How to Buy a House
Lots of people emerging from the Armed Forces may have never attempted to purchase a home of their own but now that they’re back on civvy street have ambitions to put down real roots. This is our ‘tear out and stick on the fridge’ guide to the purchasing process, based on a step-by-step approach to things you’ll need to organise to make it happen.
Mortgage
Arranging a ‘mortgage in principle’ (MIP) is the usual way lenders like to move forward if you don’t have a property in place. It’s a provisional agreement of what they’ll lend you and this along with proof of your deposit will put you in a stronger buying position; crucial if you want to snap up that rare bargain. Keep in mind that MIPs are not guarantees – and are subject to valuation. However, this may give you the flexibility you want to get a better deal if you spot one later.
Find a property
Not only will you need to look at what kind of home you want (number of bedrooms etc) but you’ll need to look at areas where you might want to live. This is the biggest of big-ticket items so make sure it’s planted in the correct location.
It also needs to fit into your budget – and this should include stuff like monthly
mortgage repayments, council tax and any redecoration or remodelling work you’re considering. There are other costs associated with the purchasing process such as:
- Mortgage arrangement fee: £1,000
- Valuation fee: £300
- Legal fees: £500 – £800
- Survey: £400 – £700 – budget for one for several properties.
- Removal fees: £100 – £1,000
Stamp duty
If you purchase a property for more than £125,000 you’ll need to pay stamp duty and land tax on the purchase price unless you are a first time buyer and the property costs less than £300,000. (Online calculators can give you a good estimate.) (All figures are approximate.)
Make an offer
Tell the current owner what you’re willing to pay and if there are any conditions to your offer. Once this is accepted you’ll need to hire a solicitor or a conveyancer to, take care of the legal transfer of ownership. You can ask your own solicitor to do the work but in some cases you mortgage lender may insist that you use one of their choosing. (Estate agents will usually be able to recommend one they have worked with before.)
Lead time between your offer and exchange of contracts can take between two to six weeks.
Deposit
Before contracts are exchanged you’ll need to pay your deposit (via your solicitor). This is usually around 10% of the sale price.
Exchange contracts
Once contracts have been exchanged you become legally committed to buying the property. It’s wise therefore, to make sure everything else is in order and it should not take place before you have received the surveyor’s report, and taken any necessary action and that the solicitor/conveyancer is satisfied with the searches. By this point a formal mortgage offer should have been received, and arrangements made for the 10% deposit. Finally, before you exchange contracts, you need to agree a completion date with the seller. (This is usually about four weeks after the exchange.)
Be aware that if you pull out at this stage, you could forfeit your 10% deposit. It’s also a good idea to arrange buildings insurance for the property, since you are now legally responsible for it. (This takes possession of it.) On completion day the money and the deeds of the property are transferred, between each side’s conveyancers.
Move in
Collect the keys from the estate agent and move in – or make a start on any refurbishments or building projects you have planned.
Finally
Your solicitor or conveyancer will send you an account, covering all their costs as well as the purchase price of the house and any stamp duty. (They will usually process the stamp duty payment for you.)
Options…
Shared Ownership
Shared ownership is designed to make that first step of getting onto the property ladder possible by enabling an initial purchase for part of the home. While repaying a manageable monthly mortgage amount for part of your property – usually between 25%-75% – you continue to pay rent on the rest. The aim is to purchase the remaining shares over time, eventually owning 100% of your home.
Forces Help To Buy
The FHTB scheme allows Service personnel to borrow an interest-free advance of up to 50% of their salary (to a limit of £25,000), which they can use towards a deposit on a property. This is then paid back over 10 years through their monthly salary.
