A First Time Home Buyer’s Guide: The Basics
Being a first time buyer is very exciting but can also be extremely daunting. Buying a property is one of the most significant purchases you are likely to make and you can feel as if you are entering into a world of the unknown. Taking the correct initial steps will help ease the process and make the transaction go much more smoothly.
What is a first time buyer?
A person is generally classified as a first time buyer if they’re purchasing their only or main residence and have never owned a freehold or leasehold interest in a residential property in the UK or abroad.
Finding a mortgage
Most first time buyers will require a mortgage to purchase a property. There are many different mortgage products on the market so choosing the right product can be tricky. It is advisable to do some research and talk to experts such as a mortgage broker to find a product best suited to your needs and situation. They will also be able to assist with the application process.
Having a survey?
It is your responsibility to ensure that your new home is free from structural defects or other issues that may affect the value. There are two types of survey, a Home Buyers Report or a full structural survey. A surveyor will be pleased to let you know the cost of each type of survey and talk to you about what they include so you can assess which one is suitable for the property you wish to buy. In addition, the surveyor will also be able to advise you if specialist reports are needed to give you the full picture.
Whilst you are not obliged to have a survey undertaken, if you are carrying out a survey this should be done before exchange of contracts. After exchange of contracts you are committed to the purchase and any defects that you find after exchange will be your responsibility and could come as a nasty shock!
What happens with a survey if you are buying the property with a mortgage?
You need to be aware that, in normal circumstances, you cannot rely on a mortgage valuation survey carried out by your mortgage lender. All a valuation does is confirm that your new home is worth the amount that your mortgage lender is prepared to lend. The valuer will not necessarily be looking for structural defects but will focus on what they think the property is worth. Therefore, you need to consider having your own surveyor to look around the property.
Some mortgage lenders will allow you to pay extra and ask the valuer to undertake a survey for you at the same time as the valuation, which will mean a survey that you can rely on. Your lender will be able to advise you if this is possible.
What other costs are involved in buying a property?
Apart from your monthly mortgage payments and utility bills, there are other costs when buying a home. These include but are not limited to:
- Survey costs
- Legal fees and disbursements
- Removal costs
- Buildings and contents insurance
- Initial furnishings and decorating costs
- Mortgage arrangement and valuation fees; and
- Stamp duty.*
*First time buyers will pay no stamp duty on properties worth up to £300,000.00 and a discounted rate is available if the purchase price is higher than £300,000.00.
How much deposit do I need?
Before looking at properties, you need to save your deposit. A deposit is generally 5%-10% of the value of the property.
My family wish to help me with the deposit. Is this ok?
Gifted deposits from relatives are very common to assist family members in getting their first step on the property ladder. Gifted deposits are accepted by most high street lenders. If you are receiving a gift to help with the deposit, you need to ensure the lender, mortgage broker (if applicable) and your solicitors are aware as generally this must be approved by the lender before you instruct a solicitor.
I have a help to buy ISA. Can I use this for the deposit or the purchase price?
Help to buy ISAs were introduced by the government to boost your savings by a bonus of 25%. These are available from a range of banks and building societies. There are limits on the initial deposit and what you can save each month. The savings and bonus paid can be used towards the monies requested on completion to fund your purchase. The bonus cannot be used as part of the deposit on exchange of contracts.
Please note that you cannot claim the ISA bonus if you are buying a property that is worth more than £250,000.00.
If you are a first time buyer looking to move then you need GA Solicitors’ award-winning residential team on your side. The team was named Best Conveyancing Firm in the South and South West by the Law Firm Services Awards in 2018 and I was also named Young Conveyancer of the Year South and South West.
Laura Lofting, solicitor