Buying your home will probably be the biggest investment you make in your life.
Most people take on a major financial commitment via a mortgage, and this means making a choice from what is often a bewildering range of options. Being well informed is the key.
How much can I borrow and obtaining an agreement in principle
Before starting to look for a house it is advisable to establish how much money you can you borrow in the first place. You can do this by speaking to a mortgage consultant. They will be able to produce an “agreement in principle" from a suitable lender based on your unique circumstances. This will give you greater confidence knowing you are looking at properties within your budget. This also will also speed up your mortgage application once you find the right place to live in.
When you are deciding how much you can afford, do not forget to take account of the costs involved in buying a home. These costs might include:
- the valuation fee and perhaps a fee for a home-buyer's report or building survey;
- a high lending fee (sometimes called an additional security fee) if you want to borrow a high percentage of the property price;
- your legal expenses;
- stamp duty;
- land Registry fees and removal expenses
Finding the property for you
When you have worked out the price range you can afford to buy at, the next step is to find a property.
Finding a property can be time consuming. You can use technology to help you save time. Property listing sites such as Rightmove, Primelocation, Look4aproperty to name but a few. However, it will also be worthwhile using more traditional routes such as estate agents with local knowledge to ensure you do not miss out on property that meets your criteria.
To save time it will be worth noting down your exact requirements however it also worth bearing in mind that you may have to compromise on certain things.
Things you may wish to consider are:
- how many bedrooms do you need?
- do you want a garden, garage, off-street parking?
- do you need to be near good transport links, schools, shops, work or leisure facilities?
- how busy or quiet an area are you looking for?
- any other features that are important to you, such as style of property, security, ease of access and running costs.
It is a good idea to use your criteria to note how each property measures up to your list of needs. You will probably find you have to compromise on some details - but if you have to make any major compromises, be certain that you can live with them.
Making an offer
Once you have found a suitable property you need to make an offer on how much you are wiling to pay for it. It's important not to be over enthusiastic and you must consider how much you can really afford based on mortgage calculations and any equity you have in an existing property. Once the vendor (seller) has accepted the offer you should instruct your solicitor to start the buying process. Any offer you make is "subject to survey and contract" which means that neither you nor the seller has to go ahead with the deal. The sale of the property is not legally binding until exchange of contracts. Once your offer has been accepted by the seller, you will then need to formally arrange your mortgage to buy it.
Applying for a mortgage
It is important not to waste time once you have had your offer accepted as the vendor will want to know that the mortgage has been arranged or that the process is well underway. An Agreement In Principle (AIP) can provide some confidence that you can afford to buy their property and that you are a serious buyer.
That said, it is important to organise your mortgage as quickly as possible as it can take several weeks. There are a number of ways in which you source a mortgage. The first is for you to shop around contacting lenders yourself to see what they can offer you. Alternatively you can use a broker who can search the whole of the market through thousands of products to find the best mortgage for your set of circumstances.
Checklist of Choosing a Mortgage
Does the mortgage guarantee a fixed rate of interest for the first few years? This can be a help during the first few years, because it will guarantee your monthly payment at a time when your finances may be stretched.
Are there any penalties for early redemption? Paying off your mortgage or changing to another deal with another company. If there are, it can make it costly to change lender.
Will the loan let you take payment holidays? If your income fluctuates from one month to the next or things are tight at certain times of the year, you can get what is known as a "flexible loan".
Does the mortgage offer you a cashback lump sum when you first take it out? When you first move into your home it can be hard to actually furnish it, so offers like this can really help.
Will you still be able to afford the repayments when any fixed-rate or discounted period is over? This is extremely important. Check what the lender's standard variable rate is because it may be much higher than the fixed or discounted rate.
When you formally apply for a mortgage, you will need to fill in a mortgage application form.
The lender will normally need the following information:
- Proof of identity;
- If you are employed, proof of salary from your employer;
- If you are self-employed, copies of your audited accounts;
- If you are working on a short-term contract, evidence of the length of your contract;
- Details of how you have kept up any previous mortgage payments, or evidence of regular rent payments;
- Details of your wider financial circumstances.
The lender's assessment of your ability to repay the loan will usually take account not only your income, but also your credit history and credit scoring profile. The lender will therefore consult a credit reference agency and may want to see copies of your current account statements as part of this process.
A broker can help you prepare this information and manage this process on your behalf if you wish.
Depending on the type of house you are buying, your mortgage lender may require more than just a valuation and homebuyer’s survey. It's important to note that a full structural survey may cost a little more but on older houses it can expose potential problems that you or your mortgage lender was not aware of. Any issues may affect the lenders ability to issue a mortgage and also highlight expensive problems to you before you purchase the house. This can provide you with the opportunity to renegotiate the price.
"Conveyancing" is the legal process that must be followed to transfer the ownership of the property from the seller to you. The legal aspects of buying a home can be complicated. Although in theory you can do the legal work yourself, in practice most home-buyers appoint a solicitor or a licensed conveyancer to do the legal work involved in buying a property. That person, known as the conveyancer, will be your legal adviser and will act on your behalf.
You need to appoint a solicitor or licensed conveyancer as soon as possible after your offer is accepted.
If you do not have a preferred solicitor please complete the contact form on our solicitors section and we will source one who is registered with the Law Society.
To verify your chosen solicitor please call The Law Society on 0870 606 2566.
Your solicitor will carry out the following on your behalf:
- Get the title deeds (documents giving evidence of ownership) of the property from the seller's conveyancer and examine them to make sure there are no problems.
- Make sure that you will get proper ownership of (title to) the property.
- Make sure that there are no planning conditions or particularly harsh conditions of ownership (for example an intrusive right of way) affecting the property.
- Make sure the seller has all planning permission and completion certificates for any alterations or extensions to the property.
- Check that there are no local developments (for example, road-widening schemes) planned which might affect the value of the property.
- Check that the street, pavement and main drains are public and maintained by the local authority.
- Negotiate and agree (with the seller's conveyancer) the draft of the contract setting out the terms on which you are buying.
- Register or record the change of title to the property, and the mortgage deed (loan agreement) in favour of the lender, with the Land Registry.
Formal Mortgage Offer
This is important, without a formal mortgage offer you cannot proceed unless you are buying the property as a cash buyer. The offer will be sent to your solicitor for your signature and approval. Once signed you can move forward to exchanging contracts. Ensure you read this carefully and get your solicitor/conveyancer or Mortgage Consultant to check everything is correct and explain anything you do not understand.
Exchange & Completion
The contract is signed by both you and the vendor and the deposit is transferred or paid by your solicitor to the vendor's solicitor, typically 10%. Once you have signed the contract there is no going back as you are now legally obliged to buy. The date is then set for completion.
Once the exchange has taken place then completion generally happens within a few days. This is dependent on your circumstances and any other parties involved in the house buying chain. On the date set any monies owed are transferred from your solicitor's account to the vendor's account. Once the monies have been received you can collect the keys and you are the legal owner of your new house.
Removals & Insurance
Make sure that once you know your completion date you book your removal service as soon as possible. At busy periods removal services can be booked up and it's important that you ensure that you can rely on a reputable firm to help you move house.
Make sure that you have all the necessary insurance policies in place for the day that you are moving into your new house.
Now sit back relax and enjoy your new home.