First time buyers guide

THE FIRST-TIME BUYER'S GUIDE TO PURCHASING PROPERTY 田田 Buying your first home has a huge impact on your finances - and your future. Understanding the process is crucial to making the most of your budget, saving time and reducing stress. STEP 1: FIND OUT HOW MUCH YOU CAN AFFORD Before you start searching for a property, you need to calculate your budget. Unless you're a cash buyer, speak to your bank and other lenders to determine what mortgage you can afford. UNDERSTANDING MORTGAGES %, Mortgages are loans created specifically for property purchases. To secure a mortgage, you will need to prove that you can afford the monthly repayments on the The interest rate depends largely on the loan-to-value (LTV) of your mortgage. This shows what percentage of your property is mortgaged, and how much you have paid for in the form of a deposit. property you are interested in. HIGHER LTVS ARE RISKIER FOR LENDERS, SO HAVE HIGHER INTEREST RATES. THE AVERAGE FIRST-TIME BUYER PAID A 17% DEPOSIT OF £29,218 IN 2014. EXAMPLE MORTGAGES PROPERTY ANNUAL MONTHLY MORTGAGE DEPOSIT LTV TERM TOTAL PAI PRICE INTEREST RATE REPAYMΕT £200,000 £160,000 £40,000 80% 4% 15 YEARS £1,184 £214,025 £200,000 £160,000 £40,000 80% 4% 25 YEARS £845 £254,357 £200,000 £190,000 £10,000 95% 6% 15 YEARS £1,603 £289,594 £200,000 £190,000 £10,000 95% 6% 25 YEARS £1,224 £368,247 Average You must pay back the amount borrowed plus interest over the agreed term. Most mortgages are for 25 years, but you can go longer term to reduce monthly mortgage rate: 25 YEARS outgoings, or shorter term to reduce overall costs. DON'T FORGET TO INCLUDE MORTGAGE FEES IN YOUR CALCULATIONS. AVERAGE FIRST-TIME BUYER PROPERTY PRICE IN 2014 £300K £250K £200K £150K £100K £50K TYPES OF MORTGAGES FIXED RATE TRACKER The interest rate changes in line with the base rate, The interest rate remains stable throughout the agreed period, usually I to 5 years. which is set by the Bank of England. OFFSET INTEREST The interest rate -ONLY changes depending Monthly repayments only contribute to on the amount of money in a 0% interest savings interest fees, and do not reduce account linked to your mortgage your mortgage. debt. DISCOUNT CAPPED RATE The interest rate changes in Like a discount mortgage, line with the lender's but a cap prevents rates exceeding a standard variable rate (SVR). certain level. FINANCIAL ASSISTANCE: HELP TO BUY THE UK GOVERNMENT INTRODUCED THE HELP TO BUY SCHEME TO MAKE IT EASIER FOR PEOPLE TO PURCHASE THEIR OWN HOME EQUITY LOANS Available on selected new-build homes in England with a purchase price up to £600,000, this scheme allows buyers to benefit from a small deposit and low-interest 20% loan. CASH DEPOSIT: 5% MORTGAGE: 75% EQUITY LOAN FROM THE ... GOVERNMENT: 20% • No fees for five years • 1.75% interest charge in year six • Rate adjusted according to Retail Prices Index plus 1% each year thereafter ... MORTGAGE GUARANTEES NEWBUY This scheme helps UK buyers secure an 80-95% mortgage Eligible new-build properties under £500,000 can be on new-build and older properties under £600,000. secured with a 5% deposit through this scheme. STAMP DUTY FEES As well as mortgage fees, monthly repayments and a deposit, you need to budget for property-purchase tax. RESIDENTIAL PROPERTIES OVER £125,000 IN ENGLAND, WALES AND NORTHERN IRELAND ARE SUBJECT TO STAMP DUTY LAND TAX (SDLT) NOTHING ON 2% 5% 10% 12% ON THE NEXT ON THE NEXT £125,000 THE FIRST ON THE NEXT ON THE REST > £1.5 MILLION £125,000 OF £675,000 £575,000 THE PROPERTY PRICE YOU PAY: IN 2014, THE AVERAGE FIRST-TIME BUYER PAID A £937 STAMP DUTY BILL It is expected that residential properties in Scotland will be subject to Land and Buildings Transaction Tax (LBTT) from April 2015. The proposed fees are: NOTHING ON 2% 10% 12% ON THE REST > £1.5 MILLION THE FIRST ON THE NEXT ON THE NEXT £125.000 OF £125,000 £575,000 THE PROPERTY PRICE YOU PAY: STEP 2: FIND YOUR PERFECT PROPERTY Once you have calculated your budget, you can start looking for your perfect home. There are many different types of property buyers, each with their own criteria. You'll find typical checklists below. 目 目 In walking distance of schools Near to local shops Room to grow In an area of low crime A large garden Close to other families FAMILIES • Close to business district • A small garden • Convenient transport links • A compact property • Nearby bars and restaurants • Convenient transport links • City centre or suburban apartment • Close to family, friends and amenities PROFESSIONALS RETIREES • Low price • 5% deposit • Potential for large returns • Good energy rating • Suitable for a wide range of buyers • Affordable property • Desirable or up-and-coming location • Part of Help to Buy scheme DEVELOPERS FIRST TIME BUYERS Of course, every property buyer's C GARDEN O GARAGE O SPACE O PRICE needs are different. Create a list of the must-have features you require before visiting the estate agent or searching online, so you don't waste time viewing properties that don't suit your needs. THE PROPERTY SEARCH View as many properties as possible and conduct multiple viewings of those you're interested in, preferably at different times of day. Take photographs and write notes so you remember what you did and didn't like, and speak to neighbours to glean more information. YOU SHOULD ALSO THOROUGHLY EXAMINE EACH ROOM SO THERE ARE NO NASTY SURPRISES AFTER YOU MOVE IN. LIVING ROOM WINDOWS BATHROOM • Turn onlight the fire • Do windows open easily? • Turn on the taps and shower to test the water pressure • Can you hear noise • Inspect wooden window frames for signs of rotting from upstairs? • Look for damp and mould • Check behind the bath panel, • Does the room benefit from much natural daylight? • Take note of any condensation basin and toilet for leaks 3. • Is there sufficient insulation? LOFT • Check for signs of structural damage BEDROOM 3 DRIVEWAY • Look out for cracks • What are noise levels like? and sunken areas 8 • Check to see if the guttering is leaking ROOF • Is the roof in good condition? KITCHEN OTHER GARDEN • Test taps and appliances Test the heating system • Is the garden south-facing? Check storage and worktops • Check light switches work • Is the garden overlooked? STEP 3: MAKE AN OFFER Once you are confident you have found the perfect house, it's time to make an offer. ASKING PRICE Determine what you're willing to pay. Make your initial bid relatively low to kick off negotiations and ensure you get the best price. REMEMBER TAKE INTO ACCOUNT THE FOLLOWING BEFORE MAKING A BID RENOVATION COST REPAIR COST ASKING PRICE BUDGET REMEMBER: UNTIL CONTRACTS ARE EXCHANGED, OFFERS IN ENGLAND AND WALES ARE NOT LEGALLY BINDING STEP 4: HIRE A SOLICITOR Your solicitor will help organise the legalities and finances of your property purchase. BILL They usually charge around 1% OF THE BUYING PRICE, or a FIXED FEE. STEP 5: ARRANGE A MORTGAGE VALUATION AND PROPERTY SURVEY After your offer is accepted, you must organise a mortgage valuation. A mortgage valuation typically Your lender will send a surveyor to value the property, costs £0-£1,500, dependent on your and use this mortgage deal and the property size. It is information to decide whether they're usually arranged by your happy to provide mortgage provider. your mortgage. MORTGAGE VALUATION It's recommended you This report should highlight any potential arrange a professional house survey. This report can be used to prompt issues with the property, so you're fully informed about potential repair costs. further price negotiations with the seller. PROPERTY SURVEY ONLY 20% OF BUYERS PAY FOR A PROPERTY SURVEY CONDITION REPORT HOMEBUYER'S REPORT BUILDINGS SURVEY INSPECTION LEVEL BASIC STANDARD COMPREHENSIVE PRICE £150-£300 £250-E600 £500-E1,00O UNUSUAL MODERN OR OLDER MODERN HOMES IN PROPERTIES AND SUITABLE FOR HOMES WITH SOME GOOD CONDITION PROPERTIES IN POTENTIAL ISSUES POOR CONDITION STEP 6: COLLECT THE KEYS You will need to pay a telegraphic transfer fee, which covers the cost of transferring the funds from your mortgage provider to your solicitor. THIS IS USUALLY BETWEEN... £25 £50 AND NON-REFUNDABLE ONCE THE TRANSACTION IS FINAL... YOU CAN COLLECT YOUR KEYS! SOURCES https://www.gov.uk/affordable-home-ownership-schemes/overview https://www.gov.uk/stamp-duty-land-tax-rates https://www.gov.uk/buy-sell-your-home/offers http://www.which.co.uk/money/mortgages-and-property/guides/buying-a-house/house-surveys-explained/ http://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/what-sort-of-survey-should-i-havel https://www.revenue.scot/land-buildings-transaction-tax/guidance/calculating-tax-rates-and-bands http://england.shelter.org.uk/get_advice/Buying_and_selling/the_buying_process/buyers_costs http://www.lloydsbankinggroup.com/Media/Press-Releases/2015/halifax/number-of-first-time-buyers-in-2014-at- highest-since-2007/ https://www.moneyadviceservice.org.uk/en/articles/mortgāge-related-fees-and-costs-at-a-glance All Information correct as of January 2015. COURTESY OF www.WATERPRESSUREPROBLEMS.COM commons NORTH YORKSHIRE ANDR H WEST EAST MIDLANDS WEST MIDLANDS EAST ANGUA WALES SOUTH WEST SOUTH EAS GREATER NORTHERN IRELAND SCOTLAND EED