Money: A User’s Guide. Laura Whateley
bank will carry out affordability and credit-score checks and then, with a mortgage-valuation survey, on the property you want to buy. This survey is not the same as a building survey, which checks whether the house is in good condition. You need to set this up yourself.
Meanwhile your solicitor will be carrying out checks too, on things like whether your property is on a floodplain. You have to pay for these. Press your solicitor for these to be completed quickly.
When you have received your mortgage offer and your solicitor is ready you can exchange contracts, a process carried out between your own and the seller’s solicitor. At this stage you normally need to pay 10 per cent – sometimes, if you negotiate, 5 per cent – of the price of the property you are buying to your solicitor, who passes it on to the seller’s solicitor. Make sure you have this money ready to be transferred out of your bank account; some banks will require a few days’ notice.
Be super-careful about the accuracy of your solicitor’s bank details. There is a common fraud where solicitors’ email accounts are hacked by a fraudster who sends out an email to a buyer stating that the solicitor’s bank details have changed, or adding in false sort codes and account numbers. If in any doubt, call your solicitor to check again where you send the money. Once you’ve clicked send it’s gone, and you cannot get it back if you send it to the wrong place. I’ve seen this happen several times, and it is heartbreaking.
You also need, at this stage, to arrange buildings insurance, legally required as part of receiving a mortgage.
You agree a day of completion, on which you arrange to send over the rest of your home deposit, plus any fees owed to your solicitor, as well as stamp duty. Your solicitor will receive cash from your mortgage company and arrange to send this to the seller’s solicitor on completion day, at which point you receive the keys for your new home. Woohoo!
The many other costs of buying a house
When working out whether you can afford to buy you need to budget for all the many other unexpected costs that crop up along the way: stamp duty, legal costs, local authority searches, survey costs, mortgage arrangement fees, mortgage broker fees, buildings insurance, removal vans, and, only if you are selling too, estate-agency fees.
Need-to-knows: Stamp duty
This is the biggest cost of moving, a tax you pay on any property you buy in the UK. The tax is based on the price of the property you are buying, and is staggered in thresholds. For example, you pay 2 per cent of a property’s value on properties priced between £125,001 and £250,000; 5 per cent on properties worth between £250,001 and £925,000; 10 per cent on properties worth £925,001 to £1.5 million.
First-time buyers are exempt from paying stamp duty on any home worth below £300,000. If the property you want to buy is worth more than £300,000 but less than £500,000 you pay 5 per cent of any proportion between the two.
If you are buying with another person you both have to be first-time buyers, otherwise it does not count. There is an exception if only one person’s name is on the deeds, and that person is a first-time buyer, but only if you are not married. You are not a first-time buyer if you have already owned a property in another country, or if you have inherited a property. You also only get the exemption if you are buying a home to live in. It does not apply to buy to let, even if you have never bought a property before.
Conveyancing
You need a property solicitor or conveyancer to help you buy a house. Expect to pay fees in the region of £1,000 to £1,500. Having a solicitor who cracks on with the work and will answer your calls promptly will save you a lot of aggro, so a personal recommendation is probably the best way to find one. Failing that, The Law Society website’s ‘find a solicitor’ section lists conveyancers. You do not need to use a local solicitor. You could find a more affordable, reliable one from back home, even if you are buying in London, for example.
You will also need to pay your solicitor certain fees for Land Registry, which charges for changing the ownership of a home into your name, and local authority searches. Budget an additional £300 or so.
Finding a solicitor before you put in a house offer makes you look organized and committed and can help save precious time when an offer has been accepted and you want to exchange as soon as possible.
Surveys
When you get a mortgage your bank will want to check that the property you want to buy actually exists, as well as that it is worth the price you are going to pay for it: the bank does not want to lose money if it has to repossess. It will therefore carry out a mortgage-valuation survey, which you will probably have to pay for: a few hundred pounds. Do not make the frequently made mistake of relying on this as some kind of comprehensive survey of whether or not the house you are buying may fall down.
You need another building survey, by a qualified surveyor, or the less extensive homebuyer’s survey to check for damp or rot or Japanese knotweed or a ceiling that is about to collapse. You are not obliged to have one, but you may regret it if you do not and there are extensive problems in your new home.
Some are considered not worth the paper they are written on, however, so put some research into what kind of survey to go for, and whether it is worth it for the type of property you are buying. Expect to pay from £300 to well over £1,000, according to the HomeOwners Alliance. The Royal Institution of Chartered Surveyors site (RICS.org) is a good starting point.
Mortgage brokers
First-time buyers will particularly benefit from using an independent mortgage broker or mortgage adviser who can help you wade through the different mortgage products that are out there. Brokers can also hurry along a lender and keep things progressing smoothly, filling out all application forms for you. Some brokers charge fees of from £300 to several thousand, others get commission from banks they match up to borrowers, either instead of or as well as a fee.
Broker London & Country does not charge a fee and promises that, though it gets commission, you do not get any worse a mortgage deal than you would if you went to the bank directly.
Do not be bullied into using an estate agent’s preferred adviser. You are under absolutely no obligation to meet their ‘in-house broker’, and it is illegal for estate agents to suggest that the price of the house you want to buy will go up unless you do. A word-of-mouth recommendation is often best, or you can search the website unbiased.co.uk for regulated advisers.
Brokers will try to recommend add-on products while arranging your mortgage – life insurance for example. You will find a better deal by searching elsewhere, so don’t feel pressured by any hard sell (see chapter 9 for more on this).
Choosing a mortgage
What’s actually in a mortgage?
A mortgage is likely to be your biggest financial outlay for the next twenty to thirty years. Choose wisely and you save thousands of pounds. There are a lot of mortgages to choose from, however, so it’s not easy. A broker will help you navigate the market, but first understand what you are signing up for yourself.
How much a mortgage will cost you up front, when you first get accepted for one, and from month to month for the next few years, depends on what that mortgage ‘product’ is made up of and the length of its term. Most are a mix of capital repayment, interest, and arrangement fees. These fees