There are a number of ways in which you can find a property to buy, including estate agents, property listings in local newspapers, and development companies. Before deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional costs. These include survey fees, valuation fees, Stamp Duty Land Tax, land registry fee, local authority search, mortgage fees, and VAT. You should also take into account the running expenses of the property you wish to buy, including heating bills and insurance costs. You will also have to pay a deposit on exchange of contracts, up to 10% of the purchase price, a few weeks before the purchase is completed and the money is received from the mortgage lender.
Making an offer
When you decide you would like to buy a particular property you do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money. If the property is being sold through an estate agent, you should tell the estate agent what you are prepared to pay for the property. The estate agent will then put this offer to the owners. If the owners do not accept the first offer put to them by you, you can decide to make an increased offer. There is no limit on the number of times you can make offers on a property. If you make a written offer it will always be made subject to contract. This means that you will not be committed to the purchase before finding out more about the state of the property. If you make an oral offer this is never legally binding.
When the offer has been accepted
When your offer for the property has been accepted you will have to consider the following:
-whether a holding deposit is payable
-arranging a mortgage – see below
-whether a survey is necessary – see below
-who will do the necessary legal work – see below
Once the owners have accepted your offer the buyer may be asked to pay a small deposit to the estate agent. This is not usually more than £500. It is meant to show that you are serious about going ahead with the purchase. It is repayable if the sale does not go ahead.
Arranging a mortgage
If you have not already begun to arrange a mortgage, you should start to do this now. It should take about three weeks from the application for the mortgage to the formal offer being made by the lender. However, this time-scale may vary.
Whoever agrees to lend the money will want to have the property valued. This is to make sure that the lender could get the loan back if for any reason you stopped paying your mortgage and the house had to be sold again. The valuation will be done by a surveyor on behalf of the lender but you will have to pay for this valuation. The fee will be payable in advance, usually when the you send a completed mortgage application form to the lender.
If the amount of money to be borrowed is more than a certain percentage of the valuation of the property (usually 75-80%), your lender makes it a condition of the loan that you take out extra insurance to cover the extra amount. You pay a single premium to your lender which is usually added to the loan. This is known as a higher lending charge (or mortgage indemnity guarantee).
Arranging a survey
The valuation which is done for whoever is lending the money is not a survey. You should consider whether or not to have an independent survey carried out in addition to the valuation. The survey would not only consider the value of the property but would also examine the structure of the property and should identify any existing or potential problems.
There are two levels of survey that you can choose between:
-a full structural survey. This is suitable for a property which is large, more than 80/90 years old or in doubtful condition
-an intermediate or ‘house/flat buyers report’ that gives a report on the condition of the parts of the house that are easy to see and to get at and may recommend further tests or investigations, for example, a specialist check for woodworm. This is particularly suitable for properties built this century which appear reasonably sound. It is much cheaper than a full structural survey.
It is possible for you to use the same surveyor who does the valuation to carry out the survey and this may be cheaper. However, you can use a different surveyor if you wish. If the surveyor reports that there are some problems with the property, you will have to consider whether you still want to go ahead with the purchase or want to negotiate further with the seller about the price. The surveyor will usually advise you as to how any problems they have identified should be dealt with and the likely costs of this.
Choosing who is to do the legal work (conveyancing)
The legal process of transferring the ownership of the property from the present owner to the buyer is known as conveyancing. You should decide who you want to do the conveyancing work. You can do it yourself – although this can be complicated – or you can use a solicitor. Most firms of solicitors offer a conveyancing service. Although all solicitors can legally do conveyancing, it is advisable to choose a solicitor who has experience of this work.
If you wish to buy a home you may be able to borrow money to do this. This is called a mortgage. The loan is for a fixed period and you have to pay interest on the loan. There are several types of mortgage available. The most common are:-
-repayment mortgage. This is a mortgage in which the capital borrowed is repaid gradually over the period of the loan. The capital is paid in monthly installments together with an amount of interest. The amount of capital which is repaid gradually increases over the years while the amount of interest goes down
-endowment mortgage. This mortgage consists of two parts: the loan from the lender and an endowment policy taken out with an insurance company. You pay interest on the loan in monthly installments to the lender but do not actually pay off any of the loan. The endowment policy is paid monthly to the insurance company. At the end of the period of the mortgage, the policy matures and produces a lump sum which should pay off the loan to the lender and may, in some circumstances, produce an additional lump sum. There is a risk that the endowment policy will not be worth enough to pay off the loan at the end of the mortgage period. If you have been told by your endowment provider that your policy will not be enough to pay off your loan, you should seek independent financial advice. You can get information about dealing with endowment policies from the Financial Services Authority (FSA) at www.moneymadeclear.fsa.gov.uk
-pension mortgage. This mortgage is primarily for self-employed people. The monthly payments consist of interest payments on the loan and contributions to a pension scheme. When the borrower retires, there is a lump sum to pay off the loan and a pension
-ISA mortgage. With an ISA mortgage, you pay interest to the lender, and contributions to an Individual Savings Account (ISA) which should pay off the loan
-Islamic mortgage. This is a mortgage in which none of the monthly payments includes interest. Instead, the lender makes a charge for lending you the capital to buy your property which can be recovered in one of a number of different ways, for example, by charging you rent
Where to get a mortgage
A mortgage could be available from a number of different sources. Some of the available options are:-
-insurance companies (endowment mortgages only – see above)
-large building companies might arrange mortgages on their own new-build homes
-specialized mortgage companies.
If you intend to get a mortgage you should make sure you investigate the different options available. If in doubt, you may wish to consult an independent financial adviser. For help with finding a financial adviser, consult a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, visit www.citizensadvice.co.uk.
Using a broker to get a mortgage
Instead of going directly to a lender such as a building society for a mortgage, a broker could be used. A broker may be an estate agent, or a mortgage or insurance broker. They will act as an agent to introduce people to a source of mortgage loan to help them buy a home. A broker may be used when it could be difficult obtaining a mortgage directly from a lender, for example:
-the mortgage required is particularly large
-the property is unusual in some way
-more than two people wish to jointly purchase the home
-the applicant is self-employed and their income fluctuates. There are rules about how much a broker can charge for their services.
There are a number of websites with listings of rentals (called lettings), as well as letting agents who can assist you in finding property for rent. For example:
www.ukpropertyshop.co.uk (listing of lettings agents)
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