9 Things You Oughta Know When Buying A Property

9 Things You Oughta Know When Buying A Property

Regular visitors to the blog will know I’m currently saving up for the deposit on my first ever house. As I was a bit… no… VERY naive to the whole process when I started saving, I decided to do my research and unsurprisingly there is way more to it than I ever imagined. If you one day dream of owning your own property there are some vital things that oughta know before seeking out that dream home.

You save the deposit, choose your property and make an offer, right?

It’s a little bit more complex than that and there are a few things that you can do to make the process much easier. From saving your deposit to handing in the application, here’s what you need to know.

Regular visitors to the blog will know I’m currently saving up for the deposit on my first ever house. As I was a bit... no... VERY naive to the whole process when I started saving, I decided to do my research and unsurprisingly there is way more to it than I ever imagined. If you one day dream of owning your own property there are some vital things that oughta know before seeking out that dream home.

How much deposit will I need to to buy a property?

Before you have even considered looking at desirable properties and locations you need to get a deposit together. If, like me, you’re not lucky enough to have someone who can pay it for you, you’re going to need to save up. In most circumstances you are going to need between 5% and 20% of the cost of the property you want to buy – so if you’re buying a property for £100,000, you will need a minimum of £5,000. Saving more than 5% deposit will ensure you have a much wider range of lenders and cheaper mortgages available to you so it is wise to aim at 10% as an absolute minimum.

Property

Check you can afford the monthly repayments  

Sounds a such a simple thing to check, but it’s vital that you can keep up with the repayments. There is no point in saving every penny away for a deposit if you end up falling into financial difficulty and are unable to keep up with your repayments further down the line. It is good sense to make a budget before you even start looking for a property, this way you know what you can truly afford.

There are strict checks in place now when purchasing property. Lenders will check that you can not only afford the mortgage, but also if you can pass the ‘stress-test’, which determines your ability to be able to cope if interest rates were to rise, you have any children or are made redundant.

Lenders will ask you to provide proof of your income and outgoings as part of the mortgage application process.

Identify all the other costs of buying a property

There are several other costs you need to factor into your budget when buying a home. These include:

  • Mortgage arrangement valuation fees
  • Stamp Duty (Land Building Transaction in Scotland)
  • Survey cost
  • Solicitors fees
  • Removal service costs
  • Building insurance

Check out the home buyers schemes available to get you on the property ladder

There are a few government backed schemes available to you to which are aimed at helping first-time buyers onto the property ladder, and also to help current owners move.

If you qualify to use one of these schemes, lenders would still perform the necessary checks to ensure you can afford to pay the mortgage. Click the links for more indepth information about the following schemes:

Find the most suitable mortgage for you

This is where speaking to an expert is crucial. There are so many different mortgages to choose from that it can be really confusing as to which one will suit your best. It can depend on many different factors so do your own research and talk to a licensed mortgage advisor.

Property

Know the difference between freehold and leasehold

This is something I have heard two million times on my favourite show Homes Under The Hammer but never had a clue until I read up on it a few months back.

If you’re looking to purchase a house, it is likely that you will be buying the freehold which basically means you own the land that the house sits on. If it is a flat or apartment you are looking to buy, you will be buying a leasehold, or buying a share of the freehold.

A leasehold means you only own your flat or apartment and not the land or communal areas, which is why you are usually charged a service charge by the person/company that holds the freehold, to pay for any ongoing maintenance.

The application

When you have decided on the mortgage option you’d like to apply for, your lender will want reassurance that you will be able to keep up with your mortgage repayments if interest rates rise or there is a change in your financial circumstances.

You will be asked to prove your income and any outgoings you have including, household bills, outstanding debts and other associated living costs such as travel, childcare and clothes etc.

You may be required to produce payslips and bank statements to prove your income to your lender. If you’re self-employed you may be asked to provide your tax returns and your business accounts prepared by your accountant.  

Someone can act as a guarantor

If you have found it difficult to get a mortgage to buy your first home you could consider a guarantor mortgage. Your parent, guardian or close relative can agree to act as your guarantor which means they would take responsibility for the mortgage repayments should you be unable to meet them.

You should never enter into a guarantor mortgage without careful consideration as it is a legally binding arrangement and the person agreeing to act as your guarantor has to be able to afford to pay your mortgage payments for you if you get into difficulty.

In conclusion

As always, with such a big decision you should always consult with a professional. A licensed mortgage advisor who will be able to take you through all your options available to you, as well as what you can expect to pay roughly in costs. It’s better to be as prepared as possible.
Did you have any problems when buying your first house?

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David Jack Taylor is the founder and editor of the Thinking Thrifty blog. After a striking realisation about the direction his life was heading he set himself a 15 year plan to achieve total financial freedom. Join the journey!

He is also a contributor to Clear Debt, ICOUNT Money and M1 Debt Advice blogs discussing all things personal finance.
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10 thoughts on “9 Things You Oughta Know When Buying A Property

  1. Great post David, interesting to see how some of the stuggles my wife Sarah and I had with our first (and current) property translate across the pond! One monster we have is the dreaded Land Transfer Tax. On a $400,000 (£210,000) property you’d be looking at $8,200 (£4,300) in taxes. Very smart of you to do your research, too many people here in North America jump into home ownership without being prepared because they are “entitled to it”.

    1. It’s an absolute minefield Scott! I was very naive to what was expected, so glad my friend told me to do the research. I now know I’m going to need much more than the deposit to purchase, but I’m using that to drive me to cut down even more and save that extra I’ll need. Thanks for taking the time to have a read and comment my friend.

  2. So interesting to see how things differ (and how much is the same) here in the US! We own a townhouse, so I guess that technically translates to a flat? We pay for a maintenance fee for communal areas in our neighborhood, but are responsible for the exterior of our home. There’s all sorts of in-betweens here too – for example, my mom owns a townhouse, but isn’t responsible for maintaining the exterior of her home, as it’s part of her association fees.

    One things that’s the same – it’s definitely not easy, and it’s definitely a ton of paperwork. Congrats on saving for your home – fingers crossed you find the perfect one!

    1. Hey Pia! No, a town house is the same over here too, a flat is an apartment! 🙂 Yeah you’re right it’s a minefield. Thankfully I’ve got about a year to prepare myself! Thanks for stopping by.

  3. Hi,
    Fantastic tips for first-time property buyers. More importantly examining about your home whether it is freehold or leasehold ensure your ownership over the house if they meet certain qualifying criteria. The downside to that is this can be hugely expensive. Fees are a major source of contention between freeholder and leaseholder. A qualified Conveyancing Instructor can help you understand your rights and responsibilities.

    Thanks for sharing.
    Alice recently posted…What is a Life Insurance Review?My Profile

  4. Hi David – Good luck with buying your own place! Just a point about leasehold vs freehold when buying a flat. Even if you own a share of the freehold, you’ll almost certainly still have to budget for service charges for shared costs like repairs and redecorations for communal areas and exterior, and insurance for the whole building. The difference is that with a leasehold, you just get stuck paying the bills, but if you own a share of the freehold you can influence the costs, by working with the other freeholders to choose a managing agent or getting quotes for the work if you don’t have a managing agent. Share of freehold can give you more control of the service charge costs, but you’ll still have to pay some.

    1. Great tips thanks Faith! Still saving hard, but it’ll be a while yet before I’ve hit my new target. Wouldn’t even contemplate it now without £25k minimum! The thought of a huge mortgage at my age is too scary a prospect.

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