Before you start house-hunting, it’s a good idea to work out what you can afford to spend on buying a house or a flat and your monthly mortgage payments.
Consider how you’ll cope if your financial situation changes, or interest rates rise, and be careful not to overstretch yourself.
Remember, your savings will have to cover not just the deposit, but expenses such as mortgage fees (typically anything between £0-£2,000) and Stamp Duty on properties costing more than £125,000 in England and Northern Ireland. In Wales, you will need to pay Land Transaction Tax on properties over £180,000.
It’s never too early for you to start thinking about arranging a mortgage as this can be time-consuming.
You can get a mortgage from an Independent Financial Adviser (IFA), mortgage broker or lender.
Once you’ve found a mortgage product you like, agree it as a mortgage ‘in principle’.
This tells you how much money the lender is likely to offer and the interest rate you’ll pay.
You might have to pay a booking fee to reserve the mortgage product you want. Typical cost: £99-£250
Before you apply for a mortgage, check your credit report for any errors and to get an idea of your score.
Lenders will look at it when considering your application.
Once you’ve found a home you want to buy, the next step is to make an offer, usually through an estate agent.
You only pay for an estate agent if you’re selling property.
The fees usually range from 0.5% to 3%, plus VAT, of the selling price.
The solicitor will handle the legal work around the property.
The surveyor will survey the property to check for problems, which might affect the cost of the home.
Your solicitor will tell you how much you can expect to pay and might ask for a deposit upfront – this is typically 10% of their fee. Typical cost: £500-£1,500 + 20% VAT
Your solicitor submits searches to the local council to check whether there are any planning or local issues that might affect the property’s value. Typical cost: £250-£300
This survey is done by the lender to make sure the property is worth the price you’re paying before they approve the mortgage.
It is not an extensive survey and will not identify all the repairs or maintenance that might be needed.
Typical cost: £150-£1,500 depending on the value of property.
Some lenders might not charge you for this, depending on the type of mortgage product you select.
You should commission a survey on the property to help you avoid hidden costly problems in the long run.
It’s your property, so it’s in your interest to pay for a decent survey at this stage. It can also help you to renegotiate the price.
For example, if the survey reveals a problem with the home that will need £5,000 to pay for repairs, you could ask the seller to lower the price by that much.
There are several types of survey available:
Once the survey is complete you might want to go back and renegotiate the price of your new home.
There are two reasons for this:
It’s this stage in the process that is often most stressful. Delays and problems can arise from such situations as:
When problems occur, it’s worth making the effort to stay in touch with the seller via your solicitor and estate agent.
It’s often possible to rescue the situation by keeping the lines of communication open.
If everything has gone according to plan, contact your lender or mortgage adviser to proceed.
There is often a fee, usually called an arrangement fee, to set up the mortgage.
This can be added to your mortgage, but if you choose this option, bear in mind you’ll pay interest on it for the life of the mortgage. Typical cost: £0-£2,000.
After you have received a binding mortgage offer, your mortgage lender must give you at least seven days to think about whether or not this is the right mortgage for you.
You can use this time to compare this offer with other mortgages.
If you’re sure that this is the right mortgage for you, you can let the lender know in less than seven days that you want to go ahead.
If you decide not to buy, you can pull out and cancel your mortgage application before you have exchanged contracts.
But you might lose some of your money depending on how far you’ve gone in the process.
If there are no problems or delays, then you should receive the contract to sign and complete the sale.
Before signing the contract, go through it with your solicitor to check that all the details are correct.
Make sure you’re happy with what the sellers have agreed to leave in the property and that all your queries have been answered.
At this stage, you and the seller are committed to the sale.
The seller might also ask you to pay a holding deposit – typically £500-£1000 to show intent.
Once you’ve exchanged contracts you’ll need buildings insurance in place to cover the structure of the property.
If you’re purchasing an additional home or a buy-to-let property, you’ll have to pay an extra 3% on top of each Stamp Duty or Land Transaction Tax band.
Read the full article from The Money Advice Service here >