Mortgage Assistant - helping you with the mortgage process

Step by Step Guides Buying

Looking to get on the property ladder? Broaden your portfolio? This guide covers all the aspects involved in a property purchase, helping you whether you’re a first-time buyer or have some experience in the property market.

Sections:

1. Where to begin

So you've decided to buy a new home. Congratulations! However, there are important things that you have to do before even starting to look for a place, such as:

  1. Figuring out your budget
  2. Getting a mortgage agreement in principle

1. Your Budget
You can start by figuring out how much you're able to afford for a new house. Ideally, this means you will plan a budget:

Incoming:

  • If you're selling a house, the amount you will get from this transaction.
  • How much money can you borrow from a mortgage lender?
  • Any savings or investments that you could use to back your purchase.

Outgoing:

  • The cost of the property itself.
  • Additionally, you have to consider a number of one-off costs, such as:

    Arrangement Fee: lenders charge to set up the mortgage, even though some waive this fee.

    Arrangement Fee: lenders charge to set up the mortgage, even though some waive this fee.

    Lender's Valuation (Basic): Required by every lender so that they know that the property is worth the price being paid for it. The buyer has to cover this cost.

    Survey: apart from the lender's valuation, you should carry out your own survey to check for any defects within the property. This survey can be of two types: 1. The Homebuyer's Report (£250-500) 2. Buildings Survey (up to £1000 plus VAT)

    Legal / Conveyancing fees: You need the services of a solicitor in order to deal with the legal issues involved in buy a house. More on this later in this guide.

    Stamp duty: A government tax charged for properties on three bands:

    1. £120K to £250K - 1% of the purchase price
    2. £250K to £500K - 3%
    3. Over £500K - 4%

    Land Registry fee: Charged by the government to transfer the register of the property to a new owner. This can range from £40 to £800, depending on the price of the property.

    Local Authority search fees: Your solicitor / conveyancer performs searches for urban planning issues. These fees can come to around £60 or more in London boroughs.

    Estate agent's commission: If you're selling a property to buy another one, there's a percentage (usually around 1.5% or 2%) for the estate agent who sells your property.

    House-hunting expenses: Such as eating out, travel, telephone calls.

    Removal fees: Shop around for a favourable quote, or do it yourself by hiring a van. Add about £25 for insurance.

    MIG (Mortgage indemnity guarantee) fees: charged by the lender as an insurance premium when your loan is more than a certain percentage (from 75% for some lenders) of the price of the property. Costs vary between lenders.

    Other costs:

    • Buildings insurance
    • Contents insurance premiums
    • Additional removal insurance
    • Disconnection of services (water, gas, electricity, telephone)
    • Reconnection of services
    • Installation of new equipment
    • Carpet laying
    • Kennelling of animals
    • Mail redirection
    • Change of address notices
    • You should also allow for a well-sized contingency fund to use in case of emergency.

2. The Agreement in Principle
Even though this is not a requirement, it is advisable that you get an agreement in principle for a mortgage from a potential lender. This helps sellers recognise that you are putting in a serious offer and also that you want the transaction to be as quick as possible. On the other hand, you will gain an accurate mortgage estimate to consider while budgeting.

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