Planning to buy your first home? Moneywise’s Helen Knapman shares her experience as a first-time buyer and offers five valuable tips.
I took my first steps on to the property ladder this summer. It was a nail-biting five months wait from having the offer accepted to picking up the keys. Now, I just need to decorate…
But in the meantime, first-time buyers and home movers, take heed of what I’ve learnt.
1. Don’t look at houses until you know your budget
Don’t spend hours lusting after your dream home on property portals Rightmove and Zoopla only to have your heart broken when you realise you can’t afford them. Get a quote or ‘Agreement in Principle’ from a mortgage lender or broker to find out what banks and building societies are likely to lend you and then check how much you have in savings to put towards a cash deposit.
According to broker London & Country, a maximum mortgage offer will be about four times your annual income (or joint income if more than one of you are buying).
2. Prepare your paperwork in advance
I had to supply reams of paperwork – some going back three months – to both the conveyancer (the solicitor that deals with the legal side of purchasing property) and the mortgage lender to prove my address, income, identity, and outgoings.
If you’re self-employed, according to advisory service the Money Advice Service, you’ll have to provide information going back even further – some two to three years.
Plus, be warned:
- Many documents need to be originals, not photocopies.
- Some documents must be certified by a so-called “professional person”, such as a teacher or chartered accountant.
3. Check if the property is leasehold or freehold
Leasehold typically applies to flats and some new-build homes – this is where you own the right to live in the house or flat but someone else, known as a freeholder, owns the building and the land the property sits on.
Leasehold properties typically come with annual ground rent and service charges, which can run into the thousands. You also need to be careful of how long is left on the lease.
If you buy a place where the lease has dropped to 80 years or below and you want to extend it, half the “marriage value” – the rise in the property’s value expected from the lease extension – becomes payable, plus the freeholder’s legal costs in addition to your own.
4. Pick the right survey
Confusingly, there are four types of surveys. First off is the lender’s valuation, which is compulsory – your bank or building society will want to assess the value of the property. Then there are three main surveys you can buy to help check if the property is sound. These are:
- RICS Home Condition Report, which identifies the condition of the key elements of the property;
- RICS HomeBuyer Report, which provides more detail; and
- RICS Building Survey, which is essential for larger or older buildings.
See Rics.org for more information.
5. Beware ‘gifting’ fees
If your parents are giving you money to put towards your home, ask them to transfer this into your bank account so you can eventually pay the conveyancer. If the money is within their bank’s Faster Payments limit, this will be free.
If the money is transferred directly to your conveyancer by a third party, you may be stung by an admin fee. My partner wasn’t aware of this and was charged a £56 ‘gifting fee’.
This article is based on my experience buying in England. The rules may differ in Northern Ireland, Scotland and Wales.