Essential Guide to Buying a House
If you are one of the thousands of people in the UK who find buying a house bewildering then look no further! This article contains helpful information to ease the pain of house buying. Either read through the entire article or jump to the following sections of interest.
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Independent Financial Advisor Back to top
Go and find an independent financial advisor- you shouldn't have to pay for their service. Most estate agents tend to have an IFA affiliated to them, (you don't have to use that estate agent to buy your house!)They have access to a huge database which gives out much more accurate details then banks' online mortgage calculators . The other advantage to using an advisor is that they tend to have relationships with the mortgage providers so that when it comes to filing your application they ensure that it goes through smoothly.
They type all of your details in to a huge data base-
- Monthly salary (when it comes to the mortgage application you need to show three months pays slips)
- Bonus (do you get one, how likely is it that it will pay out?)
- Any other income?
- Deposit - the more you have, the more you are likely to be able to borrow. (If you have a large deposit, many lenders will look beyond the traditional 31/2 x salary model)
They will also deduct any debts that you may have -
- Student loans
- Credit cards
Using all of this data, the database will calculate the maximum amount you can borrow, it will also show you how much the mortgage will end up costing you over the full 25 year term. So although an interest only mortgage may seem very attractive in the first few years, over a full 25 year term it may end up costing you a lot more than a repayment mortgage.
It is also important to look at the individual clauses of each mortgage provider:
- What is the joining fee
- How much do they charge to survey the house?
- Are there penalty clauses for early payment
- If you choose a fixed rate mortgage what happens after the time is up
- Are there any incentives to join the scheme?
- What will the monthly payments - can you afford these?
Choosing a Mortgage Back to top
Fixed or Variable Rate?
In the current climate of interest rates slowly rising, it seems mad to choose a variable rate mortgage. We were explained the choice very simply - do you like to know exactly what you are paying every month, even if it means you may loose a little if interest rates go down or would you get frustrated if the interest rate dropped and you were paying above the base rate?
Interest Only Mortgage?
This is an attractive solution when you are first buying a house as it gives you more cash to spend on diy and all of the other things you have to think about when you first move. You should be investing the money you would normally be spending into an ISA savings account or a pension fund, not just spending it!!
Interest only is also attractive as for the first few years of any mortgage you are only paying off the interest.
Mortgage in Principle
Using all of the details, the Financial Adviser will work out how much you should realistically be able to borrow providing you are approved by the mortgage provider. You can then confidently go and visit lots of houses knowing that you should be able to borrow the money.
Estate Agents Back to top
You should register with a four of five estate agents in your chosen area. It is probably good to do some investigation first - do they have a good portfolio of the types of houses you are looking for?
It is important to develop a good relationship with the estate agent as they will remember you and take you to the good houses first. Go and see them in person rather than registering over the phone or on the internet, then they know you are serious.
A good relationship will also pay off later down the line of buying a house as the estate agent will chase up vendors and solicitors if things are going a bit slowly.
Don't forget that the estate agent is acting on behalf of the seller and not you - the more you are prepared to pay, the higher their fee so be careful what you give away about how
much you can afford. This is particularly important when it comes to the offer stage as if they know you can afford a lot more than you are offering they will advise the seller not
to accept your offer.
Questions to Ask About Buying A House Back to top
Here is a list of questions that I found useful to ask, they give you an indication of the vendors situation.
- How long have the lived in the flat/ house (if it is a long time it is less likely that they are moving because there are problems)
- Why are the vendors moving?
- Have they already found somewhere to buy? Is it a long chain?
- How long has the house been on the market?
- Who are the neighbours?
- How quickly are the hoping for the sale to go through? Make sure their plan marries up with yours as this can save problems later on
These list of questions are related to the check list:
- Heating - is it gas/ electric
- How old is the boiler
- Are the electrics up to date
- Is the house freehold or leasehold? (Particularly important for London)
- If the house is leasehold - how long is the lease?
- Is there a service charge - what does this cover
- What is the vendor including in the sale (oven, fridge sofa?)
- Is there access to a garden?
- Have a close look at paintwork/ walls - is there a lot of workinvolved in bringing the house up to date
- How much is the council tax?
Making an Offer To Purchase A House Back to top
Once you have decided on a house/ flat now is the time to make an offer. Using the questions above you can ascertain how desperate the seller is to sell - of the house has been on the market for a long time, they may be more likely to accept a lower offer.
There is no set rule as to what to offer but have a look at similar houses in the area and see how much they are being sold for. Also work out what you realistically would be prepared to go to if they decline your first offer.
Don't forget if you are a first time buyer you have a big negotiation tool as it is likely that your sale will go through much more smoothly and quickly. It is always worth
reminding the vendor of this when you make the offer. It is also worth mentioning if you have a good deposit (don't say how much) as this means that the mortgage company is more
likely to lend to you and the sale will go through quickly.
Filing Mortage Application Back to top
Once your offer has been accepted you need to get a confirmed mortgage. This involves filling out lots of forms. You will also need to take copies of:
- Your passport
- 3 months pay slips
- 3 months bank statements
If you are worried about your credit rating, it may be worth being upfront with the mortgage adviser. If you have missed the odd credit card payment they can mention this to the
mortgage company and make sure this isn't a problem with the application.
Housing Solicitor Back to top
You will need to engage a solicitor as soon as your offer is accepted. Try and find someone who comes recommended as the solicitor has the biggest influence on the smoothness of the sale. Costs can vary hugely, find out what is included as some solicitors quotes may include the cost of the searches, whilst others do not.
It is helpful to use a local solicitor as they should have a relationship with the local planners and will understand and local regulations.
The solicitor is in charge of:
- Paying the stamp duty
- Local authority searches- planning applications, roads
- Contaminated land assessment
- Environmental search
- Drawing up the contract
Getting Your House Surveyed Back to top
The mortgage company will survey your home - they do a basic survey to check that the house is worth what you are paying for it.
At the same time you should pay for a survey to check that there are no major structural problems or other issues.
Types of House Survey: Back to top
Basic house survey - checking that the house is worth what you are paying
Medium level (normally called home buyers). This does a fairly thorough check and will highlight if there are any key issues. After taking this out and it comes back with lots of problems such as subsidence or damp you may want to take out a full structural survey (approx £300- £400)
Full structural survey - this is the most thorough survey and is worth taking first time if you can see evidence of problems or if you are buying a very old house. (£900- £1100)
First Time Buyer/ Chain Back to top
There is an enormous advantage to being a first time buyer as the whole process should be much smoother. When you put an offer in find out how long the chain is - remember for each member of the chain, every solicitor needs to exchange the documents on the same day. The more members, the more likely there are to be problems and the more likely the process will be very slow.
Exchanging Housing Contract Back to top
Once all of the searches have been completed, the contracts have been drawn up and the solicitors are happy to proceed, it is time to exchange contracts. This means that the sale is now legally binding and you cannot pull out of the sale without losing your deposit. Once you have exchanged you also choose a time to complete the sale. You can exchange and complete on the same day but this is quite unusual as most people need time between exchanging and completing to book removal vans and sort out logistics.
Completion of House Purchase Back to top
Usually you get the keys to your new house after lunch time on the day of completion. This gives the old owners time to move out and clean before they leave. On
the morning of completion, your solicitor will transfer the rest of the money from your mortgage advisor to the vendor. They will also pay your stamp duty (you will either have paid
this to your solicitor already or they will bill you after)
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"Very useful and good advice especially for first time buyers!"
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"This was really useful - thanks. I would like to warn people that my solicitor advised taking out building insurance from exchange of contracts."
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"I have been advised by a real estate agent that I HAVE TO make an appointment to speak to their mortgage advisor before my offer will be accepted - so they can check I'm not money laundering .... do I have to do that???? No one else has mentioned anything like this."
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