From a successful search to collecting the keys
Whether you are a seasoned homeowner or a first time buyer, there is always a lot to learn when it comes to househunting.
From property search, to selling your home, from finding the right mortgage, to moving day – each stage of the journey is equally important, and at every one there are pitfalls to look out for.
So here is Contractor Mortgages Made Easy’s guide to house buying. Whether you’re a contractor, freelancer or are self-employed, this guide will help you climb the (housing) ladder and avoid the snakes!
Step 1: Are you a home owner?
If you already own a property the first step is to know its value. Most people start by looking at comparable properties in the area that are on the market or have recently sold. Rightmove and Zoopla make it very easy to check.
But don’t just rely on this, speak with an estate agent to get an actual valuation of the property. You may want to ask two or three agents– you’ll be surprised by the variations.
When you get a figure, and an agent, you are comfortable with, then you can put your home on the market.
Step 2: How much deposit do you have?
Some people struggle with working this out, but the equation is fairly straight-forward. If you’re a homeowner your available deposit is the value of your property minus the settlement figure of the mortgage. What you have left is the equity, and your deposit will come from this.
If you’re a first-time buyer you’ll not have access to equity. But you may have other options; could you ask your parents to help? The Bank of Mum and Dad may be more feasible than you’d think; there are mortgages available which ensure a parent’s loan is returned, with interest, as long as repayments are kept up.
Then you need to take into account other costs associated with moving and house-buying, including mortgage account fees, estate agent fees (if you’re selling), solicitors’ fees (whether buying or selling), stamp duty (if you’re buying and if the property is over the threshold), survey fees and mortgage-related fees such as arrangement fee and broker’s fee.
Step 3: What can you afford to buy?
So you’ve worked out the value of your current home (if you’re selling), and worked out the cost of moving, and how much deposit you have.
Next you need to establish how much you can afford in terms of mortgage repayments.
A bit of old-fashioned budgeting will help here. Work out your monthly out-goings, including any debt repayments. Not all debts are equal; it’s advisable to pay off credit card debt ahead of, for example, a student loan, because credit card debt can adversely affect your chances of securing a mortgage.
And importantly, only borrow what you can afford. You’ll not be happy in your new home if crippling mortgage repayments mean you’re living on the breadline.
Step 4: How much can you borrow?
There are literally dozens of mortgage providers, and hundreds of products. To work out what is right for you – particularly if you are a contractor or are self-employed with a fluctuating income – you need to speak with specialist broker to get advice on the most suitable mortgage and how much you can borrow.
Get an agreement in principle (AIP), and gather together all the information and documents (such as ID, proof of residency etc) to submit to your lender. But there’s no need to share your AIP with the estate agent or vendor; play your cards close to your chest and ask your specialist adviser to negotiate on your behalf.
Step 5: Securing your mortgage offer
Do this as speedily and efficiently as you can. Your specialist adviser will help you here, and will be key to success in getting your mortgage. Around a third of transactions fail to complete, and one of the commonest reasons cited is delays by the purchaser.
Estate agents are not known for being understanding or sympathetic. Ensure you select a lender who can work with your timescales.
Step 6: Picking a solicitor
As with mortgage brokers, you should choose your solicitor carefully. Receiving a poor legal service can elongate the buying process and any delay could mean you lose that dream home.
Don’t be pushed into using a solicitor suggested by the estate agent. Ask your friends and network for recommendations. If they’ve had an efficient, speedy and quality service, then chances are you will too.
Step 7: Planning your move
Once you have received a mortgage offer, start planning the move but don’t commit to any expenditure until your solicitor confirms you have exchanged contracts. Allow for unexpected costs such as an extra month’s rent/mortgage payment, cleaning, storage etc.
And in advance organise a removal company.
On the day of completion your solicitor will let you know that you can collect the keys from the estate agent.
Step 8: Understanding your finances
If you haven’t got protection for your mortgage repayments in place, then consider this a priority.
The first time you pay your mortgage is bitter sweet. It means you’re a homeowner – but you have to get used to a chunk going out of your bank account every month. And in the first few months you may have additional expenditure on things like furniture, decorating or even just equipping the kitchen. Be very aware of your income and outgoings so you don’t overspend.
Step 9: relax you’re a homeowner
Sit back and enjoy your new home.
If you’re a contractor, freelancer, or are self-employed and would like help and advice with any part of the buying process, please get in touch with the team at Contractor Mortgages Made Easy.