5 questions to ask when buying your first home
4 November 2016
Buying a new home – especially for the first time – can be a bit daunting. Straight away you’re plunged into dealing with mortgage advisors, lenders, estate agents, solicitors, and surveyors, each of which have their own areas of expertise and, inevitably, their own particular brands of jargon. But it’s important not to be intimidated; the professionals you deal with when buying a house each have an obligation to help you understand what’s happening at each step of the process. So always remember: if you don’t understand something, or are unsure about what happens next, just ask. To get you started, here are a few of the big questions you might want to consider when you set out to buy your first home.
1. Can I afford it?
The first question is one you have to ask yourself – can you realistically afford to buy a new property at this time? It’s all too easy to underestimate the costs of buying your first home. The deposit is the biggest consideration – most mortgages require a deposit of at least 5 to 10 percent of the purchase price, and a larger deposit may be necessary to access the best mortgage deals. Other up-front costs you’ll have to consider can include:
- Mortgage arrangement fees
- Mortgage broker fees (see point 2)
- Conveyancing / solicitors’ fees
- Surveyors’ fees
- Stamp Duty Land Tax (currently charged on purchases over £125,000)
- Removal, renovation or furnishing costs
As well as the initial outlay, it’s important to think about what your monthly budget will look like once you’re in your new home. Your largest monthly outlay is likely to be your mortgage payment (and remember, if you have taken out a variable or tracker mortgage this could potentially go up), but you’ll also have to account for things like home and contents insurance, council tax and utility bills. Before committing yourself to buy a new home, be sure of your budget and how flexible it might need to be if any of your monthly payments increase, or your job circumstances were to change.
2. Should I use a mortgage broker?
There are a couple of ways to approach the task of applying for a mortgage. You can either deal with lenders directly (either on the high street or online, perhaps after checking deals via a price comparison site) or you can use a mortgage broker. Neither approach is right or wrong. For example, some people prefer the personal touch of dealing with a mortgage advisor at their chosen high street bank or building society branch, particularly if they have existing accounts and a good prior relationship.
Using a mortgage broker may cost you more up front – brokers usually receive a commission from the lender for introducing mortgage business, but many also charge the homebuyer a fee. However, you might be able to secure a better deal as brokers have access to hundreds of different mortgages from lenders across the UK, including more specialist niche lenders alongside the big high-street names. Many lenders also offer special “broker-only” deals that you can’t get if you deal with the lender directly. Mortgage brokers can give you impartial advice on the best mortgage to meet your individual circumstances, and will also deal with the application on your behalf, liaising directly with the lender throughout the process.
3. What type of mortgage should I take out?
Mortgage deals – or “products” as they’re also known – can vary in type as well as interest rate. Examples of mortgage product types include:
- Fixed – Taking out a fixed rate mortgage means your interest rate (and therefore your monthly payments) will be fixed for a set period – typically two, three or five years.
- Tracker – Tracker rates are variable and are linked to another base rate; this is usually the Bank of England base rate (or “official bank rate”) but it could be linked to a different base, such as the lender’s own standard variable rate (SVR).
- Capped – Capped products are variable, but provide a level of reassurance in that they are guaranteed never to rise above a set maximum or “cap”.
There are a lot of variables to take into account when choosing a mortgage deal, including the product type, how long it lasts, and of course the interest rate itself. You should also consider how it is priced (more attractive deals tend to have higher up-front arrangement fees) and whether you are tied in to the mortgage deal with an early repayment charge – this could result in fees if you choose to move your mortgage to a different product or lender within the agreed product term.
4. What type of survey should I get?
In England and Wales there’s no legal requirement to arrange a survey on a property you want to buy, and your lender will arrange for a surveyor to provide a property valuation report. However, many buyers who take on a property without a survey go on to regret it: according to Which?, one in ten homebuyers who don’t arrange a survey end up having to spend at least £10,000 fixing serious defects. The Royal Institution of Chartered Surveyors (RICS) offers three levels of property survey:
- Level 1 –Condition Report. Reports on the condition of the property and urgent defects only, plus guidance notes for your conveyancer. This is the most basic type of survey, intended for conventional and newer properties.
- Level 2 – HomeBuyer Report. From Autumn 2016 this is available in two forms. The first (“survey”) includes all the features of the Level 1 Condition Report, but also includes guidance on the repair and maintenance of any defects that might affect the property, this can include subsidence, damp, dry rot. The second option (“survey and valuation”) is essentially the same, but includes a market valuation and insurance rebuild costs.
- Level 3 – Building Survey. This is the most comprehensive RICS report, including a detailed analysis of the property’s condition and advice on defects, repairs and maintenance options. This type of survey is recommended for older and larger properties, or if major renovation is planned.
If you’re not sure what type of survey to arrange, ask your surveyor for advice. They will be able to recommend the best option for you based on the age and size of property, and their experience of similar properties in the area.
5. Does my conveyancer have the right qualifications and experience?
Conveyancing is the legal process by which ownership of the property is transferred from the existing owner to the new owner. It can be a complicated business, and includes carrying out “searches” relating to various aspects of the property and grounds, for example local planning permissions or constraints, boundary disputes and potential environmental factors such as flood risk. Strictly speaking anyone – including the buyer – can deal with the conveyancing of a property. Perhaps unsurprisingly, most people prefer to use a qualified professional. There are two types of conveyancers:
- Conveyancing solicitors are fully qualified practising solicitors who tend to have a wider experience in different aspects of the law. In England and Wales all solicitors should be registered with the Law Society and regulated by the Solicitors Regulation Authority.
- Licensed conveyancers are qualified lawyers who exclusively deal with property law and conveyancing; they usually do not have experience in other legal matters. The profession is regulated by the Council for Licensed Conveyancers.
When looking for a conveyancer, always check that they are registered or licensed by the appropriate professional body, and that they have specific experience of conveyancing on the type of property you are looking to buy, particularly if it is an older property or one of non-standard construction. You can find local conveyancing solicitors and conveyancers at reallymoving.com.
This article was brought to you by ReallyMoving- UK’s leading provider of instant quotes for home moving services.
Disclaimer – This is a guest blog written by a third party. This blog does not represent the views or opinions of Timberwise.