Property Buying Process in the UK
Buying a new house is one of the biggest financial commitments you can make in life. The process can be lengthy and stressful, and taking the first step on the property ladder can be a daunting prospect.
In this guide we will cover everything you need to consider prior to buying a property, how the process works, and the financial costs involved.
Understanding Your Budget
By far the most important factor to consider when buying a property is whether you can afford it.
The most obvious (and largest) expense involved is the purchase of the property itself. The average house listed by estate agents in London is priced at over £500k, other parts of the country may not be quite so expensive but buying a house is not going to be a cheap endeavour regardless of location.
You are likely to need a mortgage, and this will require that you save a deposit. As a minimum you can expect to pay 5% of the property price, but most lenders will require a deposit of 15% or even higher from a first time buyer. Properties purchased for investment purposes usually require a deposit of at least 25%.
Mortgage terms can vary a lot from lender to lender, so shop around to make sure you get the best deal. The size of your deposit and your credit score can make a big difference to how much you need to repay, so it may be beneficial to delay your purchase in order to better organise your finances.
Whilst the purchase itself may be the largest, it is by no means the only expense involved in buying a property. You will also need to consider agency and legal fees, moving costs, and the cost of ongoing property maintenance. One trap many first time buyers fall into is forgetting that the upkeep of the property falls on their shoulders, it is important to make sure you can not only afford the purchase but also the ongoing expenses of owning your home.
Finding a Property
Before you start actually looking for a suitable property to buy, it is advisable that you get an agreement in principle from a mortgage lender. An agreement in principle (also known as a decision in principle or mortgage promise) is confirmation from a mortgage provider that they would be willing to lend you a certain amount in principle. Whilst an estate agent won’t require that you have such an agreement in place it is recommended to ensure you stay within budget.
Once you have a figure from a lender, you need to consider exactly what you are looking for in your ideal property and how that fits your budget. Decide which items on your checklist are non-negotiable and which you may be willing to compromise on should an option tick all other boxes. Certain features that can push the price of a property up may offer no real benefit to you, take the time to consider whether they are necessary.
Draw up a shortlist of properties that meet your requirements and fit your budget. If practical, take an informal drive past the properties on your shortlist prior to booking viewings. You will often decide against a potential purchase purely based on first impressions, and it will save time for all parties involved if you eliminate such options early in the process.
With your finalised shortlist prepared, you can contact the relevant estate agents and arrange viewings for your chosen properties. Prepare a list of requirements and questions in advance, and take notes and photographs to assist you when comparing your options. You will likely want to take a second or even a third look at any properties you seriously consider making an offer for.
Should any listing appear to be a serious candidate for purchase be sure to be thorough in your inspections, take the time to fully assess the condition of the property. Check electrical and plumbing systems, look for signs of damp, and try to visit the property at different times of day to get a proper feel for how it would be to live there.
Be sure to view as many properties as you need to be fully confident in any choice you make. When you have identified the correct property you can proceed to make an offer and start the purchase process.
The Purchase Process
If you have offered below the asking price it is quite possible that you will have to negotiate with the seller. Some properties prove to be extremely popular and you may even have to offer above the asking price to beat a competing bid.
Assuming you can come to an agreement on price, the purchase process can begin. You will need to appoint a solicitor and complete your mortgage application. Your mortgage lender will undertake a valuation survey to ensure the property is worth the agreed sale price and subject to all other terms being satisfied will approve your mortgage offer.
It is worth noting that the valuation survey is not extensive and will not identify all possible repairs needed, you will want to pay for your own independent (Home Buyer Survey) survey to fully assess the condition of the property.
The seller’s solicitor will receive the title deeds from their client and draft a contract for the purchase. Your solicitor will review the contract and confirm full details of exactly what is included in the sale. They will also perform searches of Land Registry and Local Authority information to check whether there are any issues that might affect the value of the property.
Should the survey or searches highlight any issues you may need to renegotiate the price with the seller. Assuming all parties still wish to proceed at this point you will agree on a completion date with the seller and will receive the contract to sign. Once you have exchanged contracts you will be legally bound to the purchase and will need to have all relevant insurances in place.
Your solicitor will register the transfer of ownership with the Land Registry. On the agreed completion date, they will transfer the outstanding balance of the purchase price to the seller’s solicitor, and on confirmation of receipt, the estate agent will release the keys to you. At this point the process is complete and you are officially the owner of the property.
As we mentioned at the start of this guide, buying a property can be a stressful experience. The process becomes a lot less stressful once you fully understand how it works though, and we hope that we have given you all the information you need to assist you in your journey to buying a property.
For more information on any step of the process or how we can assist you, please contact us today.