If you’re thinking of buying your first property in London, we have many years experience helping people just like you. Our guide offers some helpful tips on getting a mortgage through to making an offer on a property.
You’ll see the terms freehold and leasehold on property, which are the most common ownership types. If you own the freehold then the property is yours outright and you are responsible for the upkeep and maintenance of the property as the owner.
If you hold the leasehold then your terms may specify a period of time that you can reside in the property. Many leases are for 999 years, although some can be much shorter. Your lease will specify who is responsible for specific parts of the property, and ground rent may be payable to the freeholder.
Finding a mortgage will vary depending on your financial situation. There are always lots of different offers on the market so be sure to shop around on consult a financial advisor for good packages. Independent mortgage brokers, building societies and major banks all offer different incentives to choose them, so weigh up the options. Be sure to plan your budget first and stay within it.
If you find a property through an estate agent then all offers should be made through that agent. Offers can be submitted in person, over the phone or in writing. Asking prices can be negotiated depending on your valuation of the property or independent surveys. Offers are not legally binding until the contracts are exchanged.
When buying a house there are many other costs you’ll need to consider; surveyors, legal fees and VAT can all add more money to your budget so be sure to factor these in. These are a list of the usual additional charges when buying a house.
You should always have an independent survey of a property to check for defects or other problems. These are the three main surveys options.
The standard fee charged by the lender for setting up the mortgage. This can sometimes be waived of halved as an incentive by the lender.
All properties valued over £125,000 are subject to stamp duty tax. The rate varies from 2% upwards depending on the value of the home.
If you’re buying in a ‘disadvantaged’ area or you’re a first time buyer you might be exempt from stamp duty. First time buyers are exempt from stamp duty on property up to £300,000 as of 2017.
You could be charged a flat rate or a percentage, depending on the solicitor you’re using. Fees can go higher if the transaction takes a long time. Bear in mind you’re also liable for any of your lenders solicitors fees, so shop around.
Buyers in England and Wales will need to pay the Land Registry to transfer the details of land ownership to the new owner. Fees are:
Up to £40,000 - £40
£40,001-£70,000 - £60
£70,001-£100,000 - £100
£100,001-£200,000 - £200
£200,001-£500,000 - £300
£500,001-£1,000,000 - £500
£1,000,001 and over - £800
The legal process
Once the offer is accepted, a contract is drawn up by the seller which covers all details of the sale, selling price, if anything in the property is included in the price and the date of completion.
2. Contract exchange
Once both parties have agreed on the contract, copies are signed and exchanged. At this point it is a legally binding contract, and compensation will need to be paid should either party decide to pull out of the transaction.
3. Between exchanging and completing
The conveyancers will need to make the necessary checks and then when everything is confirmed, the money is paid to the seller.
If everything presented in the offer was in good order and the process has been completed, the property now belongs to the buyer, keys are handed over, and removal vans can be booked.
5. After completion
The change of ownership is now registered by the buyer’s conveyancer; the buyer now has to inform their insurer that completion has been reached and has to pay stamp duty.
If considering a buy to let there will be additional factors to consider.
Be sure to plan thoroughly when buying a property to let. Try to get as much information as you can, and ask your solicitor and financial advisor for their advice.
You might want to consider having two surveys done: the general upkeep of your property as well as the new buy-to-let property as it could prove to be a significant drain on resources.
3. Buy-to-let Mortgages
These are easy to find and can be specifically tailored to account for the down time when the property isn't occupied. The drawback with buy to let mortgages is they can prove to be much more expensive than a standard mortgage with some lenders asking for a deposit anywhere between 20 and 30%.
4. Additional Costs
- Maintenance and repair
- Furnishing the property
- Landlord insurance
- Mortgage repayments (when property is unoccupied)
- Legal fees
- Stamp duty tax
5. What kind of property are you planning to buy-to-let?
Once you’ve taken into account the financial considerations you then need to decide what kind of property you’re going to buy to let. Your budget and choice of area may dictate the type of property; flat, studio, house? How many bedrooms? Location? Furnished or part furnished? All of these factors will influence the final value.
If you’re thinking of buying a property with a short lease you might be able to find a bargain. Many leases are around 99 years, but the closer you get to the expiration date of the lease it can be hard to get a mortgage. No-one wants to be left with the uncertainty about what the freeholder may or may not choose to do. For example, if you have a 25-year mortgage and a lease expiring in 20 years house would be hard to sell after 10 or 15 years because the lease would expire on the next buyer.
Negotiating a new lease while buying the property may be a solution to this. If you are not sure about any of this, then ask your estate agent or solicitor.