Buying a Home: a Step-by-Step Guide
Buying a home is likely to be one of the biggest financial commitments you ever make, never mind one of the most stressful. Mistakes can end up costing more than you imagine and being unprepared can see you experiencing unnecessary stress.
This is why we have collated all the most important pieces of advice our conveyancing experts have to offer. Here are the most frequent topics we get asked about on a daily basis, put together as a guide to help you through buying a home.
How Much Deposit Do I Need To Buy A House?
Generally speaking, you need to have saved at least 5% to 20% of the cost of the home you want to buy. For example, if you want to buy a home for £150,000, you’ll need to have saved at least £7,500 (5%). Saving more than a 5% deposit will give you access to a wider range of cheaper mortgages.
If you can’t afford the mortgage on 100% of a home, the Government’s Help to Buy scheme/ Shared Ownership scheme, offers you the chance to buy a share of your home (between 25% and 75%) and pay rent on the remaining share. You can buy bigger shares when you can afford to.
Most mortgage terms go up to 35 years stretching to 40 years.
Your age will be a factor as lenders will want to see you have cleared the mortgage, by the time you reach 70 or 75 in some cases:
‘If you want to extend your loan beyond the maximum age limit, you’ll need to prove you’ll have sufficient income once you’ve stopped working – from a private pension for example – which will support both your mortgage repayments and living costs.’ Zoopla
Other Costs To Consider When Buying A Home
Apart from your deposit and mortgage payments, there are other costs to pay when buying a home.
- Survey costs
- Solicitor’s fee
- Removal costs
- Buildings insurance
- Furnishing and decorating costs
- Mortgage arrangement and valuation fee
- Stamp Duty (Land and buildings Transaction Tax in Scotland, or Land Transaction Tax in Wales).
Use our stamp duty tax calculator to calculate the stamp duty you will pay on your new home
Calculate your Stamp Duty Land Tax (SDLT)
How Much Can I Borrow?
Your mortgageability all comes down to affordability. Lenders look at your income along with (ALL) your outgoings and work out how much you have left each month. Some lenders are so strict, that if you’ve paid off your debts immediately prior to applying, they factor in your available credit as a debt. They may also see you as a risk if you’re using more than half the credit available to you. Once these calculations have been made lenders still want you to be in credit in case mortgage rates rise. They will ‘stress test’ you on a higher mortgage rate, typically 6-7%, to check if you could still afford repayments.
What Does LTV Mean?
LTV stands for ‘loan-to-value’ ratio which is the percentage of the property value as a mortgage. In other words, it’s the percentage of the property value that you’re borrowing.
To calculate this, subtract your deposit as a percent of the property value from 100%. If you pay a £20,000 deposit on a £100,000 home; that’s a 20% deposit, meaning you owe 80% meaning the LTV is 80%.
Once you have a mortgage, you no longer have a deposit, so it becomes all about what proportion of the property’s value you’re borrowing. LTV is not just dependent on the deposit paid into your property, but also by house prices. This is crucial — by buying a property, you’re investing in an asset with a variable value.
What Is A Lifetime ISA?
Help To Buy ISAs
These were aimed at People aged 16+ . Those who managed to get on on time can earn interest on their savings of up to 2.53% tax-free and then get 25% added on top when they use it for a mortgage deposit.
- You can save up to £1,200 in your first month, then up to £200 thereafter
- When used for a deposit, a 25% bonus is added
- The minimum you need to have saved to get a bonus is £1,600
- The biggest bonus possible is £3,000 (£12,000 savings)
- If you’re buying with someone who’s owned before, you can still get one but they cannot. If two first time buyers buy together, they can both get one.
- Your property must cost £250,000 or less and £450,000 or less within the London boroughs
- You don’t have to use it for a deposit. You can make withdrawals. You would still get the interest just not the bonus.
- Help to Buy ISAs can be used with ANY residential mortgage, even Help to Buy, but not buy-to-let
- You are free to get a mortgage from anyone
The Lifetime ISA (LISA) is to help you buy your first home or save for retirement. You must be aged 18 or over but under 40 to open one. Here are the basics.
- The LISA lets you deposit up to £4,000 every year
- It can be used as cash savings and accrue interest, or stocks and shares investment, so you get share growth/loss
- You can save up to £4,000 a year in a LISA. The Government will then add a 25% bonus
- The maximum bonus is £33,000 if you open it at 18 and save the maximum allowed every year, withdrawing it when you reach 50
- You can use your LISA to help you buy your first home if it costs £450,000 or less
- If you’re buying with someone who is also a first-time buyer you can both use your LISA savings and bonus
Making Your Purchase A Smooth One
Preparation Is Key
The early stages of buying a new home involve extensive research and financial calculations. The legal processes involved in your purchase can be left to us meaning one less weight on your shoulders.
Topics to look into ahead of time might include:
- Instruct a Conveyancing Expert, like us.
- Arrange your mortgage.
- Research the area if moving somewhere new.
- Research local schools
- If you are currently renting, inform your landlord of your move.
- Organise the necessary insurance for your belongings.
- Check if your current insurance policy covers your move. (Your removal company may provide cover.
- Make lists. Gather important numbers, dates and details of your estate agents etc
Our expert conveyancing team are ready and waiting to help you with your conveyancing needs so you can make informed decisions, quickly.
With around 1 month to go, a Chartered Surveyor should have inspected your new home by now and informed you of its structural condition.
Also, you may need to think about:
- Speaking to your conveyancer about exchanging contracts.
- Finalising your moving date
- Arrange removals company.
- Organising storage facilities.
- Deep cleaning your new house.
- Packing non-essential items.
- Clearing out storage spaces: the loft, shed… sell/throw away/give to charity everything you do not want or need.
- Appointing a removal company and assessing the technicalities at both addresses i.e: whether there is parking for a lorry.
- Notifying relevant utilities companies and switching home insurance to your new home.
Your dedicated expert conveyancing solicitor will complete all the legal work needed to complete your sale promptly. We offer low cost, high quality conveyancing.
Organisations And Companies To Contact
Update your address with the DVLA. There are fines for not doing so. Both your licence and vehicle registration need changing. Remember that you may need your licence for identification and van hire.
Depending on your circumstances, you may also need to contact HMRC or the Department for Work and Pensions.
Ask your local authority for a final council tax statement
Don’t forget to update your details on the electoral roll.
- The Council to ask for a final council tax statement
- Department for Work and Pensions
- HM Revenue and Customs (HMRC)
- Driver and Vehicle Licensing Authority (DVLA)
- Electoral roll
- TV Licensing
- Your Local Authority
Banks, lenders and credit card companies all need to know your new details.
- Banking and savings account providers
- Credit card companies
- Investment funds
- Store loyalty card providers
- Pension services.
Notify your contents insurance provider of when and where you will be moving. Check with them what is and is not insured during the move. You may need to get additional insurance from them or the removals company.
Contact any companies you have insurance with, including:
- Car insurance (and breakdown services provider)
- Home insurance
- Mobile phone insurance
- Pet insurance
- Life insurance
- Health insurance (including dental insurance)
Tell your utilities providers the exact date you are moving. Take meter readings and photographs of them. Do this in both your old and new home.
This might be:
- Home phone
- Cable TV
- Mobile phone
Let any medical organisations you use know you’re moving. You might need to register with a new GP. There may be a delay in getting treatment if you don’t.
- Local NHS GP surgery – register ASAP.
- Dentist/optician/physio/chiropractor/counsellor etc…
Update your subscriptions. Share your address with any organisations that might contact you via mail.
- Newspaper, magazine and newsletter subs
- Clubs ie: sports teams / gym
- Charities you support
- Pet microchip databases
Redirecting Your Mail And Calls
It is a lot of work updating people with your new contact details. You can make this process easier by using the Post Office change-of-address service. It can take up to 10 days to come into effect. You can keep this service for three, six or 12 months after moving.
If you are changing your phone number, you may be able to arrange for your telephone company to automatically inform callers of your new number.
Our solicitors and expert conveyancing professionals have been trained to the highest, most recent standards and deal with multiple property cases on a daily basis. We are held to the highest standards in the country for our practice, which is reflected in the quality of our service to you. Trading as a (mostly) online Conveyancing practice since 2009, Conveyancing Expert UK are fully accredited members of the Law Society Conveyancing Quality Scheme (CQS). The Council for Licensed Conveyancers offers all the help and support we need to ensure that our clients receive the best service whilst allowing us to offer low cost conveyancing with high quality assistance when buying or selling your home.