Depending on how long you are going to be in Scotland, you can either buy or rent a home. Whichever you decide to do, you can look forward to a huge range of housing possibilities, both in town – where you can choose between everything from waterfront apartments and large Victorian villas to more modern houses – and in the country, within easy commuting distance of the city.
The average price of a house in Scotland is currently £122,511 (Glasgow Area £119,000). This is 32% less than the UK average of £179,425. The annual rate of house price inflation in Scotland is now 14.5%, above the UK average of 8.0%. Prices in Scotland rose by 0.7% in Q3 2006. Over the past five years house prices in Scotland have risen by 91%.
If you do decide to buy, most people borrow money from a mortgage lender, usually paying it back over 25 years. Any one of countless independent mortgage advisers will be able to help you find the best mortgage deal for your needs. If you’re moving from overseas and don’t have a credit history in the UK, you may find it easier to arrange a loan through your existing mortgage lender, in which case your repayments might be affected by currency fluctuations, as well as any variations in the interest rate. Property is generally regarded as a good investment, so you shouldn’t have any trouble getting your money back when you do decide to sell. Prices vary considerably, but as a general rule, property is more expensive in the cities and less so in smaller towns and the country. As well as being advertised in special publications and newspapers such as The Herald and The Scotsman, there are plenty of property websites.
The legal process
Buying a house in Scotland is pretty straightforward, but you’ll need to use a lawyer (solicitor). Once you’ve seen somewhere you like, they’ll advise the seller’s lawyer of your interest – so you won’t miss out on the chance to offer. This is called a ‘note of interest.’ Houses are bought or sold either on an “offers over” basis – where you bid above the asking price, along with other interested parties – or at a fixed price, where the first person to offer the asking price gets it. New homes tend to be sold on a fixed price basis and come with a 10-year warranty against defects. Before making a choice of solicitor, you should ask for estimates of their charges for buying a house. It is important to contact more than one solicitor as there is no set scale of fees for purchasing a house and different solicitors will make different charges. You should:
- check whether the figure quoted is a fixed fee or depends on how much work is involved
- check that the figure includes stamp duty, search fees, land registration fees, expenses and VAT and get a breakdown of these costs
- find out what charges, if any, will be made if a sale falls through.
The main tasks of the solicitor will be to:
- . discuss the buyer’s needs and explain the procedure for buying a house
- . explain the different types of survey and arrange a survey for the house
- . arrange a mortgage and advise on the different methods of loan repayment available.
- . inform the seller’s solicitor that the client is interested in making an offer for the house
- . draw up and submit a formal offer for the house in consultation with the buyer
- . prepare mortgage documents
- . check the legal ownership of the property and prepare a deed confirming the buyer’s ownership. A deed is a document which proves who owns the property
- . check the property certificate from the local councils provided by the seller to find out if they are planning any repairs or developments affecting the house
- . check that alterations to the house have had planning permission from the local authority
- . check the search of the official records carried out by the seller’s solicitor to see if there are any problems with the seller’s right to sell the property
- . receive the money to pay for the purchase and pay it to the seller’s solicitor
- . check that the house is insured
- . negotiate with the seller’s solicitor in the event of any dispute.
It is now also possible to use an independent qualified conveyancer for this work. A list of independent qualified conveyancers can be obtained from:
The Law Society of Scotland
26 Drumsheugh Gardens
Edinburgh EH3 7YR
44 131 476 8179
Besides the price of the house itself, be aware of what other costs are involved in buying a house. The good news is that you won’t have to pay anything to the estate agent (realtor), as their fees are paid for by the seller. Your own legal fees though will probably run to several hundred pounds, on top of which you may have to pay survey costs. A valuation report (Scheme 1) is for lending purposes only and provides an indication of the value of the property in order to allow you to make an offer. Depending on the value of the property it will cost £90-120. A survey (Scheme 2) is a more detailed inspection, which gives a comprehensive report on the condition of the property covering the general condition of the property, main defects, and a valuation of the property as it stands. A survey will typically cost £250-450 depending on the value of the property. Besides these, the other big expense is stamp duty – the government tax on purchasing property. This is currently levied at 1% on houses costing between £60,000 and £250,000, at 3% on houses from £250,000 to £500,000 and at 4% for more expensive properties. There’s no stamp duty to pay on properties under £60,000. Before buying, you may also want to find out what your council tax charges will be for that area.
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 pays 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.
A mortgage could be available from a number of different sources. Some of the available options are:
- building societies
- insurance companies (endowment mortgages only)
- large building companies might arrange mortgages on their own new-build homes
- finance houses
- specialized mortgage companies.
You should arrange a mortgage before you find a house you would like to buy as it may take a few weeks for the bank or building society to process your application. You should investigate the different types of mortgage available and ensure that you are not being advised to take out a mortgage which is not suitable for you. You should be wary of mortgage advisers who recommend only one lender or one type of loan repayment (e.g. endowment policies) as the adviser may be receiving substantial commission for doing this. If you are having difficulty getting a loan, you should ask your solicitor to arrange one. You should check whether any charge is made for this.
Once you have been accepted for a mortgage loan and have been advised of the maximum available you need have no further direct contact with the lender. All communication should be channeled through your solicitor. When you have found a house to buy it should be possible to arrange a mortgage very quickly. In urgent cases it may be done in less than 24 hours.
If you intend getting a mortgage you should make sure you investigate the different options available. If in doubt, you may wish to consult an independent financial adviser.
Concluding the sale
If your offer is successful it will be followed by an exchange of letters between your solicitor and the seller’s solicitor in order to settle all the clauses and conditions of the offer. Once all points have been agreed, a final letter concluding the bargain is sent to the buyer’s solicitor. This is called concluding missives and is legally binding. Neither party can back out at this point without penalty. The document transferring the title from the seller to the buyer is known as a disposition, and it sets out the parties, the price, the date of entry and also usually refers to older title deeds which contain a description of the property. The Disposition is signed only by the seller. Your solicitor may act as a disclosed agent and can conclude the deal on your behalf. On the entry date the buyers’ solicitor goes to the selling solicitor’s office with the final payment and receives the keys, the title deeds and the signed disposition, transferring the title to the buyer. This process is called settlement. Because you will need to have cleared funds on the date of entry you cannot simply bring a check on the entry date. Checks should be paid in advance, so they have time to clear, or alternatively you may choose to transfer the money direct.
You don’t have to buy of course. If you’re only going to be here for a short time – say three years or less – or want to take some time out to find the right house, you can rent. Both furnished and unfurnished homes are available, usually for a minimum of six months. Renting (called “letting”) is usually organized through an agent and you’ll probably be given an inventory to sign before moving in. Before you do, check that you’re happy with what it says. Again, most rental properties are advertised in newspapers and on the web.
Some letting agents with online listings: