Homebuyer’s guide – Your questions answered

The homebuyer’s guide: How to find the best home, secure a mortgage and get ahead in the property game

homebuyer's guideBefore you begin looking, how much can you afford?

Everyone has an idea of their perfect home, but it is important to be sensible about what you can afford before you begin looking.  There is little point in viewing properties way out of your price range if you are unlikely to be offered, or even be able to afford, a mortgage on it.

If you are buying your first home, how much deposit do you have and how much will you need to borrow?

If you are looking to move, how much is your home worth, how much equity do you have and how much extra would you need to borrow?

Once you know the size of the mortgage you require to the value of the property you are buying, you can figure out your loan-to-value.  This is the percentage of your property’s value that the mortgage represents.  This enables you to have a look at available mortgage rates and see what your monthly payments are likely to be.

If you work on the basis that your repayments should not be more than 35-40 percent of your take home pay, this will help you to work out what you can realistically afford.  Use our mortgage affordability calculator to work out the monthly cost of your home loan.  This will help you ensure you won’t be borrowing too much.

How to find the right mortgage for you – do you need a new one?

It is worth bearing in mind that a mortgage is not the only cost you will have to account for.  There may also be stamp duty to pay on the purchase, as well as legal or valuation fees.

Unless you have a huge amount of savings stashed away or are due to inherit a house or money, you will almost certainly need a mortgage to buy a property.

New rules mean lenders have to run strict affordability and stress tests on applicants.  Almost all mortgages now have to be taken out with financial advice.  If you already own a home and are looking to move, you may be able to continue with the same loan, depending on the property value. Your existing lender may be able to lend you more money should you need it.  However, you may want to use this opportunity to have a look around for better rates.

You can get advice from a bank adviser who will only recommend their own products, with this is mind it is wise to do your own research and make comparisons across the whole of the market.

Alternatively, you can speak to a mortgage broker who can search the whole of the market for you.  Using a broker can be beneficial as they can assist you through the whole application process and will be more likely to know what type of applicants a lender will accept. This can speed up the process and make it less stressful for you.

Whether to fix or track your mortgage is the first big decision you need to make.  A fixed rate gives stability and the knowledge that your rate will remain the same for a set period of time; this can give you peace of mind that your monthly payments won’t suddenly rise and become unaffordable.  A tracker allows you to take advantage of any Bank of England rate cuts.  Tracker deals may appear attractive but they also run the risk of rates unexpectedly rising, which can make these types of mortgage expensive so you should take this into consideration when making your decision.

If you have savings you could also opt for an offset mortgage.  This allows borrowers to balance savings against their mortgage and only pay interest on the balance in return for not receiving interest on their savings.

House hunting – tips from locations to estate agents

There are many things you should take into consideration when choosing somewhere to live such as the size, the location and the price.

The most popular areas usually come at a higher price, therefore, looking further afield may be a good option.  Another possibility may be to downsize the type of property you are looking at to keep within your price range.

One very helpful tip is to look for cheaper areas right next to the more popular locations.  These tend to become much more sought after as people are forced to move away from the most popular locations due to price.

Being near family, schools or transport are just some of the factors that may affect your choice of area.  Location should be near the top of your considerations when looking for a property.  You should have flexibility to an extent, but if you aren’t happy with the location it could become a real problem.  You can improve the property but you can’t move it.

When it comes to choosing a home, treat buying a property carefully and try to see it as a transaction.  Aim to evaluate a home on its qualities and pick out the positive aspects as well as the negative, before you fall in love with it and start dreaming of filling it with family and furniture.

Think of a viewing as your chance to examine a property and not just see how good it is and how much potential there might be, you should also to identify any faults.

Ensure the property is big enough and that you would be happy living there for the medium term – say the next five years at least.  Think about how you would enjoy it and how practicable it would be. Will it need improvements?  How could you add value?  How does it compare to similar properties?

In terms of financial and practical points, check what council tax band the property is in before arranging a viewing.

How to make yourself an attractive buyer

While it is the seller and estate agent’s job to make the property fit for sale, it is worthwhile for the buyers to show themselves to be suitable bidders.  This comes in handy if there is a lot of competition for a property.

To start with, being free from a chain immediately makes you an attractive buyer.  For example, if you are a first-time buyer then there won’t be any of the complications that come with selling a property.  If you’re not, it is good to show that you are a serious buyer by already having your own property on the market.

An agreement in principle on a mortgage also makes you appealing as it indicates a lender has said you should not have any problems getting a mortgage.

Making an offer and what next?

If you are buying through an estate agent you should discuss making an offer with them to get an idea of what the seller may be looking for in terms of price.  The agent will handle negotiations on your behalf, but keep in mind they are acting for the seller and not you.

Don’t be afraid to make a lower offer.  The agent is required to pass on all offers.  Discuss why you think the property is worth less than its asking price and put forward your bid.  Be willing to discuss further but set yourself a maximum price.  When that is reached explain to the agent that you will not be offering any more.

The estate agent will have an idea of how much the seller is willing to accept, but  by doing your own research into the local area you can make a more informed offer.  Don’t go in too high as it’s not as easy to negotiate down.

With areas that are extremely popular with potential buyers you may get pushed into a sealed bid, where buyers make a single confidential bid.  Even if you really like the property, don’t let your emotions make you overpay.  Looking into the local area and other property sales can give you a good idea of what it is worth paying.

You could opt to have a survey to get a professional to inspect and identify any faults with the property.  The money you spend on a survey could save you thousands by providing evidence for negotiating a price reduction – or by making you reconsider buying the property at all.

Don’t just rely on a mortgage lender’s valuation report, this is only a basic valuation to confirm how much the property is worth and that they will get their money back if you default on the mortgage.  It is not a thorough home survey.

Once your offer is accepted remember to ask for the property to be taken off the market to avoid the risk of being gazumped.

Home selling tips – how to make the most of yours

When it comes to selling a home, the usual route is to go through an estate agent who will hopefully have access to a queue of keen buyers and can help arrange viewings and assist with the sale process.

Estate agents will take cut of your sale price.  Fees do vary, however, and according to the Homeowners Alliance, the majority of estate agents will charge a fee of anywhere between 0.75 percent and 3.5 percent of the sale price.

You could save money by managing the process yourself and using a reduced price DIY-selling service.  These services tend to charge an upfront fee but do not guarantee results, it usually works out less than an estate agent’s commission, however, you may have to pay more with the legal aspect of the sale.  Some DIY-selling sites may offer assistance with getting details made up, negotiating, booking viewings and obtaining feedback.  However, you will probably have to show potential buyers around on viewings yourself.

Both will usually get your property displayed on the two main property websites; Rightmove and Zoopla.

Whichever route you decide to take, the first time a potential buyer will see your house is almost certainly going to be a photograph online or in the newspaper, so it is important to ensure they represent the property in a good light.

You should make sure the house is presented well when people come to view, as untidy rooms, dirty carpets and unpleasant smells will leave a bad impression.

Make sure you are realistic about your price. It can be easy to get emotional if you have put a lot of work into the property about how much you would hope to get for it, but listening to expert advice from estate agents to see what properties have sold for in the surrounding area will provide a more objective view.

Making your move

When your offer is agreed, all the legal work and surveys will then be completed and once your solicitor is happy with the deal, a date for exchange of contracts can be arranged.  At this time the buyer must put down the agreed deposit, typically about 10 percent of the purchase price.  Exchange of contracts is when the sale of a property becomes legally binding to both buyer and seller.  After exchanging contracts there can be no changes to the price, or conditions of the sale, without both parties agreeing.  If a buyer pulls out they will lose the deposit they have put down and if the seller pulls out, the buyer can sue them.

Once contracts have been exchanged a completion date is agreed.  The completion of a purchase is when everything goes through – money is exchanged between buyers and sellers – and you get the keys and so can now move into your new home.

If you don’t have access to a van then the best option is to hire one.  This would typically cost between £100 and £200 for a weekend – plus extra for fuel.  You may find the vehicle is too small to get everything in and you may have to make more than one trip.  Another option is to hire a removal firm and men but this can be very costly.  If you do decide to use a removal firm, make sure your possessions are insured – it is worth checking your home insurance policy and any cover provided by the firm.

Remember to leave your old property in good condition, out of courtesy if you are selling and necessity if renting, as this is likely to be a part of the tenancy agreement.

Be sure to give plenty of notice to your broadband, phone and TV and energy providers that you are leaving.  You may find it easier to transfer your service to the new property, but it may worthwhile shopping around as you may find a better deal for becoming a new customer or in a different area. Also make sure you get any mail redirected and make people aware of your new address.