Saving for a deposit
The deposit put down on a new property will be one of the biggest investments in your lifetime, with lenders asking for an absolute minimum of 5% of the property price upfront.
The more you can afford to put down as a deposit, the better, but always remember to keep sufficient funds aside to cover your legal & moving costs, plus any money you will need to decorate or furnish your new property.
How much can you afford to spend?
Before you start browsing the market, identify what your budget will be.
You will have already determined how much you have in the way of a deposit, with the next step being to consult with an independent broker or directly with your bank/building society.
A broker will be able to provide a broad overview of products from a selection of lenders and source the best mortgage deal for you by shopping around. They will be able to calculate how much you can afford to spend on your property, guiding and advising you about the various types of mortgages and how much you can afford based on your income and the cash deposit you have available.
They will take into account your earnings, savings, any additional sources of funds and your credit score – this will also to apply to any co-purchasers.
The type of mortgage you choose will determine how much you need to save and how much will need to pay monthly.
You will have to choose between a Repayment mortgage (where you repay interest and some of the capital loan back each month, eventually repaying the entire amount by the end of the term) OR an Interest only mortgage (where you only repay the interest each month, still owing the full amount at the end of term).
Some of the most popular mortgage types are; Fixed-rate, Tracker and Variable.
Once you have established your deposit and mortgage capability you will be able to carry out a more targeted property search.
If I already have a property, do I need to sell this first?
If you are relying on the funds from selling your existing home to purchase another property, we recommend that you at least have it on the market, though ideally you would have accepted an offer for it. This will give you more credibility as a serious buyer, with both the estate agents and with sellers of properties that you are interested in.
The other advantage of having agreed a sale on your own property is that your budget for buying your next property will be clearly defined.
If you have a property you need to sell before you can buy, it is important that you speak to an estate agent and have it valued. If you would like our assistance and opinion click here.
Choosing a property
Deciding on a property needs you to determine what the key criteria for your new home will be.
If you are buying outside of your current area, do your background research to ensure it has everything you need for the time you will be living there.
You may want to consider the following:
Call us to register your interest and we will keep you up-to-date with the latest properties that are relevant to your search. We will email you when a new property comes onto the market which matches your requirements, ensuring that you are kept ahead of the competition.
Putting in an offer
Once you have found a property you’d like to buy, the next stage is to put in a strong bid. Do not commit all your money at once, as you want to leave room for negotiation with the seller – you may even get very lucky and have your first offer accepted. Bear in mind that if it is a popular property, you may be bidding against other purchasers too.
Making a mortgage application
The next stage is to seek a mortgage agreement in principle (AIP) from your chosen lender. This states they are, in principle, happy to provide you with a loan. This sets you up as a serious buyer and can give you the edge over others as it shows you have the backing of the lender to afford the property.
Finding a solicitor
You will need a solicitor to handle the legal work associated with the purchase of the property. This will involve dealing with things such as stamp duty, Land Registry, obtain local searches and transfer of funds once the deal has been completed. If required, our team will be happy to recommend a friendly and dependable local solicitor who we have been working with for a number of years.
Organising a survey
This is usually required by your mortgage lender when purchasing a house.
It allows them to justify the amount you are asking them to lend you and for you to identify any problems with the property, so that it can be budgeted for and the sale price potentially adjusted. Alternatively, if issues are raised, the seller can arrange to solve these themselves.
There are usually two key types of survey available – a condition report and a HomeBuyer’s report.
Finalising the deposit
The money you have available for the deposit will have to be given to the solicitor. This can either be raised from the money you originally had for the deposit, or by the sale of any existing property you may own.
Exchanging contracts
When the contracts are exchanged you become legally obligated to proceed with the sale – so be sure you are happy with everything at this point. Should you decide to withdraw after this happens you could lose your full deposit.
Before exchanging contracts you will need to agree a completion date, which is typically 4 weeks after the exchange date. Also ensure that buildings insurance is taken out from the same day of the exchange.
Completing the sale
The solicitor will update the land registry with your details at this point. They will also be in contact with your mortgage lender to verify funds are available, so have this prepared to transfer to the solicitor. The day of completion is when funds and property deeds are transferred between seller and buyer, and the keys to the property can also be obtained.
Final actions
The solicitor will send a statement listing all their costs, along with the cost of the property and stamp duty. The stamp duty will usually be paid by the solicitor, so you won’t have to worry about dealing with that element of the transaction.
How much is Stamp Duty?
Under normal circumstances, buyers don’t have to pay Stamp Duty on properties costing £250,000 or less. For first-time buyers, this is £425,000.
If the property costs more, you will have to pay stamp duty, which is set on a sliding scale according to the property value. Non first time buyers;
You will usually pay 3% on top of these rates if you own another residential property.
