Typically, first time buyers must put down a deposit of at least 20%. However, with house prices having risen far more than wages in recent years, it has become almost impossible for first time buyers to save up that big a deposit, hence the introduction of certain government schemes to help first time buyers to get a foot on the property ladder.
One of the first things that you may want to consider if you are buying your first home is the Help to Buy scheme. Help to Buy helps people afford to buy their own home to a capped value of £228,100 with a relatively small deposit of just 5%. There are two separate parts of the Help to Buy scheme – Equity Loans and Mortgage Guarantees. With Help to Buy Equity Loans, the government gives you a loan to put down as part of your deposit, allowing you to put down a larger deposit and thus get a better mortgage. You need to contribute at least 5% of the property price yourself, and then the government gives you a loan for up to 20% of the price. You then need a mortgage of up to 75% to cover the remainder, which is obviously better than getting a 95% mortgage. With Mortgage Guarantees, the government provides a guarantee to your mortgage lender, allowing you to take out a mortgage with a deposit of just 5%.
When you want to take out a mortgage, you apply to a mortgage lender. They will then carry out an assessment of what you can afford, considering a wide range of issues, including your income, credit cards, credit history, loans, dependants and amount you spend on living costs. They will also consider what the bills in your new home are likely to be, including council tax, gas, electricity, water and phone bills, and insurance.
We would recommend you speak to an independent mortgage adviser such as Fulcrum Financial Services, who have access to the whole of the market and can help you explore a wider variety of options.
You will need a property solicitor to deal with the legal aspects of buying a property, who will charge you either a flat fee or a percentage of the value of the property. Typical conveyancing fees are between £500 and £1,500 depending on the complexity of the transaction.
When you take out a mortgage, you will not just be paying the cost of the deposit. Firstly, you will have to pay an arrangement fee for setting up the mortgage, which on average is around £1,500. Sometimes you can add this to your mortgage, but you will then have to pay interest on it. Finally, your mortgage lender will carry out their own valuation survey of the property to ensure that it is worth what you are paying for it. They arrange it, but you must pay for it, with the cost normally between £200 and £400.
As house prices increase, more first-time buyers are finding that they must pay stamp duty on the home they are buying. Stamp duty land tax is a tax that anybody buying a house or land over a certain amount must pay. The rate varies according to the price of the property. If your home costs up to £125,000, you will not have to pay stamp duty, but any purchase price over that amount will be subject to stamp duty. Stamp duty rate is as follows:
Up to £125,000
£125,000.01 - £250,000
£250,000.01 - £925,000
£925,000.01 - £1,500,000
To find out how much stamp duty you will need to pay, use our stamp duty calculator.
When buying a house, it is highly recommended that you get a survey carried out by an independent surveyor to check if there were any problems with the property which you otherwise would not know about. The two main types of survey are homebuyer reports and building or structural surveys. A homebuyer report usually costs between £250 and £500 and covers the general condition of the property, including damp. A building report is more in depth, takes longer, looks at the structure of the property, and will most likely cost between £500 and £1,200.
When you buy a property, you must register as the new owner with the Land Registry. This is a government department which keeps records of all registered properties in England and Wales. They charge a fee to register your property, which is generally between £200 and £500, but varies depending on the price of the property.
As a rough guide a transaction can, be expected to take around 12 weeks to complete, this mainly depends on whether there is a chain involved in the purchase.
A chain is created when a person buying a property needs to sell another, to fund their move. When a chain of multiple parties builds up, it can make the process longer. On the other hand, if the person buying a property is proceedable and therefore has nothing to sell in order to buy, it can be a much faster process.
Both the seller and the buyer sign identical contracts, and then these are exchanged between the solicitors for each party. Here you will pay the deposit, typically 10% of the purchase price, which your solicitor will hold. At this point the sale becomes legally binding.
The exchange of contracts will only happen when all enquiries have been answered and you, the seller and your respective solicitors agree that everything is in order.
Owning a freehold means that you own the property and the land that it is situated on outright. You are responsible for both the property and the land, with complete control over it. However, owning a leasehold means you are a tenant, and whoever owns the freehold is essential your landlord. Meaning you will be required to pay maintenance fees and service charges.
It is more common for leasehold properties to be flats and your property may share certain common areas and responsibilities.
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