Buying your home

 

How to buy a home

Buying a home is often the largest purchase you will make in your lifetime. It is important you have the right information, at the right time, to ensure you make informed decisions.

Gov.uk have developed a guide for people who are thinking of purchasing a home. First-time buyers may find it particularly useful, but as the buying process can change, even more experienced buyers can benefit from understanding the latest key steps.

It is focused on freehold properties.

It includes a short overview of how to buy a leasehold property – more detailed information is available in the government’s How to lease guide.

It covers purchasing a property which is currently rented out, but only if you plan to live in it yourself. If you’re looking for more information on buying to let, details are available in the government’s How to let guide.

Visit www.gov.uk to read the guidance on How to buy a home

When considering buying any property, you should always seek independent legal and financial advice.

 

Who can help me?

During the home buying process, a number of specialists can offer you advice or assistance:

• Lender – able to lend you money to purchase the property
• Insurer – able to provide the building insurance policy you need in order to purchase a property and the contents cover to protect your belongings
• Legal representative/conveyancer – able to carry out the legal work needed to buy a property
• Surveyor – able to assess the physical condition of the property and can give an independent valuation
• Mortgage broker or adviser – able to advise which mortgage is best for you
• Specialist professional or tradesperson – able to advise on any maintenance or building works that are identified in the survey
• Energy assessor – able to answer queries on the Energy Performance Certificate (EPC)

The estate agent will help guide you through the buying process and work with other parties to help the sale progress. But remember - their primary role is to help the seller sell their property.

The Government has a range of schemes to help people buy a home. These include:

• Help to Buy: Equity Loan
• Help to Buy: ISA
• Lifetime ISA

 

Citizens Advice

Citizens Advice provide information on buying a house including information on making an offer, buying with other people, mortgages and the right to buy.

Visit www.citizensadvice.org.uk for more information about Buying a home and moving and improving your home.

 

Consumer Code for Home Builders: I’m a Home Buyer

The Consumer Code for Home Builders was developed by the home-building industry to make the home buying process fairer and more transparent for purchasers.

The Code is designed to help you understand what levels of service to expect from your builder, feel fully informed about your purchase and know your consumer rights before and after you move in. In the unlikely event that problems arise, a speedy, free dispute resolution scheme is available to deal with complaints about breaches of the Code.

Visit consumercode.co.uk for more information about the Consumer Code for Home Builders

 

Money Helper

Buying a home could be the biggest single investment you ever make. It’s an exciting time, but there is a lot to think about.

You can find guidance on saving for a deposit, getting a mortgage and much more on the MoneyHelper website. You can even use an online calculator to estimate how much your mortgage repayments could be.

You can also check websites of mortgage lenders (banks and building societies), as some have their own online mortgage calculators. Lender websites may provide you with a wider choice of terms and mortgages as lending criteria can vary. However, you should note that website calculators only provide informal estimates.

To find out more about the process, key stages and what fees to expect, we recommend you visit their home-buying timeline first.

MoneyHelper is a free, unbiased and impartial service set up by the government.

 

Citizens Advice

Citizens Advice has produced guidance on the house buying process; from making an offer, to buying at auction, the website has helpful guidance and information covering the house buying process.

Visit the Citizens Advice ‘Buying a home’ web pages for more information.

 

How to choose a property

What factors you use to choose a property to buy will depend on what is important to you personally, but generally most people start with thinking about what they can afford and where they want to live.

Other factors that people will consider are:

• Urban or rural
• Number of bedrooms needed for household size (or simply through preference)
• Type of property, e.g. house, flat, bungalow etc.
• Parking/garage
• Garden
• Proximity to facilities, such as shops, doctors and schools
• Level of work needed to update a property, e.g. DIY or professional tradespeople

 

New build or existing property?

There will be a choice between buying a brand new property or one (of any age) that someone has already lived in. If you are buying a new property from a developer, there may be incentives to help you purchase it, and a defects and warranty period to help with any repairs needed.

The incentives offered will vary between developers but can include:

• Low or no deposit
• Part exchange (if you already have a property to sell)
• Mortgage contributions
• Key Worker deposit contributions (Key Workers are generally nurses (and other health staff), police officers, fire officers and teachers but can vary by developer and area)
• Help to sell existing property
• Armed Forces specific schemes

One of the other benefits of buying a new property is that you may be able to make choices about fixtures and fittings if it is still being built. This could include kitchen units and appliances, bathroom fittings, some elements of the layout, tiles, flooring and any adaptations needed for a disability.

New homes will also be more likely to have good digital connectivity as standard and be more energy efficient.

New build properties will not be right for everyone though and also may not be available in the area you want to live in. For some people, the character of an older property may be important, or maybe just the fact that many older properties were built with larger internal spaces than some newer homes.

 

Surveys

If you are considering buying anything other than a new build home, having a survey done during the buying process will be important. The age and the condition of the property will dictate whether a standard survey or full structural survey is needed. It may also be a condition attached to any mortgage offer, if you have applied for one.

You can find more advice on home surveys on sites like Which? and Money Helper.

 

Consumer Code for New Homes

The Consumer Code for New Homes, approved by the Chartered Trading Standards Institute, is a mandatory Code for Members which has been established to ensure that best practice is followed by registered Developers in respect of the marketing and selling of New Homes to consumers, and also sets expected standards for after-sales customer care service.

Visit consumercodefornewhomes.com for more information about the Consumer Code for New Homes

 

Property Redress Scheme

The Property Redress Scheme is a consumer redress scheme, authorised by the Government since 2014, to provide an impartial service that considers consumer complaints about a variety of property related issues.

All property agents who carry out estate, lettings and property management work, have a legal responsibility to belong to a redress scheme and, if at any point, the consumer feels the service one of our members has provided falls short of what is expected, they may be able to raise a complaint.

Visit theprs.co.uk for more information about the Scheme and to check whether you are able to make a complaint against your property Agent or Professional.

 

First Homes Scheme

If you are a first-time buyer, you may be able buy a home for 30% to 50% less than its market value. This offer is called the First Homes scheme.

The home can be:

• a new home built by a developer
• a home you buy from someone else who originally bought it as part of the scheme

You can look for new homes in your area that are advertised by developers as part of the First Homes scheme. Developers offer these homes to first-time buyers with 30% to 50% of the market value taken off the price.

Every home that’s sold is valued by an independent surveyor to make sure the discount is based on actual market value.

The homes cannot cost more than £420,000 in London, or £250,000 anywhere else in England, after the discount has been applied.

You can only sell the home to someone who is eligible to buy a First Home. You must give them the same percentage discount that you got, based on the home’s market value at the time of sale. More information can be found on gov.uk

 

Freehold & Leasehold

When considering a property purchase, it is important that you know whether the property is freehold or leasehold.

A freehold property means you own the property and land outright.

A leasehold property means you only own the property for a fixed number of years. You have the right to live in that property, but you will need to follow any rules laid down in the terms of the lease. Flats are often leasehold, but houses can be too.

The length of the lease will be specified in the contract, but you should ask the estate agent up front how long is left on the lease and should wait until you have this information before making an offer.

Estate agents must be upfront about lease length, any costs or fees, and how these might change over time. As the lease length gets smaller, the property value may be affected, especially once it falls under 80 years.

Many lenders are reluctant to lend on properties with less than 80 years left on the lease. More information is available from the Leasehold Advisory Service.

If you buy a leasehold property, you may have to pay regular ground rent and service charges to your freeholder.

• The ground rent is a sum you have to pay to your managing agent/landlord if it is a condition of the lease.
• The service charge is paid to the managing agent or landlord towards the costs they incur for the services they provide, like repairs, gardening or cleaning of common areas. It can also include building insurance.

Both ground rents and service charges vary from one property to another and details about both should be written in the lease.

If you are thinking of buying a leasehold property, make sure that you have carefully considered the terms of the lease. It is important you ask your legal representative to find out:

• what the cost of the ground rent is; when it is likely to increase; and what the scale of these increases will be as these costs may impact the future value and saleability of the property. They should also check that your mortgage lender is happy to provide your mortgage based on the proposed level of ground rent and the length of the remaining lease.
• whether the previous owners of the property have paid all outstanding service charges and if the landlord is planning any major building works you will have to contribute to. The seller’s legal representative should provide an LPE1 form and supporting documents which will help clarify these issues.
• whether the lease contains any restrictive terms and conditions; for example it may not allow you to keep pets in the property.

A leasehold property can often take a few weeks longer to purchase than a freehold property due to a number of additional steps in the process. More information on leasehold properties can be found in the government’s How to lease guide and from the Leasehold Advisory Service.

 

Shared ownership

Shared ownership was introduced by the government to help people who can’t afford to buy a home outright.

Shared ownership lets you buy a share of a property (initial shares are available from 25% to 75%) and you pay a rent on the remaining share that you do not own. If you wish, over time you can buy more shares. This is called ‘staircasing’, so that eventually you own your home in full if the scheme allows, or allows you to own more of the property.

The ability to fully own the property may be limited if it is in a rural area or a leasehold scheme for older persons. Please check the individual scheme for details.

The scheme allows you to buy a share of a property. The share you buy is usually funded by a mortgage which you will need to arrange with a bank or building society. The remaining share, namely the part you do not own, will be rented to you by the organisation who owns the property, such as a Housing Association.

If you already own a home without a mortgage, you could consider shared ownership as a way to afford a different type of property (such as a bungalow which can be more expensive than houses), that is likely to be newer (reducing maintenance costs) and to release equity for other purposes.

If you decide to buy a house or flat using the shared ownership scheme, you will usually get a lease for 99 or 125 years. This will give you the right to live in your home as an owner-occupier. It will also allow you to buy more shares of your property later on if you would like to and you can afford to do so. The lease also gives you the right to sell your property.

The lease will set out the responsibilities you have for repairing the property and paying your rent and any service charges.

Even though you have not completely bought the property, you will still have the normal rights and responsibilities of a full homeowner occupier.

There are three main things that you need to consider carefully with shared ownership:

• Whether you can own the property fully
• You will be responsible for all repairs to the property despite not fully owning it. If it is a new property, there will likely be a warranty period covering any defects
• Selling a shared ownership property can be more complicated than one you fully own. The organisation you bought it from may have included clauses in the lease that requires any sale to be managed through them, including what price to sell it at and selecting a buyer

Find out more about Affordable home ownership schemes and shared ownership at www.gov.uk

 

Right to Buy

Right to Buy allows most council tenants to buy their council home at a discount. Use the eligibility checker on the Own Your Home website to find out if you can apply.

You can apply to buy your council home if:

• it’s your only or main home
• it’s self-contained
• you’re a secure tenant
• you’ve had a public sector landlord (for example, a council, housing association or NHS trust) for 3 years - it does not have to be 3 years in a row

For more information, you can look at gov.uk but for specific information about your home, you should contact you Social Landlord directly.

You can find out more about the other government home buying schemes available to make buying a home for affordable at ownyourhome.gov.uk

 

Whichever type of ownership you are considering, you will need to be able to afford the cost of the property, either through cash purchase or a mortgage.

 

Mortgages

If you are relying on a mortgage to fund the purchase, you will need a sufficient income to be offered one (you can usually borrow around 3.5 times your income), to be able to afford the monthly repayments and pay a cash deposit (usually a minimum of 10% of the purchase price).

The larger the deposit you are able to pay, the less you will need to borrow as a mortgage.

Mortgages are loans with much longer repayment times with generally lower interest rates because they are secured against the property. In simple terms, this means you are buying the property over time from the bank or building society who provided the mortgage and if you are unable to keep up the monthly repayments, they will take ownership of the property (repossession) and re-sell it to someone else.

There is a wide variety of mortgage products available and you should get independent financial advice to help choose the right one for your circumstances.

There are options for fixed and variable interest rates, repayment (capital) or interest only, along with specific types that allow family to assist you, buying to let the property and buying shared ownership property.

You can get a mortgage from a number of different sources, including:

• building societies
• banks
• finance houses
• specialised mortgage companies

You can get more information about different types of mortgages and the costs involved in buying a home from the Money Advice Service

 

Fees

There will be other costs to ownership that you will need to consider:

• Estate agent fees
• Solicitor fees to process the purchase (conveyancing)
• Stamp duty
• Fees for searches (identifying ownership claims, boundaries, utility responsibilities, contamination, flood risk etc.)
• Fees for a building survey
• The cost of buildings insurance (it is a requirement to release mortgage funds)
• Appropriate insurance such as life insurance or income protection

In addition to these, if you are buying a leasehold property (including shared ownership) you may also have to pay:

• Ground rent (rent for the land the building is on)
• Service charges, typically to cover the cost of maintaining communal areas such as cleaning, gardening and lift maintenance
• Reserve (or sinking) funds, which is a pot of money collected towards funding any major works needed to the overall property
• A proportion of any improvements to the property (usually where there is no reserve fund or insufficient to cover the full cost), such as replacing a roof or windows
• Rent for the portion of the property you don’t own (shared ownership)

As the freeholder or shared owner, you are responsible for all internal and external repairs or improvements. As the leaseholder (other than shared ownership), you are generally responsible for internal repairs only but would need to check the exact terms of your lease for details.

You can get more information about different types of mortgages and the costs involved in buying a home from the Money Advice Service