- 19th December 2018
- Posted by: Celticfp
- Category: Mortgages
1. Know your Budget
Firstly, avoid setting yourself up for disappointment by understanding what you can afford on a monthly basis. This will also govern how much you can borrow and when you include your deposit funds, the property price you can afford.
You’ll need a deposit of at least 5% of the property price – but the more you can put down the lower the rate you’ll be able to access on your mortgage. Typically we call it Loan to Value (LTV), essentially its how much you want to borrow versus the property price. So, if you were purchasing a property worth £100,000 and you had a £30,000 deposit, you would need a 70% LTV Mortgage.
We tend to find as you increase your deposit by 5% the mortgage deals get a little cheaper. The cheapest mortgages rates tend to be at the 60% LTV and lower.
You’ll also need to raise enough money to cover your legal (solicitor) fees, surveys and moving costs.
There could also be stamp duty to budget for but, since November 2017 when the Chancellor delivered his last Budget, this is one cost you might be able to strike off the list.
So as long as you (and anyone you are buying with) has never owned or part-owned a place in any part of the world, the first £300,000 will now be exempt from stamp duty, up to a maximum value of £500,000.
Most important of all however, is qualifying for a mortgage. Success will depend on a combination of your deposit, salary (or combined salaries if you’re buying with someone else), outstanding debts and your credit score. Based on all of these factors a good mortgage adviser will be able to do an affordability exercise with you, this will then help to identify what your target purchase price could be.
2. Check out Government schemes
Potentially via a number of Government schemes, you could be entitled to bonuses that could increase your deposit savings in the form of a Help to Buy ISA or Lifetime ISA, its worth exploring these schemes and understanding how they work.
Furthermore, if you are struggling to get a deposit together but have surplus income, you could consider the Governments Help to Buy deposit scheme, where they can borrow you a 20% deposit.
For more details visit the Help to Buy website https://www.helptobuy.gov.uk/
3. Secure a mortgage Decision in Principle
Also called a agreement in principle, most estate agents will require one of these for them to accept your purchase offer. Once you’ve been offered a loan from a bank or building society, get an agreement in principle. This document is free and demonstrates to sellers and estate agents that you’re a serious contender.
4. Do your homework
We can’t stress this point enough! By now you should have your budget established, you can search for homes you can know you can afford. But preparation is key and, as ever, start with location. It sounds obvious but it’s the single most important factor as it’s the one that can’t be changed.
In terms of the property itself, think very carefully about your requirements and narrow them down to must-haves and nice-to-haves. List these down, remain focused on them and your search will be a whole lot easier.
A tip we always share about properties is associated with valuation reports, a valuation must be conducted for the lenders benefit to check that the property you are buying is a suitable security. However, if you are buying an older property where it doesn’t have a new build guarantee, you might want to go an extra couple of steps…
A HomeBuyer Report is a survey suitable for conventional properties in reasonable condition. Costs start at £400 on average.
This will help you find out if there are any structural problems, such as subsidence or damp, as well as any other unwelcome hidden issues inside and outside.
This is the most comprehensive survey and is suitable for all residential properties. It’s particularly good for older homes or homes that might need repairs. This type of survey typically costs upwards of £600 and provides detailed advice on repairs.
It’s very extensive and in some circumstances worth the extra money but it does not usually include a valuation. Although this survey can’t look under floorboards or behind walls it should include the surveyor’s opinion on the potential for hidden defects in this area.
The surveyor should also provide information on potential repair options. Again, you could try to save money by comparing the details of the repairs required against the lender’s valuation.
For more information visit the Money Advice Service website https://www.moneyadviceservice.org.uk/en/articles/a-guide-to-homebuyer-surveys-and-costs
5. Get the local estate agent on your side
Estate agents are the gatekeepers to early information on properties, but you must take care. Unfortunately there are still agents out there that want to make a quick buck, do your research and go and see them face to face. Ask about their experience, their process and even if they have any awards for their service.
Building rapport with local reputable firms such as Williams Estates could mean you find out about crucial developments before other potential buyers, get to know them and talk to them about your requirements. They can provide a lot of guidance when it comes to area, price and other important aspects of the buying process.
Once you’ve found a property you want to make an offer on, check the asking price against that of other homes that have recently sold in the local area. This should help you determine if your asking price is true value.
Bringing it back to valuation reports, if a report does flag issues with a property such as damp or the need for a replacement boiler etc, you can use this as a bargaining tool when it comes to making an offer.
7. Get the most out of property viewings
Take your own photographs and use a compass to find out what direction the property or garden faces – south facing is most popular. Take stock of the natural light levels versus the time of day, check for cracks in walls and keep a keen nose for the smell of damp.
Outside the property, look for leaks or bad guttering. Note how busy the road is, what the parking’s like and the condition of neighbouring homes. Ask direct questions on viewing, such as if there have been any major works or extensions to the property. And make notes as when you’ve been on several viewings, it’s easy to get mixed up.
This Article is for information purposes only – should not be perceived as financial advice. We recommend you should always speak to a financial adviser before making any financial decisions.