THE BUYERS GUIDE
A SIMPLE STEP BY STEP GUIDE
190 PENGE HIGH STREET, LONDON, SE20 7QB 0208-265-5667 info@agentsrus.co.uk www.agentsrus.co.uk
THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
Making the right decisions Whether you’re a first time buyer, upsizing, downsizing, or simply seeking to maximise future rental returns, a little fact-finding at the outset will save you time and money.
Purchasing a property is an enormous financial undertaking and often accompanies changes in your lifestyle.
Establishing your property needs At Agents R Us we understand everyone has different priorities, which is why we’ve compiled a list of questions to help focus your attention on the characteristics of the property you long for.
Features // How many bedrooms and bathrooms/WCs will be needed both now and in the future? // Are separate kitchen and dining areas essential? // Is a garden essential? // Is storage space essential? // Is a garage, off-street or on-street parking required? // What type of property; House, flat or Maisonette?
Location // Is a prime location important? // Is there convenient access to local transport and amenities? // Is the property within a school’s catchment area? // Is the property in a conservation area and subject to planning restrictions? // Does the property overlook parkland or water? // Is the property above (or even near) commercial premises or on a High Street: mortgage lenders frown at properties that are within earshot of restaurants, pubs and nightclubs since this can affect future marketability. // Where is your preferred area(s) and why?
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
Tenure The term tenure describes the rights of possession you have as the owner of a property, and you should always ask whether a property will be sold on Freehold, Commonhold or Leasehold tenure.
Freehold tenure gives you an indefinite right of ownership over your property and the land it sits on. Be mindful of Freehold Anomalies such as any property that overhangs land that is not included in the freehold – a situation commonly referred to as a flying freehold.
Commonhold tenure grants you an indefinite freehold over part of a multi-occupancy building (typically a block of flats). You’ll still need to abide by any covenants (rules) which state how you must behave towards your neighbours, and will usually be required to pay service charges towards the upkeep of communal areas of the building.
Leasehold tenure conveys no ownership rights over the land your property is on and you’ll be liable to pay the landowner (freeholder) ground rent. For multi-occupancy building (typically blocks of flats you’ll usually be required to pay additional service charges towards the upkeep of communal areas.
Leasehold tenure: pitfalls and opportunities // The length of a lease can vary dramatically, you may come across a lease as long as 999 years commonly known as a virtual freehold. Most residential leases start from 99-125 years. // Buyers should be mindful about the amount of years remaining on a lease as will your mortgage lender. Mortgage companies prefer to lend against properties with leases that will have at least 50-55 years remaining after the loan is paid. ie.If your mortgage is 25 years your lease should have at least 80 years remaining. (This will vary so check with your lender) // A short lease can be expensive to extend/renew therefore always ensure the asking price reflects the length of the lease on offer. // Ask if there are other leaseholders since a right to acquire the freehold or take over a building’s management may arise when 2 or more occupiers occupy a property (especially in the case of houses that have been converted into flats).
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
Working out what you can afford When budgeting for a property the initial purchase price is only one factor you’ll need to consider.
Associated Costs Putting aside enough money to meet incidental costs is essential, and you should remember to account for all of the following:
Initial purchase and moving in costs // Valuation fees // Stamp Duty Land Tax // Land Registry fee // Local Authority searches // Mortgage lender fee (which is sometimes added to the loan to cover commission payments to the broker) // Removal and storage expenses // Mail redirection fees // Solicitors’ fees
Ongoing property cost Before making an offer on any property you should also remember you’ll need to meet daily running costs after the purchase, including: // Council Tax // Water Rates // Rates (in Northern Ireland) // Ground Rent (leasehold properties) // Service Charges (leasehold flats) // Insurance premiums (including life insurance, building insurance and contents insurance) // Utilities (electricity, gas, TV licence) // Decoration/re-decoration expenses and the cost of buying new furnishings
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
Financing your property A property is the biggest capital purchase most buyers will ever make and it’s likely you’ll need to take out a mortgage unless you’re downsizing an existing property or have money from an inheritance.
Securing a mortgage When processing a mortgage application, lenders will consider several factors, including the size of any deposit (down-payment) you make towards the purchase, your credit rating and household income.
Deposit Lending is a risky business and mortgage lenders like to reduce the risk of payment default by sharing it with you. By offering a potential lender the largest deposit you can afford, you’ll improve your chances of securing a mortgage on preferential terms significantly. Deposits are expressed as a percentage of the property’s purchase price and it will be clear from the following table that a direct link exists between higher deposits, acceptance rates and future monthly mortgage payments.
Size of Deposit (%)
Likelihood of Acceptance
Monthly Repayments (Interest)
5-10
Low
Very high (if application approved)
10-15
Reasonable
May be expensive
15-25
High
Competitive rates
25-40
Very High
Most competitive rates
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
Credit Ratings Having a good credit rating is vital for securing a mortgage, especially if the size of your deposit will be small. Credit ratings indicate to lenders how good you are at managing your finances and, more importantly, whether you’ll be able to keep up future monthly mortgage repayments. Lenders will request a copy of your credit file (which shows your history of making repayments under credit card, mobile phone and other credit agreements) from Credit Reference Agencies. Inaccurate information, a history of late payments or defaults and County Court judgments, can all ruin an application – as can making repeated applications to different lenders (who might all be rejecting you for one of these reasons). Starting your search for a mortgage by requesting copies of your own credit reports from the three main Credit Reference Agencies is therefore a good idea. The Consumer Credit Act 1974 requires them to send you a copy if your request is accompanied by a payment of £2 to cover administration fees.
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eQUIFAX
EXPERIAN
0870 060 1414
0844 335 0550
0844 481 8000
Consumer Services Team PO Box 491 Leeds LS3 1WZ
Credit File Advice Centre PO Box 1140 Bradford BD1 5US
Customer Support Centre PO Box 8000 Nottingham NG80 7WF
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
Household income Your household income will indicate to a mortgage lender whether you’ll comfortably be able to make monthly payments without stretching your finances. A formula based on a multiplier of your income that also takes into consideration the size of the mortgage you are applying for, will typically be used. If you are making a sole application, the mortgage lender will typically apply a multiplier of 3.5 times your salary (or your average earnings during the last 3 months if you are self-employed, or salary plus dividend if you are a company director). By way of illustration, a business executive earning £100,000 a year might typically expect to qualify for a £350,000 mortgage if the lender uses a multiplier of 3.5 times earnings.
Joint mortgage applications The maximum size a lender is willing to lend joint applicants will often be determined differently. Multipliers used might be 3.5 times your joint income OR 4 times one person’s incomes PLUS 1 times the income of the second applicant.
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
The application process Arming yourself with the information banks and other lending institutions look at will also help you determine whether you should apply directly to a lending institution or engage the services of an Independent Mortgage Adviser. Independent Mortgage Adviser are under a legal obligation to provide impartial advice and will often have detailed knowledge of lending practices at different institutions (which can be invaluable if your score is less than perfect!).
Call us on 0208 265 5667 send an email to info@agentsrus.co.uk for assistance in sourcing an Independent Mortgage Adviser.
Finding your ideal property When your mortgage has been approved you’ll finally be in a position to start house-hunting! It’s always a good idea to take a friend, a builder or someone who knows something about owning property when you’re on a viewing. And remember to take along a camera/cameraphone to help recollect details of the properties you view. (Ensure you ask the property owner or estate agent for permission before you start taking images). Another essential tool to take along is a tape measure, since it will come invaluable when you need to establish measurements that may not be indicated on the sales particulars.
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
Viewings If you are not already familiar with your chosen area, try to visit the property and the area at least a couple times at varying times of day before making a final decision on purchasing.
Questions to ask when visiting a property // What are the neighbours like? // Why are they selling? (This information may prove useful in weighing up your offer) // R e-affirm the information provided; Schools, Transport, amenities etc. // Try to get an indication about items that might be sold with the property. // Probe and ask questions about the functional items that may be sold with the property, ie. Boiler, integrated appliances, plumbing and electrics or the last time any works had been carried out. // Energy Performance Certificate (EPC)? Ask to see if not provided with the sales particulars // An EPC rates a property’s energy efficiency using an alphabetical scale from A to G (with A representing the highest degree of energy efficiency and G, the lowest). // NHBC warranty or New Build Indemnity Certificate for a newly built property? This should be made available, however, ask to see this if not made available.
Remember! If you proceed to purchase your solicitor will request confirmation of all these items, nonetheless, a little prior knowledge may save time dealing with any adverse comments. Most sellers do prepare themselves for questions nonetheless do not proceed with questions if they do not have the relevant information, pass your questions on to your solicitor.
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
Submitting your offer Before making an offer on a property it is a good idea to review the questions you answered at the beginning of this leaflet, in order to double-check the property meets your requirements.
Consider your buying position! Properties rarely sell immediately and a first time buyer with an Agreement in Principle from a mortgage lender or home mover who is not in a property chain will be in a much stronger position when submitting an offer.
When determining how much to offer you should consider: // How long the property has been on the market // Whether the buyer has received previous offers // The prices of similar properties on the same road or in the same area // The seller’s circumstances and reasons for wanting to sell. // The current general condition of the property and the cost in order to bring the property up to a reasonable standard. // Any professional or expert advice received. As a general rule of thumb, an offer that is between 5 to 10 per cent of the asking price for a property will usually be taken seriously (bear in mind that you will usually be able to revise your offer upwards, IF NECESSARY) And remember to make it clear to the seller that any offer will be subject to contract and a satisfactory survey.
WATcH oUT foR Gazumping, which describes a situation where a seller has accepted a higher offer from another buyer despite accepting yours (always ask the seller to confirm if he is willing to take the property off the market immediately on accepting an offer from you).
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
What happens when my offer’s been accepted? On acceptance of your offer, you will need to contact the lender to request a Valuation from a Chartered Surveyor. You should note the basic Building Valuation is intended for the benefit of the lender and is aimed at obtaining the current market value for lending purposes. The surveyor may highlight items that require further inspection, where you may need to hire additional expertise such as; Structural, timber and damp, Environmental, drainage or a preservation report. We always advise asking your Solicitor to request a Homebuyer’s Report (or Full Survey), which will offer at least some legal protection in the event of major issues arising.
Conveyancing The process of transferring the legal ownership of property from a seller to a buyer is called conveyancing and involves the following steps and procedures: // Verification that the property is being sold by its legal owner, your conveyancer will prepare a Report of Title. // Local Authority searches, local Planning Application searches, and inspection of Building Regulation Certificates. // Questions to the seller’s Solicitor to determine boundary ownership, whether there is a history of disputes with neighbours, or requesting clarification (for example, of what fixtures and fittings might be included in the sale). // Registration of Title Deeds to the property in your name and the registration of a mortgage charge in favour of your lender. // Confirmation of any questions or reassurrances agreed. // Stamp duty payments
VALUE UP TO £125,000*
NIL
OVER £125,000* TO £250,000
1%
OVER £250,000 TO £500,000
3%
OVER £500,000 - £1,000,000 **
4%
OVER £1,000,000 ** - £2,000,000 **
5%
OVER £2,000,000**
7%
*£150,000 for non-residential property and residential property in disadvantaged areas. Special rules apply for new zero-carbon homes. **Residential property only. A 15% rate will apply to properties over £2,000,000 purchased by certain “non-national persons”.
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
Completion The sale is finalised when all monies have been exchanged and the seller has made the keys to the property available for you to collect. Practical issues which you will need to deal with at that time will include: // Ensuring Solicitors’ fees have been settled // Coordinating the removal company // Contacting your Local Council to notify them you have moved into the property // Contacting utility providers to arrange final meter readings (if these have not been taken), and the transfer of bills into your name // Redirecting your mail or change of address with all your previous correspondence.
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THE BUYERS GUIDE - A SIMPLE STEP BY STEP GUIDE
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WE ARE HERE TO HELP YOU The guide to maximising your property potential
190 PENGE HIGH STREET, LONDON, SE20 7QB 0208-265-5667 info@agentsrus.co.uk www.agentsrus.co.uk