Work out how much you can borrow
Since 2014, mortgage lenders have been limited to lending no more than 4.5 times your annual salary on most mortgages – although some lenders are offering up to six times. When calculating how much you need to borrow, bear in mind interest rates are low, and could rise.
Check your credit rating
It pays to improve your credit rating if you can. Accounts registered to old/wrong addresses can hurt your credit score badly and make borrowing harder, so correct any errors/out-of-date information. Setting up direct debits to pay your bills and making sure you’re on the electoral register make a big difference to your score. It’s best not to apply for other loans or credit cards in the run up to applying for a mortgage.
Check your spending
The government-backed Money Advice Service suggests you calculate all of your other monthly outgoings on top of your mortgage payments. Your mortgage is secured against your house so, if you can’t meet the repayments, you might lose your home.
Therefore, have a brutally frank financial self-assessment. You’ll have to go through this in the mortgage interview, so make sure you know the answers now – how much exactly do you spend on groceries, utility bills, clothes, holidays, household goods, bars and restaurants, and childcare?
Don’t be afraid to contact your mortgage provider if you have any concerns about affording your mortgage.
Make sure you’re prepared for all costs
A mortgage booking fee is often charged for applying for the loan – £100-£200; a mortgage arrangement fee pays for setting up the loan – anything up £2,500 (note that often a high fee will secure a lower interest-rate deal and higher fees can be particularly beneficial for larger loans); a mortgage valuation fee covers the cost of your lender’s survey on the property – £300-£400 on average, although some lenders, like Barclays, waive this on all but the most expensive properties.
Should you choose to have your own survey, this will cost in the range of £400-£700, depending on the detail you need. Legal fees typically come to £850-£1,500. A local council search looks at all information held by the local authority about the property and costs up to £500. Moving costs from £300-£1,000 – although you could rent a van and do it yourself.
Then there’s stamp duty – 0% on your first £125,000, rising to 12% on any amount above £1.5m. Use the HM Revenue and Customs calculator to work out how much to put aside.
Do you qualify for government schemes?
It’s worth investing time and doing some research in case you are eligible for any government schemes such as the help-to-buy equity loan scheme or the first-time buyer ISAs. Help-to-buy loans are available on new builds, so check with the builder/developer to see if it’s available on the specific property you are looking at.
Find the right mortgage
A comparison site is a good starting point before you speak to either a mortgage lender or a financial adviser/broker. Searching online first gives you a good idea of what’s available but it’s worth talking to your bank as some lenders keep the best deals for direct customers. An independent mortgage broker can provide a more in-depth search.
Arrange an ‘agreement in principle’ (AiP)
AKA a mortgage in principle. This covers some of the ground before you find a property, although it doesn’t commit either side. Proof of deposit and AiP can be a big advantage when putting in an offer.
Worth knowing before you start looking …
Everybody says buying a house is one of the three great stresses in life, alongside relationships and work. It can be. If you’re buying with someone else, and you find yourselves screaming at each other and wondering if this proves your relationship/friendship is doomed – relax. Everyone feels that. It’s not doomed. This too shall pass …
Find the right area
It’s tempting to go with what you know – but look around. Maybe that part of town you’ve ignored is on the up, which could mean a bargain. Check out the community feel on a weekend and if there is a nice coffee shop nearby. If you’re planning a family, think about schools. If you’re planning to party, check transport links.
Find your perfect home
The fun part – mostly. Zoopla and Rightmove are great aggregators and their GPS-based apps are essential tools. Checking prices for similar properties in the area helps avoid overpaying.
Get to know the agents
Friendly visits to local estate agents often mean you hear about properties before they show up on the aggregator sites. Some homes are sold quietly to buyers the agents trust and the oh-my-gosh-it’s-amazing places usually sell to people the agents like, before they’re even posted online … shoe leather and a smile are as important as they’ve ever been.
Don’t panic
You can test drive some new cars for 24 hours, so don’t choose your home based on one 20-minute visit and a fear of losing out. Go back at different times of day and check the things you can’t change – the view, the natural light, the parking and the neighbours. And just like you test drive a new car, test drive your new commute or school run before you buy.
Visit Barclays Local Insights for interesting – and sometimes surprising – facts, figures and insights about your local community.
Get a room
If you’re moving to a new town, or an area you don’t know at all, stay over in a B&B or hotel to get a feel for things night and day.
Do a DIY survey
Outside, take a good look at the windows – if people look after the frames, they’ve probably taken care of the rest of the house. See if you can push your finger into any wooden frames. If so, they’re rotten.
If there’s condensation between double-glazed panes, they’re faulty. If there’s a flat or nearly flat roof, check how it’s been sealed. A membrane is far better than asphalt and gravel – which can leave seams and edges unsealed.
On your way round inside, do your own checks for damp, cracks and stains before contemplating an offer – lift mats and rugs for hidden nasties. Inspecting the loft is a good way to spot woodworm or rot.
Sellers’ tricks
Things to watch out for: baked bread, coffee, flowers … anything that smells good. Lots of mirrors give the impression of space and light. An expensive car on the driveway pushes the price up. Don’t let them set the time – are they trying to hide the noisy school? Sealed bids and mass viewings can stir up competitive panic among would-be buyers.
Check your mobile signal in every room
Buying in a dead zone is miserable.
Buyer beware …
Check the age of the boiler, wiring, plumbing and central heating. Boilers over 10 years old, for instance, may mean a hefty additional spend in the next couple of years – it seems to be a law of the universe that boilers break just after the manufacturer stops servicing that particular model. Add that into calculating your offer.
If the property is newly built, check whether it has a National House Building Council (NHBC) Buildmark warranty. This protects your money if the builder goes bankrupt after contracts have been exchanged but before completion. It also covers problems that may arise if the builder hasn’t kept to NHBC standards.
Get the law on your side
You need a solicitor, but be careful of firms recommended by estate agents – there’s usually a commission.
Check the Law Society’s “find a solicitor” page and remember conveyancing (legally transferring the home ownership) can be done from anywhere. You might find a better quality, cheaper firm in another part of the country. Make sure you feel comfortable with them – you may find you have to keep calling and chivvying them along, so find someone you like. And always ask if they have holiday booked …
Good to know
Are you buying freehold or leasehold? If it’s leasehold … how long is the lease? Less than 80 years is a red flag. Can you buy the freehold if you want? What are the service charges if any? What’s included in the sale – white goods? Curtains? Is there a chain? Why are they selling?
Take some snaps
If you’re looking at more than one house – and why wouldn’t you? – taking photos on your phone will help when all those houses blur into one at the end of a long day. Maybe check with the estate agent out of politeness.
Use your phone’s compass
Just because the estate agent says it’s a south-facing garden …
Meet the neighbours
It’s hard for Brits to do this, but if you knock on the neighbours’ doors you can find out if they’re a nightmare before you’ve put in an offer. And you can ask about the seller. You’d be amazed …
Before you put in an offer
Go round the property at least twice. On the second visit, take a friend, family member or your children, if you have any – they’ll be living there too after all! Also, take into consideration any pets you have – moving can be traumatic for animals, so it’s worth keeping them in mind.
Put in an offer
Sites like Property-bee.com offer browser add-ons that show how listings have changed, including price cuts – lack of demand might mean your seller will accept less. If your offer is accepted, ask the seller to take the property off the market. That reduces the risk of gazumping.
Remember the agent earns commission
An old estate agent trick is sucking in the teeth or tutting when a buyer makes an offer they think is too low. Panicky buyers often try to increase their offer just at that sound. Say the price and then say nothing. Let them break the silence.
Get the survey done
A cheaper homebuyer’s report should be enough for properties less than 50 years old. For anything older, consider a full structural survey. It could help you haggle down the price. Remember, everything is up for grabs before the contracts are exchanged.
Exchanging contracts
Contracts are signed, 10% deposits are paid … both buyer and seller are now committed to the sale. After exchanging contracts, ask the seller to take final meter readings.
Make sure you have buildings insurance in place from the date of exchange – as that’s when your responsibility begins. The same goes for contents insurance – you don’t want the stress of arranging this on the day of the move. Also, consider life insurance – so in the event of your death your loved ones can pay off your outstanding mortgage.
Completing contracts
Completion typically takes place a couple of weeks after exchange – but you can decide to make it sooner than this. If things get really tight, you can do them both on the same day.
Congratulations
The keys are yours. You can now paint it any colour you want.
