BUYING FOR THE FIRST TIME A GUIDE by David Pett Solicitor/Director with MJP Conveyancing
From my 16 years of working in the property market, I would have to say that the biggest mistake people make is to give up on the hope of buying a property altogether," -Elliot Castle, founder of home-buying service Webuyanyhome.com
OVERVIEW How much will I need to buy my first property? How do I get the money together? What assistance can the Government provide me with? What type of property should I be looking at? What do I do once I have found a property? How do I make sure I am not paying too much for the property? When do I instruct a conveyancer and how do I choose one? How long will it all take?
CAN I AFFORD TO PURCHASE? Cost of property - 5%- 10% deposit with mortgage There are many other costs you will have to meet, that can add as much as 15% to the total bill: The biggest is stamp duty -2% over 125K Surveys and valuations, solicitor/conveyancer fees, Land Registry fees, removal costs and of course buying all the furniture, white goods and other things for your new home Future costs: mortgage repayments, rent/service charge on shared ownership, service charge on leasehold, major works expenditure, parking, Council tax, Internet, utility bills etc www.citizensadvice.org.uk/housing/moving-andimproving-your-home/mortgage-calculator/
WHAT DO I BUY? Existing housing stock New build. Attractive option with Government Help to Buy options, but often poorly built and come with future cost with shared services/areas Read my blog - Read this before purchasing a new build property : http://solicitorsnews.blogspot.co.uk/2013/07/donot-purchase-new-build-property.html Tip : Never use the broker or solicitor recommended by the developer. You need totally independent advice Shared ownership - purchase a share of the property with view to increasing share - cons include ongoing rent, valuations, costs associated with sale, liable for cost of maintenance and insurance Leasehold v Freehold - leasehold not ideal due to ongoing costs - ground rent - rent review - service charge - major expenditure Think about how saleable the property will be in the future
WHY TO AVOID LEASEHOLD Often low headline price to entice you You may never own the land the property is built upon Higher conveyancing fee at the time of purchase as there is more legal work to undertake High ongoing costs Ground rent - may increase quite steeply in the future on review Service charge - average 1800 pa - on new builds 2777 May not include the cost of insurance May not include a contribution to a sinking fund to cover the cost of major works e.g roof replacement May not include the management company fees When it comes to sell there may be additional expense to meet: If remaining term of lease is less than 80 years you may need to apply for the lease term to be extended and this could prove expensive You will need to supply the buyer with an information pack - these can cost between 250 and 600
FUNDING THE PURCHASE Mortgage with deposit of 5-10% Mortgages are more difficult to get hold of since 2014 - affordability Mortgages guaranteed by parents Combing resources - Buying with other family members - brothers, sisters, parents and in-laws How do I raise the deposit? Savings Gift/loan from family members - Bank of Mum and Dad Tax considerations Need to disclose to lender Extra fees payable to conveyancer as additional work is required
TIPS BEFORE APPLYING FOR A MORTGAGE Check you are on electoral roll Last three months bank statements and pay slips SA302 if self employed List of income and outgoings Do a free check of your credit history using Experian Getting a mortgage in principle
GOVERNMENT 5 YEAR INTEREST FREE LOAN Help to Buy Equity Loan Government has announced a further 10 billion pounds of investment into this scheme The scheme requires a minimum 5% deposit of the property value with the Government offering an interestfree loan of a further 20%. The remaining 75% is covered by a standard mortgage Only available on new-build properties in England worth up to 600,000. The scheme will remain open until 2020 Not always cheaper than the cost of a 95% mortgage Interest on the loan becomes payable after 5 years Upon repayment its 20% of the value of the property at that time
FREE GOVERNMENT CASH Help to Buy ISA For every 200 you save into the account, the Government will add 50. This is up to a maximum bonus of 3,000 (which applies to 12,000 of savings) You can save up to 1200 in the first month and then up to 200 each month 250,000 limit on value of property outside London Unable to use towards deposit
MORE FREE GOVERNMENT CASH Lifetime ISA LISA 18-39 You can save up to 4,000 a year in a LISA as a lump sum or by putting in cash as and when you can. The state will then add a 25% bonus on top. So if you save 1,000, you'll have 1,250 and if you save the full 4,000, you'll have 5,000 before interest is added First home or pension for retirement
DISCOUNTED PROPERTY Starter Homes Scheme Gavin Barwell confirmed that construction on the first Starter Homes would get underway in 2017 with first completions earmarked for 2018 Starter Homes will be available to buyers aged between 23 and 40 who don't own a home and have never owned one before The 200,000 new homes built under the scheme will be sold at a minimum discount of 20% of the market price www.new-homes.co.uk/starter-homes/
WHERE DO I START? theadultbible.com - things they didn't teach you at school - types of mortgage and how to find and buy a home Speak to an independent financial advisor - not one connected to an estate agency Speak direct to high street lenders Do research on Government funding support - www.gov.uk/affordable-home-ownershipschemes Do your sums not just for purchase but for future expenses Register for shared ownership property - over a million of people registered on waiting lists.
TIPS ON CHOOSING YOUR PROPERTY Look at similar properties which my have sold recently Look at Zoopla to get some idea of comparable property prices Check out the locality Visit at night and at the weekend Speak to neighbours Check school ratings Broadband Crime rate Transport links Useful websites/apps: Facebook: Community Facebook groups and pages Google Streetview aroundmeapp.com
TIPS ON NEGOTIATING Don t be afraid to ask questions Ask estate agent lots of questions about the seller How long have they lived in the property? How long have they been trying to sell the property? What is their motivation for moving? When are they hoping to move? Don t be too quick to make arrangements to move Role of the survey Make it clear there is no chain behind you and you have a mortgage agreed in principle Put a 24 hour expiry on your offer
SURVEY Never buy a property without first obtaining a full survey Why? Check the bricks and mortar are sound Negotiating tool Statistics show that those who don't proceed with a survey can on average lose : 5K on repairs which would have been avoided, and 2K in the reduction of asking price Difference between Mortgage Valuation and Survey
HOW DO I CHOOSE A CONVEYANCER? Do research Reviews - Facebook, Trust Pilot, Google and solicitor own websites Don t just think local Always try and compare like with like - some conveyancers when quoting do not include all of the fees Don t be swayed by promises of speed Badges - Conveyancing Quality Scheme Look for specialists not businesses which do the occasional conveyance Will the service supplied suit your lifestyle - traditional v technology driven service
SOME FAQ ON THE LEGAL PROCESS How long will it take? Months rather than weeks - 3 months - depends on how fast others are in the chain How can I make the process quicker? Make sure you can promptly produce your identification and proof of address and source of funds evidence When will I be able to move in? Difference between exchange of contracts and completion When should I begin ordering removals and new furniture delivery or give up my tenancy? Wait until you exchange contracts - nothing is definite until then
WHAT ELSE DO I NEED TO CONSIDER? Will Declaration of trust - where one of the joint owners puts more in than the other
MJP CONVEYANCING Act for people all across the country Specialise in moving people into their new homes Brilliant client reviews Award winning service Nominated by our clients for an ESTAS award Low cost but hot on client service Technology driven Transparent Unique -Property Log Book Between 100 to 200 updates during the course of the transaction Fixed fees Register now to get 10% off your legal fee if and when you decide to instruct us in the future