I think each of us longs for the day when we can stop paying rent to a landlord or leave the house we grew up in and move into our own home.
How feasible that is depends largely on our finances and the geography of where we work and want to live. However with some research, planning and compromise, you may be closer to purchasing your own home than you think.
Start with your finances. How much do you have stashed away? Don’t forget that as well as your house deposit you will also need money for stamp duty, a solicitor, a surveyor, a removal company (or beer and pizza for helpful mates), mortgage fees and any work that the property will need.
Once you know how much you can afford to put down as a deposit you can go and have a soft conversation with a bank to find out how much you can borrow.
Banks offer few rewards for loyalty. Just because you have been with your bank a number of years doesn’t mean they will give you a preferential rate. However, if you are a prime banking customer, someone with £1,000 going into an account and direct debits going out, you may receive a preferential mortgage rate.
Some banks offer good rates with cash back and no up-front fees, some banks offer a savings account which will offset the mortgage, some banks will charge high mortgage fees and give you terrible rates. Some will let you pay off lump sums if you come into an inheritance or get a bonus at work and some won’t.
It is worth shopping around or speaking to a mortgage broker. A broker will take you through the various deals offered by a wide variety of banks and then organise it all for you. They do charge a fee for this but the bank with whom you eventually get a mortgage covers the majority of this fee. Finally, you will choose between a fixed rate or a variable interest mortgage.
A fixed rate has interest rates which are independent of market forces for the time period agreed. A variable interest mortgage means that the amount of interest you pay on your loan will depend on the interest base rate set by the Bank of England. Mortgage rates are more favourable with a larger deposit.
You should come away from your mortgage broker or bank with a “Mortgage in Principle” certificate; this is what an estate agent needs to accept your offer on a house.
Dream, View and Compromise
Now you know how much you have to spend on your new home you can start making a list of things you would like it to have.
- Do you want a new house with little work required?
- Are you willing to buy an older, cheaper place and then deal with hiring tradesmen to do it up (probably cheaper in the long run)?
- Do you want lots of bedrooms?
- A nice view?
- What location attracts you?
- Is it important to be close to transport links?
Once you have an idea of what you would like, use websites like Zoopla and Rightmove to find properties on sale that match your criteria. Do keep in mind that you won’t be able to get everything on your wish list (unless you have a huge pile of money or you are very lucky!)
After that go and view your shortlist and see whether anything takes your fancy. It is also worth talking to estate agents about what you are after as they will have a good understanding of what is available. If you have a friend who is a builder or a surveyor take them with you to check over the house on your viewing.
Making an Offer
You’ve found the house that you want and so you need to make an offer on it. If you think that the property has been valued too high compared to other properties in its location or due to its condition then you can put in an offer under the asking price. Be aware that going in too low can make it look like you’re not serious about your offer or that you are just insulting the vendor. If viewings on the property have been in high demand you may have to offer over the asking price to secure it.
Once your offer has been accepted you need to engage a solicitor to do “conveyancing to completion”. It’s worth calling around to get an idea of price and the personality of the solicitor you’ll be dealing with. I chose mine because I had no idea what I was doing and the solicitor on the end of the phone was very helpful and friendly.
The solicitor checks the boundary lines of the property, sends off searches, deals with land registry and stamp duty and will deal with the mortgage company to organise the transfer of the money from you and the mortgage company to the vendor. It is also possible to organise all the conveyancing online where all communication is carried out by email.
After the searches have come back you will get sent a wedge of paperwork from your solicitor that you have to read through, sign and return. This paperwork gives you the results of all the searches that have taken place, so you can find out whether anyone is planning to build an electricity pylon, coal mine or similar near your new house.
It will also tell you whether you are in a flood risk area or an area with high radon levels. Within the paperwork will also be confirmation of your property’s boundary lines and a list of everything that will be left in the house. We got a garden shed and some tools with our property!
Mortgage lender and surveyor
At this point you also need to go back to your mortgage broker or lender to fill in all the mortgage paperwork. They will ask you to pay for a surveyor to survey the property and look for things like rising damp, dry rot, major cracks in walls, the condition of the roof etc.
There are three types of survey: basic, where the lender checks that the property is worth the price; medium, where the surveyor will have a look at all the potential problems and write a report with recommendations on what work is needed; and in-depth, where they spend a long time at the house and note every minor jot and tittle.
The cost increases with the scope of the survey. Once you have the results you can decide whether or not to proceed with the purchase, whether you want to re-negotiate the price and whether you want to ask for a specialist report on anything flagged up.
In order to complete your purchase your solicitor will need confirmation that you have buildings insurance. This insurance covers the cost of re-building your property. It is also advisable to organise contents insurance for your possessions.
Finally, there is life insurance and critical illness cover. Life insurance comes as either a level term assurance where you are insured for the full amount of your mortgage (although you can choose the amount you are insured for) or a decreasing term assurance where the amount you are insured for decreases as you pay off your mortgage. The reducing policy is cheaper.
Exchanging and Completion
Exchanging is where you go to the solicitor’s office with the wedge of paperwork and sign it. Then you go to the bank to organise the transfer of your deposit to your solicitor, whilst they contact your mortgage lender to organise the transfer of their money to your solicitor.
Completion is when you get the phone call from the estate agents to say that you can come and get your keys! You will get asked whether you want to exchange and complete on the same day but I would recommend spreading them two days apart. It takes time for the funds to transfer from the banks and if the funds don’t get through in time you face a financial penalty for not being able to complete when you agreed you would.
So that is it, the process to owning your very own home! It is long, irritating and confusing but it is totally worth it, if only so you can hang up a picture without needing written permission from your landlord!
Good luck and happy house hunting.