A property is the biggest purchase you’ll ever make, so spend time doing your homework to make sure you get it right. Here are our top five tips to get you started.
1. Understand your local market
While media headlines and statistics may give you the gist of national trends, the UK is made up of so many wildly varying micro-markets these generic averages are of little relevance to your property search. An easy way to work out what's happening in your local market is to count 'for sale' and 'sold' boards, which will tell you if your chosen area has a fast- moving, static or falling market.
"Find a road in your neighbourhood that has around 10 boards up," explains Kate Faulkner, property expert and director of Propertychecklists.co.uk. "For example, if more than four say the property's actually already sold, this suggests you have a rising market. Whereas only two sold would tell you your market is likely to be falling."
She adds if the properties sell within two to four weeks that suggests a fast-moving market, whereas if it takes six to eight weeks that's a more stable market.
Next, understanding the difference between the advertised property price and what properties are actually selling for on websites such as Mouseprice.co.uk or Nethouseprices.com can help to identify over-priced – or good-value properties – to buy. All this can help you find agents you can trust more easily.
2. Find a good local estate agent.
You will need to find the best agent in your area who can actively look out for the best property for you. Ask friends and neighbours for their recommendations as well as looking for the one who has the most ‘For sale’ boards in the area. Also try out a new tool that has been launched to help people find out which estate agent has sold the most properties in their area, as well as how long, on average, it takes them to make a sale. Provided by the HomeOwners Alliance, you can access it at Estateagent4me.co.uk.
3. Check your finances
Be realistic about what you can afford. Work out exactly what money you have for a deposit, not forgetting to factor in the buying costs - stamp duty is currently 2% for properties between £125,001 and £250,000, 5% for properties between £250,001 and £925,000 and 10% for properties between £925,001 and £1.5 million and then 12% on properties costing more than £1.5 million.
Once you have worked out how much you will have to pay in costs, visit a mortgage broker to get an idea of how much you can borrow. Be aware rates are pretty low at the moment, so try not to overstretch yourself too much now as long-term rates are likely to rise over time to 5% to 7%.
At point of exchange, you will need to ensure you have the deposit monies ready to transfer to the solicitor's bank account. This could be anything from 5% to 10% or more of the property's value.
Always keep some money back for furnishings and unexpected immediate repairs. If buying an old property, a gas and electrical safety certificate will help identify expensive works such as a new boiler or re-wiring prior to exchange.
4. Look at different ways to buy
Don't despair if your finances fail at the first hurdle. There is the government-backed Help to Buy scheme, for which you only need a 5% deposit (plus your buying and moving costs). It is valid for properties costing up to £600,000.
The scheme allows buyers to borrow 20% of a new-build property's value from the government through an interest-free loan for five years, which with your 5% deposit means you just need a 75% mortgage. However, you will have to repay the interest after five years – either in addition to your mortgage or handing the money back if you sell up.
If you want to buy an existing property under the Help to Buy Scheme, you can secure a 95% mortgage via lenders offering Help to Buy backed mortgages, such as RBS and Halifax.
Property prices are much higher in London, so the government has increased the upper limit for the equity loan for buyers of new-build homes within Greater London to 40%. You’ll need to have a deposit of at least 5% and a mortgage of up to 55% to cover the full house price.
And if these schemes still leave you struggling to finance a property purchase, consider local shared ownership schemes – even if your household earns £80,000 a year or less (or £90,000 a year or less in London) and any of the following apply:
- you’re a first-time buyer
- you used to own a home, but can’t afford to buy one now
- you’re an existing shared owner.
You buy a share of a property – usually 25% to 75% of the home's value – and pay rent on the remaining property's value, but it's 100% yours to live in (see Gov.uk/affordable-home-ownership-schemes for more information).
5. Consider different types of property
You may have a preference for a new-build or period property. However, not all new-builds are 'boxes' these days and not all period homes have 'character'.
Old properties require more maintenance and heating – and if the building is listed, the costs and hassle of doing work is high.
Freehold properties are highly desirable, but you have to pay for 100% of the costs while a flat that is leasehold may mean you can spread the costs of repairs – depending on the lease and service charges.
So make sure you are open-minded about different property types and always compare the pros and cons.
6. Think long term
You need to think about your financial situation and how you would pay the mortgage if your circumstances change – whether that's having a child, losing your job or separating from your partner.
Could your property be easily rented out and will the monthly rent cover your outgoings? Perhaps renting out a spare bedroom will be enough to tide you over during financial difficulties.