Buying a house or flat for the first time is a pretty daunting experience. It’s ranked as one of the top three in terms of stress (the other two being death and divorce), and this stress is only made worse if you don’t know what is happening.
Elsewhere I’ve done the best first time buyers guide in the world…. Ever… (parts 1,2, & 3) but that’s quite long – probably 2 cups of tea worth. For now I thought I’d throw down 10 things that first time buyers should know
- What is a mortgage
A mortgage is simply a loan. The difference is firstly that the loan is attached to the title deeds of a house or flat – so that the property can’t be sold without having to pay the mortgage off. Secondly it’s a loan spread over a much longer period than most other loans – usually over 20-30 years.
- What is a 90% mortgage?
When people talk about percentages in relation to mortgages they are talking out the percentage of the money being borrowed against the value of the house (or “Loan to Value”). So for example if a mortgage company say the maximum loan to value they will lend is 90% then that means if you’re looking to buy a house for £100,000 the maximum that mortgage company will lend on that house is £90,000.
- What is a deposit
In relation to buying a house the deposit is usually referred to as the amount you’re putting down. So in the example given in 2 above the deposit you’re putting down is £10,000.
- What is ‘Equity’
This is the amount of money you have ‘in the house’ – i.e. if the house was sold and the mortgage paid off then it’s the amount that you would get. When you first buy a house the equity will be the same as the deposit – the amount you’ve put down. However, as house prices rise (and they do normally) so does your equity. So if your £100,000 house is worth £120,000 when you sell it then your equity will have increased by £20,000.
- How do I look around a house?
This will usually be clear in the advert for the house (either online or in an Estate agent). You’d normally go through the Estate agent to arrange a viewing. Sometimes you’ll go round with the sellers, and sometimes it will be with someone from the estate agents. It’s a good idea to take someone else with you when you are looking round – partly for personal safety reasons but mainly so you can discuss it afterwards.
- When and how do I make an offer?
When you’ve found a property you are interested in you can make an offer. What you offer will depend on the property market in your particular area at that moment, how this property is priced, and the attitude of the seller. For example if it’s a sellers market then anything less than the full asking price will be rejected. If it’s a buyers market then sellers may well entertain an offer below the asking price. It’s worth doing a bit of homework first – maybe finding out if the seller is open to offers, and how long the property has been on the market – if it’s been on for ages with no offers then they may be more open to negotiating. Also ‘sellers market’ and ‘buyers market’ are just general terms – what happens depends on this particular property – great properties in great areas will always sell strongly – no matter what the rest of the housing market is doing.
- How do I know what I can afford?
What you can afford will be a combination of how much the mortgage company will lend to you based on your income, the percentage they are prepared to lend (see point 2 above), and the amount of depsit you have saved up (see point 3 above). You can check the amount the mortgage company will lend against your income online. When doing this you’ll see phrases such as ‘4 + 1′ and ‘3.75 x joint’. What “4 + 1” means is that if you have two incomes they will work out how much to lend you by taking 4 times the higher annual salary plus 1 times the lower salary. So if one of you earned £20,000 a year and the other earned £10,000, they will lend you a maximum of 4X£20,00 plus 1x£10,000 which equals £90,000. “3.75 x joint” means they’d add the two salaries together and multiply them by 3.75. So in the 20/10 example they would lend 3.75x £30,000 (£20,000 plus £10,000) which equals £112,500.
- How much is it all going to cost?
It’s worth working this all out before you start. We can give you an instant conveyancing quote online. You will also have to factor in other costs – mortgage companies often charge an arrangement fee (basically a fee for saying ‘yes’), and will always charge a valuation fee (the amount will be specified when you check out the offers). You also need to think of the cost of moving – will you be using a removal company, hiring a van, or making lots of trips in a car.
- How long will everything take?
With regard to finding a property you like it depends what’s out there and how fussy you are. Once you’ve find the one you want then it will generally take 2-3 months for the conveyancing process to be completed and you move into your house. I’ve done a separate blog on “what is conveyancing” – but basically it’s the legal process of putting the house into your name after we’ve checked it’s OK to buy
- What if I’ve changed my mind?
Even though you’ve made an offer and it’s been accepted, under the law inEngland &Wales (Scotland is different) you aren’t committed to buying it until you have “Exchanged Contracts”. Up until that point either party can pull out with no comeback. Once contracts have been exchanged then it’s legally binding and any party pulling out after that will potentially face a legal claim running into many thousands of pounds