Ten Tips to Consider When Buying Your New Home – A Guide

Associate solicitor Manisha Bhula, head of our Residential Property team, provides tips for when buying a property.

If you are looking to purchase a residential property, there are a few things you can do to make the process easier. From saving for a deposit to the mortgage application process, here is a guide to what you need to know.

How much deposit do I need to buy a house?

Before starting to look at properties, you need to start saving for a deposit. Generally, you need to try to save at least 5% to 10% of the cost of the home you would like. Saving more than 5% will make it easier for you to apply for a wider range of cheaper mortgages.

Make sure you can afford your monthly repayments

As a home buyer, the most important thing to bear in mind is whether you can afford to take this step. It’s wise to put together a budget before you start looking for a property.

Financial advisors or mortgage lenders will check that you can afford the mortgage and also to assess  your ability to make your payments if interest rates were to rise or if your circumstances changed. As part of the mortgage application process you will need to show the lender evidence of any outgoings, and prove your income.  Most lenders now have located on their websites an ‘affordability calculator’ so that you can calculate the amount of mortgage and the possible monthly repayments.

Budget for the other costs of buying a home

Apart from your monthly mortgage payments, there are other costs associated with buying a home. These include:

• Mortgage arrangement and valuation fees
• Stamp Duty
• Solicitor’s fee
• Survey cost
• Removal costs
• Initial furnishing and decorating costs
• Buildings insurance

You should obtain quotes so that you have a good idea at the outset of the transaction of the costs to be incurred.

Finding a mortgage

There are many different mortgage deals to pick from, so you should do some research and talk to a mortgage broker or your lender direct who can offer you the best mortgage for your circumstances.  If you are a first time home buyer, there are now a number of affordable home buyer schemes as well as a number of government-backed schemes aimed at giving home buyers – and movers too – a helping hand to get onto the property ladder.  If you are able to use one of these schemes, lenders will still carry out the usual checks to ensure that you can afford to pay your mortgage.

Whichever mortgage you apply for, your lender will want to know that you can make payments if interest rates rise or your financial circumstances change.

You will need to prove your income, and show the lender evidence of any outgoings, including debts, household bills and other living costs such as clothing, childcare and travel costs.

To prove your income, you may have to produce payslips and bank statements. If you are self-employed you could be asked for tax returns and business accounts prepared by an accountant.

If you’re struggling to get a mortgage to buy your first home you might want to consider a guarantor mortgage. This means that a parent, guardian or close relative agrees to be responsible for the mortgage payments should you be unable to meet them.

Guarantor mortgages shouldn’t be entered into lightly as they are legally binding arrangements and your guarantor needs to be able to afford to pay your mortgage if you get into difficulty.

You’ll need to talk to a mortgage broker to find out more about which lenders offer guarantor mortgages.

Freehold or leasehold

If you’re looking to buy a house it’s likely you’ll be buying the freehold, meaning that you own the property and land it sits on. If you’re buying a flat, you will either be buying leasehold, or buying into a share of the freehold.

Survey

Surveys can range from someone doing a desktop survey, to standing in the road looking at the house to going round with damp meters and ladders to check every aspect of the Property.  They’re a non-refundable expense on a house you’re not sure you are going to buy yet.  The most common types of surveys are as follows:-

Mortgage valuation - As part of the loan approval process, the lender will require that the property be appraised to ensure that the value of the property is adequate to justify the loan.  Although the buyer and seller have already agreed on a price, the appraiser evaluation must support that price.

Condition Report - being a general assessment of the house’s condition, but not a valuation.

Homebuyer’s Report – for standard, post 1930’s buildings it covers the general structure, from walls, floors and ceilings to roof tiles, chimneys and windows, as well as the location.

Building Survey – this is a more thorough survey and is a good idea for older properties, non-standard constructions, and if you are planning major renovations.  It checks the condition of timber beams and potential pests etc.

Snagging Survey – if you are buying a new build, it is a good idea to get one of these. It will pick up on problems such as cracking, poor plumbing, poor decoration,  ill-fitting sockets and any other aspect of the construction and fitting out of the property.

Instructing Your Solicitor

If you are using a solicitor, make sure that they’re a specialist conveyancer and have a good reputation for moving quickly.  You do not have to go with a company suggested by the estate agent.

For more information on how to pick a solicitor, please see our recent blog article.

Once your solicitor is instructed, this is the period whereby you arrange financing, conduct evaluations, inspections, appraisals, examinations, surveys and testing.  Solicitors will generally recommend several searches which usually cost around £300.00  - but you may need more depending on the location of the property.   It is usually a lender requirement contained with the mortgage offer that specific searches are ordered as part of the solicitors title investigation and due diligence process.  Once all enquires have been satisfied, your solicitor will request the return of the signed contract and deposit funds and you will then be in a position to proceed towards the exchange of contracts.

At the time exchange of contracts the date of completion will be agreed and written into the contract.

When you exchange contracts with the seller you become legally committed to buying the property – and the seller is legally committed to sell to you.  If you pull out after this without due reason, you risk losing your deposit due to you being unable to complete the purchase of the property.

Completion is when the property changes ownership on the previously agreed date, and the keys are handed over.  On the day of completion, the money is transferred and the title deeds of the property are transferred between each side’s solicitor or conveyancer.  Following completion your solicitor or conveyancer will register the transfer of ownership with the Land Registry.

Insurance

Your mortgage lender will require that you take our building insurance, so that its investment is still safe in the event that your home burns down or some other unforeseen circumstance occurs.  If you are buying a leasehold property (typically a flat/apartment) usually the Landlord will insure the building to which the property forms part and the Landlord will recover your share of the same via a service charge (you will then simply need to obtain contents insurance).

Utilities Transfer

Prior to completion you should arrange to have the utilities transferred into your name on completion.  To accomplish this task, a date (usually the completion date) will be the agreed date for the transfer.  The seller will usually notify the companies to cancel their services on that day.  You should make application with the various utilities and ask that their services be established on that same day.

Wills

Every adult should have a Will but it is even more essential if you are buying a property, or already own one.  Once you own property, you have an asset that is likely to increase in value.  Without a Will there is no guarantee that it would automatically pass to your immediate family on your death.

Jointly owned property is sometimes held under a legal arrangement known as a ‘tenancy in common’. Should one of the owners die, his or her share in the property will not automatically pass to the surviving owner. If you each want your share to pass to the other on your death, it is essential that you both have wills.

It’s not enough just to make a will. Wills need to be reviewed regularly and brought up to date as circumstances change.  For example, if you marry, divorce, re-marry, enter into a civil partnership or dissolve a civil partnership, an existing will may become invalid.

For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.