Buying your first home – and what it will really cost you

The market has cooled, which may offer first-time buyers the perfect opportunity

Purchasing a home is an exciting yet challenging process, with many steps to work through from saving up your deposit to finally getting the keys on completion day. While it can seem daunting, especially for first-time buyers, being prepared and informed at each stage can help make the experience more manageable. This guide takes you through the key steps when buying a property, from start to finish.

Saving a Deposit

For most buyers, the first major hurdle is saving enough money for a deposit, which is typically between 5-20% of the property price. With house prices remaining high, this can take many years of careful saving for those starting from scratch.

Here are some tips on boosting your deposit savings:

– Open a dedicated savings account just for your deposit, so you can easily track deposits and growth. Consider accounts with higher interest rates.
– Set up automatic monthly transfers into your deposit account to build savings gradually over time. Even small amounts add up.
– Look at your current spending and see where you can cut back to put more into savings. Keeping a spending diary can reveal areas you can cut down on.
– Consider moving to a cheaper rental property to save more each month. Or take on a lodger if appropriate.
– Ask about any employee savings schemes offered by your workplace that can help you save tax-free. Some may even provide matched contributions.
– Use government schemes designed to help people save for a deposit, like Help to Buy or Lifetime ISAs. These top up the amount you can save tax-free each year.
– See if parents or grandparents are willing and able to gift or loan money towards your deposit. Any financial gifts over £3,000 should be officially declared.
– If you already own a property, consider renting it out to generate extra income you can put towards your next deposit.

The amount of deposit you have affects what mortgage rates you’ll be offered, so saving a sizable one can make your borrowing cheaper. As a very rough guide, a 10% deposit or lower may limit options, 15% provides more choice while 20%+ gives the most flexibility.

Choosing a Mortgage Deal

Once you have a budget in mind, it’s time to explore mortgage options. With interest rates rising, taking advice from a professional broker could be invaluable for finding your best deal.

Things to consider when choosing a mortgage include:

– Mortgage term – Typically 25 years, a longer term means lower monthly payments but higher overall interest.
– Fixed, tracker or variable rates – Fixed rates remain the same for an agreed period, giving certainty. Trackers change in line with the Bank of England base rate. Variables can go up or down at the lender’s discretion.
– Length of fixed term – 2 years gives short-term security. 5 years locks in a rate for longer to ride out market fluctuations.
– Arrangement fees – Upfront fees to secure a deal. Can be added to loan but increase long-term costs.
– Loan-to-value (LTV) – The loan size compared to property value. A lower LTV means lower rates.
– Portability – Whether the deal can move with you when you remortgage.

Consider speaking to a whole-of-market mortgage broker who can outline the pros and cons of different options for your circumstances. This may come with a small upfront fee but could save you thousands long term.

Once you’ve explored the market, formally apply for a mortgage by providing details of your income, savings, credit history and regular outgoings. If approved, your lender will issue an Agreement in Principle confirming what they’re willing to lend you. This helps guide your property search.

Viewings and Making Offers

With your budget set, start looking for suitable properties in your desired locations. Register with major property portals like Rightmove and Zoopla to see new listings matching your criteria. Arrange viewings on properties that interest you.

Attending viewings in person is essential to get a proper feel for the property and area. At each one, take thorough notes on aspects like:

– Size and layout – Do room dimensions work for your needs? Is storage sufficient?
– Condition – Look for signs of damp, mould, cracks etc needing repair. Test taps, electrics, heating.
– Potential – Could the property be extended or renovated to suit you?
– Location – Note transport links, parking, amenities, schools etc.
– Agent details – Keep their brochures and business cards to follow up.

Don’t feel rushed into making an immediate offer after viewing. Take time to reflect on each property’s pros and cons compared to others you’ve seen. Once you’re ready, submit an offer by email including your solicitor’s details. Be realistic about your budget – check online price guides to avoid overpaying. Prepare to negotiate if needed.

Appointing a Conveyancer

Once you have an offer accepted, your next step is to hire a conveyancer to handle the legal aspects of the purchase. Only specially qualified professionals can conduct property conveyancing. There are three main options:

– Solicitors – Qualified via law school and training. Most commonly used conveyancers.

– Licensed Conveyancers – Undertake special training and exams specifically in conveyancing.

– Chartered Legal Executives – Qualify by gaining experience supported by part-time study.

Shop around by getting quotes from a few conveyancers before choosing one. Look for recommendations from friends, brokers or your estate agent. Consider cost, experience, qualifications, customer service ratings and whether your case will be handled individually or as part of a team.

Your appointed conveyancer will:

– Carry out searches to check for issues like flood risk, mining subsidence and local plans.
– Confirm your identity and perform anti-money laundering checks.
– Obtain mortgage offers and request any deposits.
– Arrange surveys and valuations.
– Negotiate contracts and additional terms requested.
– Agree a completion date for exchanging contracts.
– Transfer final funds and authorise release of keys on completion.

Having an efficient conveyancer makes the legal process smoother. Maintain clear communication with regular updates on progress.

Surveying the Property

Before exchanging contracts, a property survey should be conducted to identify any potential defects or problems not visible during viewings. Your mortgage lender will arrange a basic mortgage valuation, but you may want a more comprehensive survey for your own peace of mind.

There are three main types of survey to choose from:

– Condition Report – A simple traffic light condition rating of key areas. The cheapest option.
– HomeBuyer Report – A more detailed survey identifying issues and maintenance needs with repair cost estimates.
– Full Structural Survey – The most comprehensive inspection providing extensive technical analysis of the entire building. Vital for unusual or very old properties.

Consider getting a more detailed HomeBuyer or Full Structural Survey on top of the basic mortgage valuation, especially if the property is old, extended or you have concerns. Your surveyor will provide an in-depth written report highlighting any serious or urgent defects.

Review the survey findings carefully. Renegotiate your offer price if needed or walk away if repairs are beyond your budget. Get professional advice on specialist issues.

Exchanging Contracts

Exchanging contracts represents the legal commitment between you and the seller to complete the purchase. This should happen around 2-4 weeks before completion day.

Your conveyancer will handle contract exchanges, but there are some things you must finalize first:

– Have your mortgage offer and insurance policies in place.
– Pay your deposit (typically 10% of purchase price).
– Confirm dates for completion and handover of keys.
– Complete final searches and enquiries.
– Sign the final contract in front of your conveyancer.
– Receive draft conveyancing documents from the seller’s side.

Be aware, once contracts are exchanged you are legally bound to complete the purchase. If you withdraw at this point you will lose your deposit and potentially face further penalties. So ensure everything is in order.

After exchange, your conveyancer will send funds to the seller’s conveyancer ready for completion day. No further negotiations are possible after exchanging. Your conveyancer will keep you updated on progress.

Completing Your Purchase

Completion happens around 1-2 weeks after exchanging contracts, when the property ownership officially transfers to you. On completion day:

– Your conveyancer will authorize release of the remaining funds to complete the purchase.
– The seller’s conveyancer receives the money and releases the keys.
– You can collect the keys and move into your new home!

Leading up to this milestone day, liaise closely with your chosen removal company to confirm dates and times for collecting your belongings from your old home and delivering to your new one.

Contact utility companies and council tax offices to close or transfer accounts and services. Redirect post and update important contacts like your bank with your new address details.

Transfer of keys usually happens around midday on completion day. Expect delays if you are part of a property chain – hold ups further down the chain can disrupt the whole sequence. Be patient and stay in close contact with your conveyancer if the process goes past the agreed time.

Once the keys are yours, the work isn’t over! Moving home is exhausting but also an exciting new chapter. Make sure to leave time for unpacking, settling in and personalizing your new place.

Additional Guidance

As well as the core steps outlined above, here is some further guidance on aspects that often crop up when buying a property:

Leasehold vs Freehold

An important distinction is whether a property is leasehold or freehold. Leasehold means you have a time-limited right to occupy the property, whereas freehold gives you full ownership indefinitely.

Houses are usually freehold. Most flats/apartments are leasehold, meaning you own the individual flat but the building facilities are managed communally.

The leasehold term length affects value – under 80 years remaining will make securing a mortgage harder. There are also annual service charges to factor in. Check the lease terms closely before buying.

Buying and Selling Simultaneously

If you need to both sell your current home and buy another, this adds complexity. Where possible, try to complete your sale first before finalizing the new purchase, so you are not left without a roof over your head!

Have a plan B in case the purchase falls through, like temporarily renting or staying with family. Look into ‘porting’ your mortgage. Keep all parties informed of key dates to keep the chain moving.

Issues After Completion

Notify companies involved if you find problems with the property or their service after completing – follow their complaints procedure first. If unresolved, contact relevant ombudsman schemes for disputes involving lawyers, surveyors, agents etc. Court action is a final resort.

Buying to Let

Buying a property to let out follows a similar process but with some key differences:

– Specific buy-to-let mortgages assess rental yields.
– Letting agents can advise on areas with high tenant demand.
– Consider using a limited company structure for tax efficiency.
– Ensure property meets safety regulations for tenants.
– Calculate costs like maintenance and landlord insurance.

In summary, buying a home is a major project requiring time and dedication. But you can make the process less daunting by breaking it into clear steps, seeking professional advice when needed, and staying organised and fully informed at each stage. With patience and perseverance, you’ll be rewarded with the thrill of moving into your new home.

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