It’s one of those signpost events in your life like passing your driving test or buying your first car. You’re suddenly all grown up!
And if you’re not just a little bit scared by the prospect of borrowing a large sum of money then you should be.
Competition for properties in most places is frightening too. If you live in London there could be up to 20 people looking at the same property as you, on the same day.
There is no escaping the stress involved in buying your first home either. You’ll be dealing with a mortgage broker, mortgage lender, conveyancer, estate agents, movers and the person you’re buying the property from, all for the first time.
While Dashly can’t help with everything on this list, it can make finding the right mortgage the easiest step of the lot. That includes arrangement fees, valuation fees and early repayment charges. Not just what interest rate you’re paying.
Paying for your property
Before you buy your first home you’ll need to be able to provide a deposit. There is no such thing as a 100% mortgage loan – not since the bust of 2008 anyway.
So, the bare minimum you will need will be 5% of the value of the property you want to buy (£10,000 for a home worth £200,000).
The next step is to get an agreement in principle from a mortgage lender. You can do this in two ways: apply directly to the lender or seek the help of a mortgage broker.
Both options are perfectly good but you may find the process easier with the help of a mortgage broker.
A mortgage broker can help you search for the most suitable mortgages based on your circumstances and iron out any bumps in the road. They can charge a fee to the client based on the mortgage amount, or will receive a ‘procuration fee’ from the lender.
An agreement in principle will show you how much the lender will let you borrow. As a rule of thumb, this will typically be three times your salary if you are applying for the mortgage on your own and up to four times your income if you are applying for a mortgage with someone else.
It’s best to get your agreement in principle in place first as this will increase the chances of an offer you make on a property being accepted.
Finding your property
You can now simply search online. But that doesn’t mean you shouldn’t register with estate agents In high demand areas, some properties will be sold without being advertised because agents already have a list of the most motivated buyers in branch. A good estate agent will contact you to let you know when a new property fitting your search comes onto their books.
Viewing a property
When viewing, don’t be afraid to asks questions, ask if you can take your own pictures of areas or features that might sway your decision and visit the area during the day and at night (it can make a big difference).
It’s also worth looking at how long the property has been on the market and ask yourself whether it’s the price or something else about the property that has meant it hasn’t been snapped up. Check online portals to see if it was marketed recently before the sale was abandoned. Ask the agent why they think it had no acceptable offers.
Other important questions to consider are:
- Any furniture included?
- How old is the boiler and when was it last serviced?
- Why is the owner selling?
- How much do council tax and utility bills cost?
- What are the neighbours like?
- How many offers have been made so far?
Finally, always book a second viewing of the property. You’ll notice things you didn’t see first time round.
Making an offer
You’ll make an offer via the agent.
Be confident about negotiating on price, but don’t be surprised if properties go for above the asking price in a ‘hot’ market where there is high demand for relatively few properties.
And don’t forget Stamp Duty! You pay this on top of the purchase price. However, first time buyers don’t have to pay any Stamp Duty on the first £300,000 of a home valued at up to £500,000. FTBs then pay 5% on the amount exceeding the £300,000 threshold. If the price is over £500,000, you follow the same rules for people who’ve bought a home before
Property or lease premium or transfer value FTB SDLT rate
| Up to £300,000 | Zero
| The next £200,000 (the portion from £300,001 to £500,000) | 5%
| Anything above £500,000 | NA
The estate agent will pass your offer onto the current owner and it will either be accepted or rejected. They may also come back with a counter-offer. Remember that the estate agent doesn’t work for you and it’s their job to get their client the highest sale price they can.
That said, the vendor won’t always accept the highest offer because they may prefer a buyer in a stronger position (cash buyers, buyers with homes already under offer, buyers with nothing to sell and a mortgage offer).
Once your offer has been accepted you should ask for the property to be taken off the market immediately. In most circumstance the owner will do so as a show of good faith. If they refuse you should reconsider your offer.
You’ve had an offer accepted, now what?
To progress from an agreement in principle to a full mortgage application, you’ll need to submit proof of your income – usually three months’ payslips will do. If you’ve not been in your job for very long you may need to provide details of your employment contract or a letter from your employer confirming that you are employed full time.
You will also need to reveal your outgoings - including utility bills, credit or store card balances and other living costs - and may be asked to produce recent bank statements.
In some circumstances, you may need a guarantor in order to be accepted for your loan.
When comparing mortgages don’t be fooled by an attractive interest rate. Often mortgages that offer very low interest rates can come with significant administration charges, valuation fees and other hidden costs.
You will also need to have buildings insurance in place before your mortgage lender releases the funds.
And it often pays to get a full survey rather than the more basic Homebuyers Survey (the minimum your lender will require). Finding serious structural problems could save you money in the long run, and you may opt to reduce your offer or back out of the purchase altogether.
Once you have your mortgage in place, a conveyancing solicitor will carry out the necessary checks and transfer ownership to you on the Land Registry. Try to find a local solicitor by recommendation, rather than using one referred by the lender. The cost can often be cheaper and the service better.
The conveyancer will check things such as whether the current owner has the right to sell the property, whether there are any restrictions or covenants on the land or property, check the freehold or terms of the leasehold, check the property for flood risk and just about anything else.
When you and your vendor sign contracts and exchange them - “Exchange of contracts” - you are tied into the deal and there’s no going back.
And that’s the final stage. The contracts specify the completion date and that’s the date all money has to be transferred by your solicitor and you get the keys.
Now relax, sit back and look forward to indulging your passion for DIY. All very grown up.
Property or lease premium or transfer value SDLT rate
| Up to £125,000 | Zero
| The next £125,000 (the portion from £125,001 to £250,000) | 2%
| The next £675,000 (the portion from £250,001 to £925,000) | 5%
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10%
| The remaining amount (the portion above £1.5 million) | 12%