Buying a Property can be one of the most vital decisions and it is also usually one of the biggest financial commitments that you will make in your life. It is a lengthy and complicated business, which while exciting is often fraught with stress and worry. But luckily there is a lot of good advice around helping you to make your home-buying experience as easy and problem-free as possible.
The first thing you need to do is decide how much you can afford. You will need to look at how much money you have available yourself and how much you can borrow. There are a number of different financial institutions which offer loans to people buying a property, for example, building societies and banks. You should find out if you are able to borrow money and if so, how much. For information on mortgages, see under heading Mortgages
Some building societies now provide buyers with a certificate that states that a loan will be available provided the property is satisfactory. You may be able to get this certificate before you start looking for a property. Building societies state that this certificate may help you to have your offer accepted by the seller.
Before finally deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional costs. These include:-
survey fees
valuation fees
Stamp Duty Land Tax. From 3 September 2008, this is payable on properties costing more than £175,000 and is at least 1% of the purchase price
land registry fee
local authority search
fees, if any, charged by the mortgage lender or someone who arranges the mortgage, for example, a mortgage broker
the buyer’s solicitor’s costs
VAT
removal expenses
any final bills, for example, gas and electricity, from your present home which will have to be paid when you move.
For more information about Stamp Duty Land Tax, go to the HM Revenue and Customs (HMRC) web site at www.hmrc.gov.uk/so, or ring the HMRC Stamp Office enquiry line on: 0845 603 0135.
On some properties, where the seller has to provide a Home Information Pack (HIP), the seller will pay for local authority searches.
You should be aware that if you start the process of buying a property and then the sale falls through you may have already paid for a valuation and/or a survey. If the solicitor has started any legal work you may also have to pay for the work done.
You should also take into account the running expenses of the property you wish to buy. These may include:-
community charge/council tax (in England and Wales)
water rates (in England and Wales)
ground rent, if the property is leasehold
service charges, if the property is a leasehold flat
insurance costs, including life insurance, buildings and contents insurance
heating bills. An energy performance certificate can help you work out how energy efficient your property is.
You will have to pay a deposit on exchange of contracts a few weeks before the purchase is completed and the money is received from the mortgage lender. The deposit is often 10% of the purchase price of the home but it can vary.
Types of ownership:
Freehold property
If the property is freehold, this means that the land on which the property is built is part of the sale and no ground rent or service charge is payable.
Leasehold property
A property may be leasehold, which means that the land on which the property is built is not part of the sale. You have to pay ground rent to the owner of the land - who is called the freeholder.
The length of a lease can vary and you should check that the length of the lease on the property you are interested in buying is acceptable to the mortgage lender. You should consult an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB
In addition to ground rent on a leasehold property, you may have to pay an annual service charge. This usually happens with a flat. The service charge covers such items as maintenance and repairs to the buildings, cleaning of common parts and looking after the grounds.
A group of leaseholders living in the same building may have a right to jointly buy the freehold of the building or take over its management.
In England and Wales, you can get further advice about leasehold from:-
The Leasehold Advisory Service (LEASE)
31 Worship Street
London
EC2A 2DX
Tel: 020 7374 5380 Or 0845 345 1993 (9.30am to 3.30pm Monday to Friday)
Fax: 020 7374 5373
E-mail: info@lease-advice.org.uk
Web site: www.lease-advice.org.uk
Commonhold property
If the property is commonhold, this means that you can buy the freehold of flat and own common parts of the building jointly with the owners of other flats in the building (known as a commonhold association).
In commonhold a ground rent or service charge is not payable. However, a share of the commonhold association's expenditure on maintenance, insurance and administration will be payable for the common parts of the building.
Further information about commonhold is available from LEASE – see above under leasehold property for details.
Step by Step guide
When you decide you would like to buy a particular property you do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money.
If the property is being sold through an estate agent, you should tell the estate agent what you are prepared to pay for the property. The estate agent will then put this offer to the owners.
If the owners do not accept the first offer put to them by you, you can decide to make an increased offer. There is no limit on the number of times you can make offers on a property. If you make a written offer it will always be made subject to contract. This means that you will not be committed to the purchase before finding out more about the state of the property. If you make an oral offer this is never legally binding.
Arranging a mortgage
If you have not already begun to arrange a mortgage, you should start to do this now. It should take about three weeks from the application for the mortgage to the formal offer being made by the lender. However, this time-scale may vary.
Whoever agrees to lend the money will want to have the property valued. This is to make sure that the lender could get the loan back if for any reason you stopped paying your mortgage and the house had to be sold again. The valuation will be done by a surveyor on behalf of the lender but you will have to pay for this valuation. The fee will be payable in advance, usually when you send a completed mortgage application form to the lender.
If the amount of money to be borrowed is more than a certain percentage of the valuation of the property (usually 75-80%), your lender may make it a condition of the loan that you take out extra insurance to cover the extra amount. You pay a single premium to your lender which is usually added to the loan. This is known as a higher lending charge (or mortgage indemnity guarantee).
Arranging a survey
The valuation which is done for whoever is lending the money is not a survey. You should consider whether or not to have an independent survey carried out in addition to the valuation. The survey would not only consider the value of the property but would also examine the structure of the property and should identify any existing or potential problems.
There are two levels of survey that you can choose between:-
a full structural survey. This is suitable for a property which is large, more than 80/90 years old or in doubtful condition
an intermediate or house/flat buyers report that gives a report on the condition of the parts of the house that are easy to see and to get at and may recommend further tests or investigations, for example, a specialist check for woodworm. This is particularly suitable for properties built this century which appear reasonably sound. It is much cheaper than a full structural survey.
It is possible for you to use the same surveyor who does the valuation to carry out the survey and this may be cheaper. However, you can use a different surveyor if you wish.
If the surveyor reports that there are some problems with the property, you will have to consider whether you still want to go ahead with the purchase or want to negotiate further with the seller about the price. The surveyor will usually advise you as to how any problems they have identified should be dealt with and the likely costs of this. You can find more useful information about property surveys at www.rics.org/Property/Residential Property
Choosing who is to do the legal work (conveyancing)
The legal process of transferring the ownership of the property from the present owner to the buyer is known as Conveyancing. You should decide who you want to do the conveyancing work. You can do it yourself – although this can be complicated. You can use a solicitor or a licensed conveyancer.
Using a solicitor
Most firms of solicitors offer a conveyancing service. Although all solicitors can legally do conveyancing, it is advisable to choose a solicitor who has experience of this work.
After you successfully purchased a property, our agency will be more than happy to provide you Property Management service.
Choosing who is to do the legal work (conveyancing)