Being a first time buyer looking for your first home can be scary and complicated. It’s easy for buyers to feel overwhelmed fairly quickly into the process. That’s why we’ve put together a guide covering the important steps you’ll need to take to secure your house purchase.
Saving for a deposit
The first thing you’ll need to work out is how much money you can save to put towards a deposit for your first property. Mortgage lenders will always prefer larger deposits so whether it comes from savings you’ve been putting away for a while or you get help from your family, it will benefit you to get together as much money for a deposit as you can. Lenders will offer lower mortgage rates to those with higher deposits, which means the monthly repayments will be lower.
Typically, you’ll need a minimum of 10% deposit of the value of the home you want to buy. Although, there are now a number of mortgages available that only need a 5% deposit. If you’ve got a bit extra in the bank, then a 25% deposit (or more) will likely give you access to better mortgage deals. It is worth starting your savings as soon as you can.
There are multiple great schemes available that can help with this. One example is a Lifetime ISA, where the government adds 25% of whatever you save. So, if you can save £4,000 in a year, you will get a £1,000 top up from the government.
What can you do if you don’t have a deposit?
As previously mentioned, help is out there for you to save up the money you need for a deposit. Let’s take a look at some other government-backed schemes to help first time buyers.
- Help to buy equity loan- this offers aspiring homeowners the opportunity to buy a new-build property with just a 5% deposit.
- Deposit unlock- a new scheme introduced by the house-building industry, allowing you to buy a new-build home with a 5% deposit.
- Shared ownership- enables buyers to purchase a share of a home and pay rent on the rest of the share.
- First homes- helps local first time buyers and key workers by offering new-build properties at a discount of 30%-50%.
- The 95% mortgage guarantee scheme- this means the government ‘guarantees’ mortgages for buyers that have a 5% deposit.
Start looking at mortgages
Unless you’ve got deep pockets and can afford to buy a property outright, you’ll need a mortgage to buy your first home. There are lots of different types of mortgages available from repayment mortgages to interest-only mortgages. You’re going to need to work out which one is right for you.
Don’t forget about extra buying costs
Solicitor’s fees, mortgage fees, stamp duty, and other costs can quickly add up when you’re buying a home.
Stamp duty
The biggest additional cost you are likely to incur is Stamp Duty. This is a tax paid when you purchase property or land over a certain value in England, Wales, and Northern Ireland.
The amount you will pay depends on the value of your home. You will pay a higher amount of tax the more expensive the property is. For example, if your house is worth between £250,000 and £925,000, you’ll pay 5% Stamp Duty.
However, it is important to note that if you’re a first time buyer you’ll benefit from a Stamp Duty exemption rule. This means if you’ve never owned a home or any other property before you won’t have to pay any Stamp Duty on the first £300,000 of a home worth up to £500,000. A tax rate of 5% will apply to between £300,001 and £500,000, but this will only apply to that portion of the price, rather than the entire amount.
For more information about Stamp Duty check out one of our other recent guides here.
Mortgage costs
You may be accessing a large sum loaned to you to buy a home, but you will also need to take into account the cost of a securing a mortgage. This is called a mortgage arrangement fee. A mortgage arrangement fee is normally between £1,000 and £2,000 but it will vary depending on the mortgage deal you have been offered.
Also, you may be asked by your bank or building society to cover the cost of assessing the value of the home you’re buying. This is commonly referred to as a valuation fee.
Survey costs
It’s not a legal requirement to get a survey done on the property you’re buying, but it is very useful and could end up saving you a lot of money in the long term. There are three types of surveys you could get: a condition report (basic), a homebuyer report (suitable for buildings that are less than 50 years old), and a building survey (a detailed investigation). A survey can cost you anywhere between £400 and £1,500 depending on the level of detail you want in the report.
Solicitors’ costs
When purchasing a home, you’ll need a property solicitor. They can also be known as a conveyancer. Their job is to help you organise the legal side of your home buying process. It can be tempting to try and do the work yourself, but it is worth paying for a professional’s help.
As experienced property solicitors in Newcastle we can help you with conveyancing services quickly and efficiently to get you moved into your new home as soon as possible.
Finding your first home
Now is the exciting part of searching for your ideal first home. A common way to do this is through online websites and apps like Rightmove and Zoopla as they can help you narrow down your search criteria with useful filters. Once you have visited the property and decided it’s got everything you’re looking for, you will want to make an offer to buy the house.
Making an offer
You can make an offer on a home by telling the estate agent that’s managing it what you’re able to pay and informing them of the position you’re in. The agent can then pass you’re offer onto the seller. Your offer can be made in person, over the phone, or by email.
It might be necessary to provide evidence that, as a first time buyer, you can secure a mortgage. This is likely to be a Decision in Principle from the bank that’s offering you a loan for your purchase.
As a first time buyer, you’ll be in a strong position to negotiate as you’re not part of a chain, which sellers like.
Acceptance to completion
You’ve reached the final stage of your home buying journey. The rest of the work from this point is mostly done by your solicitors. The first thing you will need to do is secure the mortgage you agreed in principle. It normally takes about four weeks for a bank to formally provide you with a mortgage offer, and for you to pay to secure it.
Your solicitor will begin all the legal and administrative work involved with transferring the property (conveyancing process). This includes arranging Stamp Duty, getting in touch with the Land Registry, moving money during the sale, and acting as an intermediary between you, the seller, and the lender.
As soon as the terms of the sale have been agreed and your mortgage has been approved, you are ready to exchange contracts. The sale becomes legally binding at this stage and you will need to pay your deposit. On completion day, you’ll be able to pick up the keys to your new home.
If you’re looking for professional conveyancing Newcastle, contact our friendly team at Toomey Legal. We’ll carefully and effectively manage the legal part of your property purchase ensuring the transfer of ownership is seamless.