What monies are involved in buying a property?

When you purchase a property, there are many different costs involved that you need to be aware of. Here are a few to consider:

  • Deposit
  • Stamp Duty Land Tax (SDLT)
  • Mortgage
  • Solicitor/Conveyancing Fees
  • Survey Report

Deposit

Most mortgage companies will require that you use some of your own money when purchasing a property. This is usually in the form of a deposit. The amount require will vary between mortgage lenders, however this can be as little as 5%. The bigger the deposit the better the mortgage interest rate.

For example, let's say you have found a property that you wish to purchase for £200,000 and you intend to apply for a 95% mortgage, you will be require to provide the deposit amount of £10,000 (5%). This will mean the mortgage amount you wish to borrow will be £190,000.

There are other products out there that help first time buyers get on to the property ladder, such as shared ownership schemes.

Stamp Duty Land Tax (SDLT)

This is a tax imposed by the UK government on the purchase of property and land. The amount of SDLT due is based on a tiered system. The amount of stamp duty will also take into consideration if you are a first time buyer where the threshold is higher.

Please take a look at our calculator here, to see how much SDLT you may need to pay.

Mortgage

Depending on the amount you will be placing as a deposit, will determine the mortgage interest rate. The mortgage companies adjust their interest rates following the Bank of England base rate. This is currently set at 0.1%. We advise that you discuss your options with a mortgage broker who will be able to help find the best deal for you.

Solicitor/Conveyancing Fees

When you have found a property to purchase you will need to instruct a property solicitor or a legal conveyancer to act on your behalf. This can range from £500 to £1,500 and more depending on the purchase and your location. We talk more about this below.

Survey Report

You may be required to pay for a survey report. Some mortgage companies include this in their product, however some require you to pay for this. A survey will attend the property on behalf of the mortgage lender to confirm that the property is worth the value you are purchasing it for.

This list is intended to cover the main costs of purchasing a property or land. There may be other costs involved and you will need to ascertain these from the seller or estate agent.

Find out how much you can borrow

Mortgage lenders take into account various criteria about you and the property you intend to purchase before they will disclose how much they propose to lend to you. If you are purchasing with someone else, bear in mind that they will also apply the same process to their circumstances too.

Seek advice from a professional mortgage broker. They will give you an idea of what the lenders will look for and which ones would best suit your circumstances.

We would always recommend that you apply for a mortgage in principle. This way it will show the seller or estate agents that you are serious about you intentions to purchase a property.

Location, Location, Location

Choosing the right location is key when buying a property. Not only for your personal circumstances but also for a potential resale later down the line. You'll want to know that your property is in a desirable location and will sell again in the future.

With regards to the here and now, you will want to investigate the areas you are considering purchasing in, especially if you are not familiar with the area. We recommend that you visit the area and maybe spend a few nights in an Airbnb or hotel. Get a feel for the area, walk around both during the day and night to see what the neighbourhood is like. What transport routes are near by? Shops and restaurants?

A few other things to consider are:

School catchment - You may wish to consider the school catchment areas. The prices may increase in an area that has a good or preferred school catchment.

Flood zones - Check which areas are prone to flooding in the area you intend to buy in. This can be done online quick and easily.

Development applications - you may also wish to check to see what development applications have been submit or granted. This may depreciate or improve the value of a property depending on the proposed development.

Crime levels - along with the personal feeling towards this from a safety point of view, there is also a financial element to this. The more an area suffers from crime, the higher the cost in your council tax which is used to support the police force. You can check an areas crime levels at police.uk.

Transport links - this is a contributing factor to property values. Being close to train station or situated on excellent bus routes will make the property more desirable.

Local Infrastructure plans - Could there be plans to improve the local infrastructure or could those plans make the area worse?

Different property types

In the UK, we are extremely privileged to have such a vibrant and diverse property market. There are a few different types of UK property, and this can be confusing especially if you have never owned property before. Here are a few you may come across on your search:

Flats

A flat is considered the most affordable type of housing and usually the first rung on the property ladder for many first time buyers. They tend to be less expensive than houses and therefore ideal for singles or small families.

There are also different types of flats, subcategories if you will. These are as follows:

Purpose built flats - These are as straight forward as the category suggests, flats that were built as such from their original build.

Converted Flats - As the title depicts, these were once a different type of dwelling and since original construction have been converted to flats.

Studio Flats - This can be confusing to first time property searchers. A studio flat is made up of one large room that will be used as a bedroom, living space and kitchen with the bathroom usually in a separate room. The room will be divided by clever placement of furniture or partitions.

Maisonettes - the true description of a maisonette would include the main detail of having it’s own private entrance that opens directly to the outside world along with the flat itself having more than one floor. However, over the years this as been misused and it has become commonly accepted that all flats split over two or more floors are seen as maisonettes.

Terraced House

A terrace house is usually a house set within the middle of a row of houses. This style of housing is one of the most common types of housing in the UK. Usually found in some of the more built up areas throughout the country.

End of terrace

As the name suggests, this is like the above terraced house description but is located at the end of the row.

Semi Detached House

Similar to an end of terrace house which shares a single side wall with a neighbouring property, the main difference with the semi detached house is that it is connect to another single dwelling and not a row of houses.

Detached House

A detached house is simply that, a house that is detached from any other dwelling. Usually comprised of front and rear gardens, these are one of the most desired styles of properties in the UK.

Bungalows

Similar to the detached house a bungalow is usually detached however it’s accommodation is found on a single level. You may come across bungalows that have loft conversions which means that the accommodation is now split over two floors. These are usually called chalet bungalows.

Different types of property tenure

Freehold - This is where the owner of the property owns the freehold to the property and the land it is built on. Most houses are freehold, and usually the best tenure when owning property.

Leasehold - A leasehold is where there is a long term lease on a property for a specified number of years. The leases usually start at around 125 years, but can range up to 999 years. The leaseholder will have a contract with the freeholder, which will set out the legal responsibilities of both parties (Freeholder and Leaseholder). This can prevent you from modifying your property without first obtaining consent from the freeholder. You may also need to pay a service charge to the freehold or managing agent as well as a ground rent to the freeholder.

Upon expiration of the lease, the property ownership returns to the freeholder, unless the lease has been extended. Leases can cause issues when obtaining finance if they drop below a certain number of years, usually below 80 years remaining. At this point it is recommended that a lease be extended to beyond 100 years, which will incur paying the freeholder, along with other fees, for this extension.

Most leasehold properties are maisonette's and flat's, with some houses being included.

Leasehold with a Share of Freehold - This type of tenure incorporates both freehold and leasehold. This means you will acquire a shared ownership of the freehold title, as well as a leasehold interest in the individual unit. Usually with a share of freeholders

Different Property Ownership Types

Without trying to state the obvious, there are obviously main different types of properties from detached houses to top floor flats. However, what you may not be aware of is the different types of property ownership and property tenure.

The different ownership types are:

Sole Proprietor - quiet simply the most straight forward ownership type. As the name suggests there is only one person that owns the property/land.

Joint Tenants - This is the most common form of property ownership. Also referred to as co-ownership, this is usually used for those that are married or in a civil partnership. Both registered owners will own the whole property together, with no separate shares.

Shared Ownership - designed to help those struggling to find the deposit amount required to purchase a property in the traditional manner. The scheme allows the purchaser the opportunity to purchase between a quarter and three quarters of a property and pay a rent on the remaining share of that property. Suitable for first time buyers this scheme is a cross between buying and renting.

Tenants in common - this ownership type allows owners the opportunity to own unequal shares within a property. Usually ideal for business partners with differing levels of investment, it allows the owners to leave their shares within the property/land to family members or beneficiaries their estate.

Help to Buy - This ownership type is perfect for those wishing to get on the property ladder but are unable to raise the deposit amount required or move up the property ladder. The scheme supports would be property owners by requiring them to raise only 5% of the property value as a deposit, with the government covering up to a further 20%, leaving 75% to be covered by a mortgage.

Contact Estate Agents

Once you have identified the areas you would like to setup home and you have an idea on what type of property you are looking for, the next step you need to take is to contact estate agents in local to your designated areas.

Make sure you register with your mobile and email address and discuss your criteria with them. Ask to be added to the database and to keep you updated with any available property.

Check list for viewings

When viewing property you will want to allow your feelings to tell you if the property is right for you. If you feel this is the one for you, there may be a few things that you want to look out for so that you don’t have any nasty surprises later on. Here are few things to look out for;

Are there signs of damp? - The first giveaway will usually be the smell as you enter the property. Keep an eye out for other signs too, such as watermarked walls and ceilings or flaky plaster.

Any signs there my be structural issues? - You need to look out for big cracks. The areas you need to look around are things like extension, bay windows, end-of-terrace walls, to name a few. Don’t be alarmed by small hairline cracks as these are common and do not signify structural issues. Don’t worry if you think you may miss something as any real issue will usually be picked up by a qualified chartered surveyor who will report any problems.

Which way does the house face? - If you have someone that enjoys spending time in the garden, then this will be a big factor. During the winter this won’t be too much of an issue, but in the summer months it will be the difference between a bright and warm home, compared to a frustratingly dark one. We recommend that you take a compass with you to check the orientation of the property.

How much storage space is available? - Storage can be over looked when you are blown away with a property and it only becomes noticeable when you have to store the hoover in a corner of a room or the ironing board bedside the wardrobe. Check things like attic space and whether this has been boarded out, if not then what would the cost be for you to do this? If you have a garden, then you will need to maintain this, so where will the gardening equipment be stored?

Are the rooms big enough? - When you are on the hunt for a property, sometimes you may find yourself compromising on room size because of location or outside space, but this can soon become frustrating when you live there every day. Make sure that the space available allows you some room to grow.

What is the EPC rating? This is ever more important especially with recent increases in energy prices. All estate and letting agents should give you a copy of the EPC (Energy Performance Certificate) upon your request. This will detail of energy efficient a property is and what can be done to improve thing. As you wonder round the property check to see if the property has double glazed windows or gas central heating.

What condition is the property in? - Does the property look tired? Will you need to redecorate the property and what would this cost to do? Do you need to replace bathroom suites or fit a new kitchen? These will soon mount up to a considerable sum.

Broadband Speed - We would recommend that you research the broadband coverage and speed in the area or street you are interested in buying in. With the vast majority of us plugged into the virtual world in one form or another, have a reliable internet speed could be an important factor for you.

Making an offer

Understanding the local market and your buying position will help you when you come to making an offer. If you are a cash purchaser could make you more favourable as a buyer than someone needing to sell a property in order to purchase a sellers property. The sales involved in a chain the more that could go wrong. Similarly, if you are purchasing in a market that has limited property available but a high demand in buyers, then equally you may not be able to make an offer below the asking price due to the competition.

When you are ready to make an offer, you can contact the estate agent and submit your offer verbally over the phone or in person, however we recommend that you put your offer in writing.

Finalise mortgage application

Once your offer has been accepted, now is the time to get in touch with your mortgage broker or lender. You will have to submit a full application for the mortgage and inform them of the property you intend to purchase. This can be a lengthy process, so the sooner you make a start the quicker the sale can complete.

Remember while your offer has been accepted, no one is legally bound until the contracts have exchanged, so it could all fall apart if the process takes too long.

Finding a property solicitor/conveyancer

At the same time that you are finalising your mortgage application, you will also need to find a property solicitor/legal conveyancer.

They will be responsible for checking all the contracts and advising you on the things you need to be aware of, such as length of lease and covenants. This is another area that you need to be mindful of, don’t just settle for a cheap conveyancer as they are usually over worked and will take time to respond to enquiries which could jeopardise your purchase. Recommendation is key here.

Stewarts Estates have worked with several conveyancers and are happy to recommend the following:

Michelle Petersen of Frettens Solicitors - 01425 501403

Charlotte Pottinger of Laceys Solicitors - 01202 377800

We do not received commission or any form of payment for recommending the above.

Property Survey

A property survey is a great way for you to get a good understand of what you are buying and any issues/problems you may not be aware of.

There are three main types of survey, a condition report, a building survey and a HomeBuyers report. The cost for each will depend on the property location, property type and size.

Please bear in mind that the survey carried out by your mortgage provider is not the same as the above. They are two different reports. We recommend that you have your our survey done independently.

Planning your move

So you’ve found the property you would like to buy, you have filled out your mortgage application and have been accepted, you have instructed your solicitor and the survey has been booked. Everything is going in the right direction, now is the time to start planning your move. Here are a few things that you may wish to think about and start organising.

1.Removal Companies - Depending on how much you need to move you may want to start contacting some removal companies as these can be booked months in advance and you could find yourself weeks before the move stuck.

2. Insurance - you will need to have buildings insurance ready for when you exchange contracts, actually most mortgage lenders will insist this be in place as a condition of lending. You may also want to consider combining this with some form of contents insurance so safe guard your belongings.

3. Broadband - have you scheduled in your broadband installation? This could take weeks to arrange an installation and you don’t want to wait until you have moved in to arrange.

Exchange of contracts

The moment has finally arrived for you to exchange contracts. Your property solicitor or legal conveyancer have received all the response from the sellers legal representative and are now ready to exchange signed contracts.

Once this has been done you can relax and pop open the bubbly as the agreement for you to buy the property is now finalised and legally binding. The chances of things falling apart now are extremely unlikely.

Your legal representative will lodge an interest in the property and apply to land register to transfer the deeds to your name.

Congratulations and happy moving.