from your home. Do you need a space for working in? How many bedrooms do you need? Do you require on-site parking? Should you buy a new build or an older home? When you have found a property you like, take a friend or family member with you to have a viewing. A home is one of the most important things you’ll ever buy in your life. Check for signs of damp, the integrity of the walls, fittings, and ask to see the loft. Ask about the boiler, heating and plumbing. Check utility and council tax bills, and ask what the owner will be leaving when they move out. When you are happy with the idea of living there, you can make an offer. Before making an offer, check if the property needs work. If it does, you can negotiate the price with the seller. Remember that as a first-time buyer with no chain, you are in a strong position to negotiate.
Exchanging of contracts and completion
When your offer has been accepted, your solicitor will start the conveyancing process so that you can buy the property and have the deeds transferred into your name. Your solicitor will arrange Stamp Duty, contact the Land Registry, and transfer the money between the lender (of your mortgage) and you. A day of exchanging contracts will be agreed, which legally locks you into a deal to buy the property, as well as a completion date, upon which you can move into your new home. The home isn’t yours until you complete, and either party can unfortunately walk away from the sale, right up until and on the day of exchange. You will need to put down your deposit on the day of exchange. When you complete, you can pick up the keys from the estate agent or seller.
Financial Advisor UK offers a national network of fully FCA-registered and approved financial professionals who can give advice on all questions from first-time buyers. Get matched today with the best advisor for your circumstances.