How much can you afford?
The first thing you need to do is decide how much you can afford. You will need to look at how much money you have available yourself and how much you can borrow. There are a number of different financial institutions which offer loans to people buying a property, for example, building societies and banks. You should find out if you are able to borrow money and if so, how much.
Some building societies now provide buyers with a certificate that states that a loan will be available provided the property is satisfactory. You may be able to get this certificate before you start looking for a property. Building societies state that this certificate may help you to have your offer accepted by the seller.
Before finally deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional costs. These include:
Survey fees
Valuation fees
Stamp Duty Land Tax
From 3 September 2008, this is payable on properties costing more than £175,000 and is at least 1% of the purchase price.
Land registry fee
Local authority search
Fees, if any, charged by the mortgage lender or someone who arranges the mortgage, for example, a mortgage broker
The buyer’s solicitor’s costs
VAT
Removal expenses
Any final bills, for example, gas and electricity, from your present home which will have to be paid when you move.
For more information about Stamp Duty Land Tax, go to the HM Revenue and Customs (HMRC) website at https://www.hmrc.gov.uk/so https://www.hmrc.gov.uk/so or ring the HMRC Stamp Office enquiry line on: 0845 603 0135.
On some properties, where the seller has to provide a Home Information Pack (HIP), the seller will pay for local authority searches.
You should be aware that if you start the process of buying a property and then the sale falls through you may have already paid for a valuation and/or a survey. If the solicitor has started any legal work you may also have to pay for the work done.
You should also take into account the running expenses of the property you wish to buy. These may include:
Community charge/council tax (in England and Wales)
Water rates (in England and Wales)
Ground rent, if the property is leasehold
Service charges, if the property is a leasehold flat
Insurance costs, including life insurance, buildings and contents insurance
Heating bills. An energy performance certificate can help you work out how energy efficient your property is.
You will have to pay a deposit on exchange of contracts a few weeks before the purchase is completed and the money is received from the mortgage lender. The deposit is often 10% of the purchase price of the home but it can vary.
How to find a property
There are a number of ways in which you could find a property to buy:
Using estate agents
Looking at the property pages in local newspapers
Contacting house building companies for details of new properties being built in the area
Looking on the internet
Deciding on a property
When you find a property you should arrange to look round it to make sure it is what you will need and to get some idea of whether or not you will have to spend any additional money on the property, for example, for repairs or decoration. It is common for a potential buyer to visit a property two or three times before deciding to make an offer.
Ask for the Home Information Pack (HIP). This will give you important information about the property you’re thinking of buying, including an energy performance certificate, local authority searches and evidence that the person selling the property is entitled to do so. From 1 May 2008, in England, the HIPs of newly-built properties must also contain a sustainability certificate.
Is the property leasehold, freehold or commonhold?
Freehold property
If the property is freehold, this means that the land on which the property is built is part of the sale and no ground rent or service charge is payable.
Leasehold property
A property may be leasehold, which means that the land on which the property is built is not part of the sale. You have to pay ground rent to the owner of the land – who is called the freeholder.
The length of a lease can vary and you should check that the length of the lease on the property you are interested in buying is acceptable to the mortgage lender.
In addition to ground rent on a leasehold property, you may have to pay an annual service charge. This usually happens with a flat. The service charge covers such items as maintenance and repairs to the buildings, cleaning of common parts and looking after the grounds.
A group of leaseholders living in the same building may have a right to jointly buy the freehold of the building or take over its management.
Making an offer
When you decide you would like to buy a particular property you do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money.
If the property is being sold through an estate agent, you should tell the estate agent what you are prepared to pay for the property. The estate agent will then put this offer to the owners.
If the owners do not accept the first offer put to them by you, you can decide to make an increased offer. There is no limit on the number of times you can make offers on a property. If you make a written offer it will always be made subject to contract. This means that you will not be committed to the purchase before finding out more about the state of the property. If you make an oral offer this is never legally binding.
When the offer has been accepted
When your offer for the property has been accepted you will have to consider the following:
Whether a holding deposit is payable
Arranging a mortgage
Whether a survey is necessary
Who will do the necessary legal work
Whether you want to buy with someone else
