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- Herausgeber: John Wiley & Sons
- Kategorie: Ratgeber
- Sprache: Englisch
No-one obsesses over property quite like the British, even though buying and selling a home can be a personal headache and a financial lucky-dip. British newspapers groan under the weight of property supplements; TV reports constantly track house prices; young people fret about getting on the property ladder, while established homeowners worry about how to increase the value of their home or the market crashing.
Buying a property is rarely straightforward and can be very time-consuming. There are numerous choices to make, from the style of building and location, to proximity to schools and other amenities. Most of all, there are plenty of opportunities to make the wrong decisions.
Selling your home is also fraught with stress; from deciding to move and evaluating your property’s worth to finding an estate agent and putting your home on the market, every step comes with it’s own difficulties. Plus the advent of the Home Information Packs has also created a new headache for potential vendors.
Buying and Selling a Home For Dummies, 2nd Edition covers everything from finding a property and getting a mortgage to preparing your home for sale and moving on. It is also one of the few guides to cover England, Wales and Northern Ireland as separate entitles from Scotland, and to cover the Scottish property market. This updated guide also contains coverage of HIPS (Home Information Packs), which were made compulsory in September 2007 and apply to all properties with three or more bedrooms.
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Seitenzahl: 575
Veröffentlichungsjahr: 2011
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Buying and Selling a Home For Dummies®, 2nd Edition
by Melanie Bien
Buying and Selling a Home For Dummies®, 2nd Edition
Published by John Wiley & Sons, Ltd The Atrium Southern Gate Chichester West Sussex PO19 8SQ England
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Copyright © 2008 by John Wiley & Sons, Ltd, Chichester, West Sussex, England.
Published by John Wiley & Sons, Ltd, Chichester, West Sussex
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British Library Cataloguing in Publication Data: A catalogue record for this book is available from the British Library
ISBN: 978-0-470-99448-1
Printed and bound in Great Britain by Bell and Bain Ltd, Glasgow
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About the Author
Melanie Bien is an Associate Director at independent mortgage broker Savills Private Finance. Before joining SPF at the end of 2004, she was personal finance editor and property writer on the Independent on Sunday. Melanie has written about buying and selling homes for a variety of national newspapers, magazines, and Web sites, and has written several books and pamphlets to accompany television programmes on property makeovers and design, buying, renovating, and selling property.
Melanie lives in East London.
Dedication
This book is dedicated to Jonathan, JB, Helena, and William.
Author’s Acknowledgements
I would like to thank Jason Dunne and Daniel Mersey at John Wiley & Sons for the opportunity to write this book and their help, direction, feedback, and constructive criticism during the process. Also, many thanks to everyone who works behind the scenes at Wiley for their efforts in making this book possible.
Thanks to those friends I had to cancel on at the last minute for being not only understanding but encouraging: it was more to do with deadlines looming than the allure of the Scottish conveyancing process, honest.
And finally, thanks to my husband and family for their untiring support and encouragement.
Publisher’s Acknowledgements
We’re proud of this book; please send us your comments through our Dummies online registration form located at www.dummies.com/register/.
Some of the people who helped bring this book to market include the following:
Acquisitions, Editorial, and Media Development
Executive Project Editor: Daniel Mersey
Project Editor: Rachael Chilvers
Content Editor: Nicole Burnett
Development Editor: Tracy Barr
Copy Editor: Martin Key
Proofreader: Kim Vernon
Technical Reviewer: Ron Cole
Publisher: Jason Dunne
Executive Editor: Samantha Spickernell
Cover Photos: © Elizabeth Whiting & Associates/CORBIS
Cartoons: Ed McLachlan
Production
Project Coordinator: Erin Smith
Layout and Graphics: Reuben W. Davis, Joyce Haughey, Melissa K. Jester
Proofreaders: David Faust, Caitie Kelly
Indexer: Christina Karpeles
Contents
Title
Introduction
About This Book
Conventions Used in This Book
What You’re Not to Read
Foolish Assumptions
How This Book Is Organised
Icons Used in This Book
Where to Go from Here
Part I : So You Want to Buy Your First Home?
Chapter 1: Why Getting Your Foot on the Property Ladder Is a Smart Move
Recognising the Advantages of Owning Property
Buying When You Don’t Have a Huge Deposit or Big Income
Timing Your Purchase to Avoid Negative Equity
Determining Whether You’re Ready for Homeownership
Chapter 2: Deciding Whether You Can Afford to Buy and Getting the Timing Right
The Costs of Buying a Home
Money Talks: Working Out What You Can Afford
Pooling Resources
Knowing When to Buy
Chapter 3: Determining What You Want
Establishing Your Criteria
Getting the Area Low-down
Let the Search Begin!
Chapter 4: Dealing with Estate Agents
What You Need to Know About Estate Agents
What an Estate Agent Does
Finding a Good Estate Agent
Getting the Best Out of Your Estate Agent
Using Estate Agents’ Websites
Complaining about an Estate Agent
Part II : Finding the Right Property
Chapter 5: Handling Viewings
Finding Suitable Properties
Arranging a Viewing
What to Look for During a Viewing
Asking All the Right Questions
Decision Time
Chapter 6: Looks Are Everything: Period Homes
Architectural Periods and Construction Styles
Georgian
Victorian
Twentieth Century Architecture
Problems with Period Homes
Buying an Ex-Local Authority Property
Chapter 7: New and Self-Build: No Previous Owners
Is a Brand New Home Right up Your Street?
Buying Off-Plan
Building Your Home from Scratch: What’s Involved in Self-Build
Chapter 8: Renovating Wrecks: Property in Need of Work
Can You Stomach Renovation?
Finding Your Wreck
Calculating Costs and Setting a Budget
Using a Surveyor
Buying a Listed Property
Thatcher’s Britain
Making an Offer
Arranging the Financing
Part III : Making an Offer and Finding the Readies
Chapter 9: Making an Offer: What Happens Next?
Making an Offer
Avoiding Being Gazumped
After Your Offer Is Accepted: Let the Conveyancing Begin!
Arranging Your Finances
Arranging a Survey: The Full Monty or the Bare Minimum
Exchanging Contracts
Completion
Chapter 10: Going, Going, Gone: Buying Property at Auction
Pros and Cons of Buying at Auction
Getting Started – Action to Take before the Auction
The Day of the Auction Dawns
Chapter 11: Getting a Mortgage
How Mortgages Work
Choosing between Repayment or Interest Only
To Fix or Not to Fix?
How Your Deposit (or Lack Thereof) Affects Your Mortgage
Using a Guarantor
Negotiating the Maze: Where to Find the Right Mortgage
One Size Doesn’t Fit All: Mortgages for Special Circumstances
Buyer Beware: Things to Watch Out For
Not Forgetting the Not-So-Little-Extras
Completing the Mortgage Application Form
Problems Getting a Mortgage
Chapter 12: Insurance: Ignore at Your Peril
Avoiding the Temptation to Scrimp on Cover
Protecting Your Mortgage Repayments: Your Insurance Options
Flood, Fire, and Theft: Covering All Eventualities
Knowing Where to Buy Insurance
Chapter 13: When Money’s Too Tight to Mention: Low Cost Routes to Homeownership
Buying a Property with the Help of a Housing Association
Getting to Grips with the First Time Buyers’ Initiative
The Rent-a-Room Scheme
Part IV : Selling Your Home
Chapter 14: Deciding When It’s the Right Time to Sell Your Home
Knowing When to Sell
Figuring Out the Cost of Selling
When Renting Out Is Wiser Than Selling Up
Chapter 15: Creating the Right First Impression
Ensuring that Your Property Is Irresistible
Salesman’s Tour Part I: Assessing the Impression Created by Each Room
Salesman’s Tour Part II: Getting the Outside Ready
Hiding the Dog – and the Kids!
Chapter 16: Using a Pro to Sell Your Home: Getting the Most from Estate Agents
The Role of the Estate Agent
Wanted: An Honest and Competent Estate Agent
Making Sense of the Contract
Checking Up on Progress
Taking Your Business Elsewhere: When to Give Up on an Agent
Complaining about an Estate Agent
Chapter 17: Going It Alone: Selling Your Property Privately
Setting the Asking Price
Advertising Your Property
Handling Viewings
Dealing with Offers
Chasing Prospective Buyers
Under the Hammer: Selling at Auction
Chapter 18: Negotiating a Successful Sale
You Don’t Always Get What You Ask For: Negotiating the Price
Contemplating Offers
Not All Buyers are Equal
Taking Action When You Aren’t Getting Any Offers
Part V : The Legal Process of Buying and Selling
Chapter 19: Conveyancing for Buyers and Sellers in England, Wales, and Northern Ireland
The Offer Has Been Accepted: Let the Conveyancing Begin!
Finding a Solicitor or Licensed Conveyancer
The Role of the Buyer’s Solicitor
The Role of the Seller’s Solicitor
Dealing with Problems Arising from the Survey: Advice for Buyers
The Final Contract: Vetting and Signing
Exchange of Contracts
Completion
Chapter 20: The Scottish House- Buying Process
Becoming an Owner-Occupier
Getting the Order Right: Finance First
Finding a Solicitor
Finding the Property of Your Dreams
Found the Property? What to Do Before You Make an Offer
Making an Offer
When Your Offer Is Successful
Chapter 21: Selling Your Home in Scotland
The Preliminaries
Picking Someone to Sell Your Home
Handling Viewings
Receiving Offers
Entering the Home Straight
Completing the Sale
Part VI : The Part of Tens
Chapter 22: Ten Things for a First-Time Homeowner to Do
Budget for the Mortgage
Buy Everything – within Limits
Get Insurance!
Switch Utility Providers to Slash Your Bills
Introduce Yourself to the Neighbours
Throw a Housewarming Party
Learn to Operate the Washing Machine
Accept that Dinner Party Conversations Will Never Be the Same Again
Stop Worrying about Fluctuating Property Prices
Go Mad Decorating
Chapter 23: Ten Ways to Sell Your Home
Maintain Kerb Appeal
Keep the Interior Spick and Span
Attend to Minor Repairs
Set a Reasonable Price
Be Flexible on the Price
Be Prepared to Include Your Curtains and Carpets
Hide Your Pets
Use the Internet
Keep Track of Your Estate Agent’s Progress
Find a Cash Buyer
Chapter 24: Ten Tips on Dealing with Estate Agents
Tips for Buyers
Tips for Sellers
Appendix: Resources
Professional and Trade Organisations
Government Agencies
Further Information
Credit Reference Agencies
: Further Reading
Introduction
Welcome to Buying & Selling a Home For Dummies, 2nd Edition. You can discover many of life’s lessons by trial and error, but because buying a property is one of the most expensive and stressful things you are ever likely to do, the fewer mistakes you make along the way, the better. In this book, you can find loads of information and advice that you might need to make buying or selling your home as smooth, straightforward and pain-free an experience as possible.
About This Book
These pages are overflowing with useful advice and information presented in a light, easy-to-access format. This book helps you decide whether the time is right to get a foot on the property ladder for the first time, how to decide upon the location and type of property you want, what you need to know about arranging the financing, and what happens on the legal side of things. Those selling their homes can also find plenty of help, from setting the price to preparing your property for viewings and haggling with prospective buyers. Just as important, this book can help you maintain your sense of humour – as well as your sanity – as you deal with these challenges and more.
Conventions Used in This Book
To help you navigate through this book, I’ve set up a few conventions:
Italic is used for emphasis and to highlight new words or terms that are defined.
Boldfaced text is used to indicate the action part of numbered steps.
Monofontis used for web addresses.
What You’re Not to Read
I’ve written this book so that you can find information easily and easily understand what you find. And although I believe that you want to pore over every last word between the two yellow covers, I actually make it easy for you to identify ‘skippable’ material. This is the stuff that, although interesting and related to the topic at hand, isn’t essential for you to know:
Text in sidebars. The sidebars are the shaded boxes that appear here and there. They share personal stories and observations, but aren’t necessary reading.
Anything with a Technical Stuff icon attached. This information is interesting but not critical to your understanding of buying and selling property.
The stuff on the copyright page. Take it from me, there’s nothing here of interest unless you are inexplicably enamoured by legal language and reprint information.
Foolish Assumptions
In this book, I make some general assumptions about who you are:
You may never have bought your own property before but are thinking about it. Perhaps some of your friends have recently got a foot on the first rung of the property ladder, and you’re thinking about joining them. Maybe you’re sick of renting and are wondering whether buying would actually work out cheaper. Or maybe you’ve had enough of living with the folks – bless ’em – and are ready to move on.
You may be a homeowner who’s looking to upgrade to a bigger property. Even though you’ve bought a flat or house before, you may not have sold one and want to know what avenue – selling privately, at auction, or with the help of an estate agent – is best.
You hope to get information on the best mortgage for your circumstances, whether you are a first-time buyer or moving to a bigger property.
You want easy-to-understand information that explains just what you need to know about buying or selling property because you’ve got better things to do (like sleeping, participating in your favourite leisure activity, or even relaxing on holiday) than become an expert on property law. In other words, you want to get it right while you retain control over your life.
How This Book Is Organised
Buying & Selling a Home For Dummies,2nd Edition is organised into six parts. The chapters within each part cover specific topic areas in more detail. So you can easily and quickly scan a topic that interests you, or you can troubleshoot the source of your latest major headache!
Part I: So You Want to Buy Your First Home?
You may currently be renting a flat or house for good reason – perhaps you aren’t in a position to buy your own home. But before you throw in the towel and decide that you simply can’t afford to buy your own place, find out for sure whether this is the case or not. You may discover that home-ownership is a possibility for you. This part helps you assess whether you can get your hands on the necessary cash to buy the home of your dreams or whether you need to downscale your ambitions. If you can’t afford to raise the money on your own, this part also help you examine what options – like teaming up with family or friends – can help you get your foot on the property ladder. You can also find advice on how to choose the right property and how to research an area, so that when you do finally buy, you’re happy with the house and the area you chose. And because you’ll probably use the services of an estate agent, this part explains what you need to know about those, too.
Part II: Finding the Right Property
Once you know what you want and have worked out that you can vaguely afford it, the next step is the sometimes hit-and-miss process of actually finding the home of your dreams. Some people are lucky and end up buying the first property they set foot in, while others spend months fruitlessly searching for what they want. In this part, you can find what questions to ask when viewing properties, and I also guide you through the various construction styles and architectural periods you may come across during your search. If you are especially brave, or can’t find a property you want to buy, this part also includes information on self-build, including advice on sticking to budget, not falling afoul of planning rules, and getting your home completed on time.
Part III: Making an Offer and Finding the Readies
Buying property is an expensive business, so it’s important to get the financing just right. This part takes you from making an offer to signing on the dotted line – and everything in between. Here you can find advice on making an offer that gets you the property you’ve got your heart set on without paying over the odds. You also get advice on using a mortgage broker and the different types of mortgage available. If finances are tight, you’ll find the information on low-cost routes to homeownership helpful. This part also helps you safeguard your money, with advice on the various surveys available to ensure that you don’t make an expensive mistake, as well as the insurance cover you need to protect the roof over your head.
Part IV: Selling Your Home
The worst fear of many homeowners is selling their property at the wrong time – and not getting as much for it as they could have done. This part helps you assess whether the time is right to move and helps you ensure that you get the best price for your home. You can find advice on getting your home ready for prospective buyers to view and how to guide them round – especially helpful information if you’re selling your home privately. Because many sellers use estate agents, this part also includes information on how to ensure that you get the best services from your agent and what to do if your agent isn’t performing as well as you had hoped. Even if you leave the negotiating to your estate agent, the final decision as to whether to accept an offer or not is yours. You can also find advice on whether your response to an offer should be yes or no.
Part V: The Legal Process of Buying and Selling
The legal stuff is usually guaranteed to make most people’s eyes glaze over, but if you’re buying or selling a home, you must become familiar with the conveyancing process – the name for the legal transfer of a property from seller to buyer. Certain things will be expected of you along the way – from signing and returning forms quickly to supplying your solicitor with additional information. By knowing what you need to do and when you should be doing it, you can avoid holding up the entire buying-selling process. This part gives you the low-down of what both parties’ solicitors do during conveyancing; it also gives you an idea of the costs involved. And because the property buying and selling process in Scotland differs in many ways from the process used in England, Wales, and Northern Ireland, I give you a full breakdown of that, too.
Part VI: The Part of Tens
Here, in a concise and lively set of condensed chapters, are tips that can make the difference between success and failure. In these chapters I address the things a first-time homeowner should know, offer suggestions on how to sell your home, and provide advice that can help you deal with estate agents.
Icons Used in This Book
Scattered throughout the book are icons to guide you along your way and highlight some of the suggestions, solutions, and cautions of buying or selling your home:
Keep your sights on the target for important advice and critical insights into the best practices in buying and selling property.
Remember these important points of information, and you’ll stand a better chance of buying or selling your property successfully.
This icon highlights the landmines that both novice and experienced homebuyers need to avoid.
This icon covers the boring stuff that only anoraks would ever know. You can skip paragraphs marked by this icon without missing the point – or you can read it and impress your friends with what you know.
This icon highlights the real-life anecdotes from years of experience and mistakes, made by friends, who have bought and sold property, and myself. While we should all learn from our own mistakes, it’s even better to learn from other people’s – and I share some of them with you here.
Where to Go from Here
This book is organised so that you can go wherever you want to find complete information. Want to know what insurance you need to take out to protect your mortgage repayments? Head to Chapter 12. If you’re interested in how to get your property ready for prospective purchasers, go to Chapter 15 for that. You can use the table of contents to find broad categories of information or the index to look up more specific things.
If you’re not sure where you want to go, you may want to start with Part I. It gives you all the basic information you need to get started in buying and selling your home and points to places where you can find more detailed information.
Part I
So You Want to Buy Your First Home?
In this part . . .
Buying your first home is one of the biggest purchases you will ever make in your life. The chapters in this part guide you through the process of figuring out whether it’s the right time for you to take the plunge. I also fill you in on working out whether you can afford to buy your first home, and how you can manage it even without a huge salary or sizeable deposit. I also help you establish where you should buy.
This is the part for you if you’ve just started to think about purchasing a property, but you’re not quite sure whether you are ready, or able, to do so.
Chapter 1
Why Getting Your Foot on the Property Ladder Is a Smart Move
In This Chapter
Being aware of the advantages of owning property
Knowing the different ways and means that enable you to afford your first home
Making sure that you don’t lose your hard-earned cash in a property crash
Understanding your responsibilities as a homeowner
Congratulations! You’re thinking about buying your first home and getting a foot on the property ladder. Property is an excellent investment: not only does it enable you to kiss goodbye to grotty rented accommodation and throwing money down the drain – paying the rent – you’re also investing in something that’s likely to increase in value over a number of years. That has to be a sound move.
But it’s a tough environment for first-time buyers, many of whom delay getting on the property ladder because they simply can’t afford to buy any earlier. The average age of a first-time buyer in 2006 was 33, according to the Halifax, the UK’s biggest mortgage lender. The reason? Many people spend their twenties paying off student debts and struggling on low incomes, which can make drumming up a deposit impossible. Rising house prices, particularly in London and the south-east, have created further problems for first-time buyers, making a place of their own seem an ever-diminishing dream.
Before you go any further you need to determine whether you are ready to buy your own home. In this chapter, I start by giving you the low-down on some of the advantages of owning your own property. Then I help you to assess whether you can afford to do so now or whether you need a bit of help before you are in a position to buy a place of your own.
Recognising the Advantages of Owning Property
Property serves two functions: It provides you with a roof over your head, and it is serves as a wise investment in the longer term. But unless you’re buying a rental property, which you do specifically to make a profit (see my book Renting Out Your Property For Dummies for detailed information), having adequate shelter is more important than making a huge profit. You need somewhere to live; that is the very practical reason behind buying a home. The following sections outline the advantages you’ll accrue from making such a practical decision.
Closing the door on the rest of the world
If you live at home with your parents, you may be looking for a bit more independence; if you’re renting – with friends or on your own – you may be looking for something you can decorate to your own tastes and make decisions about without anyone else’s permission. Buying a home may very well be the answer.
There's nothing quite like walking into your new home – the one you’ve managed to buy yourself – for the first time. It is the most incredible feeling. But it gets even better. Having your own space means not having to answer to anyone else, not having to do what anyone else wants, and being able to live exactly how you like. If you live alone in your new home, you don’t have to queue up for the bathroom anymore. And if you want to stay in bed all day in your one-bed flat, what’s to stop you? (Just ignore for a moment the fact that your boss may have something to say about you lounging in bed on a day when you should be in the office!)
The best bit about buying your own place is that it’s your space. You don’t have a landlord to kick you out after six months because he or she’s planning on selling the flat or house from under you. And because it’s your space, you’re more likely to stay in an area for longer (homeowners tend to put down roots), which can be very attractive if you’ve spent years lugging your belongings between different rental properties.
No more throwing money down the drain
Most tenants complain about paying rent because they don’t see any return in the long run. You get a roof over your head for several months, and that’s it. If you recognise that property tends to appreciate in value over time, you’re likely to feel that you’re missing out the longer you delay purchasing your own place.
In addition, decorating rented accommodation is a waste of your time and money. Spending money doing up your home – painting and wallpapering and buying new furniture – makes perfect sense if you own the property. But doing up rental accommodation doesn’t make sense. If the landlord supplies the materials and you supply the labour, you may not waste your own money, but you should consider whether you really want to spend your free time adding value to the landlord’s property. And if doing up your rented accommodation means paying for the improvements yourself, doing the work on your own, and having the colour scheme approved by the landlord, you may want to think twice about whether it’s worth the hassle.
Keeping your own home in good decorative order is a good investment. You will also have less work to do when you come to selling it later on.
Buying When You Don’t Have a Huge Deposit or Big Income
With thousands of mortgages available from over 100 lenders, you’re bound to find one out there that suits you – even if you haven’t got a big deposit or earn hundreds of thousands of pounds every year.
Buying without a deposit (or with a very small one)
Homebuyers used to save up for years for a deposit before they could get on the housing ladder. Without a sizeable deposit, lenders simply wouldn’t take you seriously and agree to let you have a mortgage. This is no longer the case. Nowadays, if you haven’t got a deposit, you may be able to get a 100 or even 125 per cent mortgage.
If saving up a 5 or 10 per cent deposit would realistically take you several years, it might make sense to borrow a greater proportion of the purchase price now rather than put off buying for a few years. In a rising property market, if you delay your purchase while you save up several thousand pounds for a deposit, you may find that house prices have risen to such an extent that you’ve been priced out of the market and need an even bigger deposit than the one you’ve got.
Following are a few points you need to be aware of if you don’t have a deposit (or have a very small one):
You won’t qualify for the cheapest mortgage rates. Lower rates are offered to borrowers with bigger deposits because the lender sees them as being lower risk.
A number of lenders impose a higher lending charge (HLC) – a one- off insurance premium to those borrowing a high loan-to-value (LTV), depending on the lender’s terms. The HLC protects the lender, but you have to pay for it. The idea is that if you default on your mortgage repayments and the property has to be sold, the HLC will cover any losses incurred by the lender.
You may experience negative equity. If you borrow 100 per cent or more of the property price and house prices fall, your mortgage may be greater than the value of your home. This means that you’re trapped and can’t sell until prices rise again.
Coping with a low income
Lenders decide how big a mortgage to let you have by taking your income into account. Four times a borrower’s income is the general income multiple, or three times joint income if you are buying with a partner. So, for example, if you earn £30,000 a year, you could borrow up to £120,000 if you are buying a property on your own, or £180,000 if you’re buying with a partner who earns the same as you. But a number of lenders are prepared to let you borrow more – up to four, five or even six times your income – in response to rising property prices and the increasing difficulty this poses for first-time buyers.
Lenders increasingly use affordability criteria rather than strict income multiples to determine how much you can borrow. They take into account outgoings and debts as well as income to ensure that you can afford to pay the mortgage.
While you may be tempted to borrow as much as possible in order to purchase a bigger property, keep in mind that doing so isn’t always a good idea. You may be able to afford the mortgage repayments initially, but would you still be able to if interest rates were to rise? Even a 1 per cent increase in the base rate could mean a big rise in your mortgage repayments – could you cope with such a scenario? If you can’t, your home could end up being repossessed. Overstretching yourself tends to be a bad idea in the long run.
Following are some alternatives to taking a high income multiple and borrowing more money than you can really afford:
Find a guarantor.If you can’t meet your mortgage repayment one month, your guarantor (a blood relative, usually a parent) is responsible for doing so. A mortgage lender is more likely to let you have a bigger loan than your salary strictly justifies if a guarantor is prepared to take responsibility for you making these mortgage payments. An increasing number of first-time buyers are finding that having a guarantor is the only way they can get on the property ladder. But if you do use a guarantor, make sure they appreciate the risks involved: the guarantor must pay your mortgage if you default on the repayments, for example.
See whether your parents can help with the deposit. If your parents aren’t in a position to act as guarantors, they may be able to help with the deposit if they have some savings. With a larger deposit you can borrow less, thereby lowering your monthly mortgage repayments. And if you’re really lucky, your folks may not ask for the money back!
Buy a house with someone else. An increasing number of friends and siblings are buying property together because it means you can get a bigger mortgage than if you buy on your own. You should also be able to drum up a bigger deposit and the monthly repayments should be more manageable because you won’t be the only one contributing to the mortgage. Consider whether you know someone that you could happily buy and share a house with.
If you do go down this route, however, make sure that you get your solicitor to draw up a legal contract stating what share each of you has in the property – how much each of you contributed to the deposit and to the mortgage each month. Then if you do fall out, your investment is protected.
Timing Your Purchase to Avoid Negative Equity
While there are many advantages to getting on the property ladder, there are potential downsides, too. These mainly relate to the value of the property. If you buy at the peak of a housing boom, you could pay well over the odds for your new home. And if a property crash occurs soon after you buy at an inflated price – as happened in the late 1980s – you could end up in negative equity. This is when your property is worth less than you paid for it, and it’s a very demoralising position to be in. You are effectively trapped until the value of your home recovers, which could take several years. If you can’t stay put until then and are forced to sell you are likely to do so at a considerable loss.
Making sure that you don’t find yourself in this position is the hard part. To avoid negative equity don’t pay over the odds for a property in the first place – and buy as a long-term investment. When property prices are rising, it’s easy to get carried away and imagine that they will continue to move upwards forever. But prices don’t always go up. Although historically house prices rise over time, they sometimes experience the odd blip or two along the way.
If the worst comes to the worst and property prices do collapse, you’ll find the situation more bearable if you didn’t pay thousands of pounds more than the property was worth in the first place. Holding off when prices get silly is far wiser than diving in without thinking about the consequences.
Sometimes property prices rise and rise, as they did between the late 1990s and in the 2000s. If you refrain from purchasing until prices fall, you may find yourself ‘on hold’ for years if the market is particularly buoyant. In this situation, you may have to wait several years until prices have peaked and start falling again before you are in a position to buy. There’s no guarantee that prices will fall.
Timing the market is a mug’s game: if the experts can’t agree on what’s going to happen to property prices, how does the ordinary man or woman in the street stand a chance? For peace of mind, don’t over-stretch yourself, refuse to pay more for a property than it’s worth and be prepared to stay put for a few years. (See Chapter 2 for more information on working out whether it is the right time to buy and ensuring that you don’t pay over the odds.)
Determining Whether You’re Ready for Homeownership
While being a property owner is a good position to be in, you shouldn’t make the decision to buy your first home lightly. Owning a home is a big responsibility: you are committing yourself to monthly repayments for the next 25 years or so.
If you don’t keep up your mortgage repayments, you could lose your home. And you’ll find getting another mortgage later on more difficult because you’ll have demonstrated that you’re a bad risk.
You’re also responsible for all maintenance and repairs. When the boiler packs up in your new home, you can’t phone the landlord to fix things. You’ll have to call the plumber out yourself and foot the bill. So before you start property hunting, consider whether you’ve got what it takes to be a homeowner:
Can you afford it? Property isn’t cheap. A mortgage covers most of the purchase price, but you still have to find a deposit (if you can), pay solicitor’s fees, the survey, stamp duty, mortgage broker, and lender arrangement fees (if applicable). If you are up to your eyes in debt and struggling to pay it back, you may be better served by clearing the decks a bit before taking on a mortgage.
Can you manage your finances? Your mortgage is your most important outgoing every month, so you must ensure that it is paid before anything else. If you run out of cash and can’t pay, you’re in serious trouble: you will incur penalties, interest charges and the lender may eventually repossess your home.
Are you creditworthy? If you’ve been declared bankrupt or have a County Court Judgment (CCJ) against you, you’ll have a hard time getting a mortgage. Obtaining the necessary finance may not be impossible but it will cost you more. Approach a lender who specialises in dealing with borrowers with credit problems but bear in mind that such a lender will charge a higher rate of interest than a mainstream mortgage provider. The smart move may be to wait until you’ve built up a good credit history before you apply for a mortgage.
Have you got a steady job? Lenders prefer borrowers to be in full-time employment. This doesn’t mean that if you are self-employed or a freelancer you can’t get a mortgage, but it is harder; you usually need proof of earnings in the form of two to three years’ audited accounts. Lenders take your income into account when deciding how big a mortgage you can have (see the earlier section ‘Coping with a low income’ for details); if you don’t have an income, you haven’t a hope of getting a home loan.
Are you good at maintenance? Once you’ve bought your own place, you won’t have a landlord at the end of the phone to call upon in times of emergency. If your washing machine floods the kitchen, would you be able to cope? You don’t have to be a skilled builder, plumber, and electrician, but commonsense and knowing who to call upon in case of emergency can help.
Are you ready to settle down? I’m not talking about marriage and kids – property itself is a big commitment. If you’re planning on travelling around the world in the near future, now may not be the right time to buy a property.
Ideally, you answered ‘yes’ to each of these questions. Even if you didn’t, you may still be ready to become a homeowner as long as you’re flexible. Consider these examples of flexibility:
If your credit worthiness is questionable, you may have to pay a higher rate of interest on your mortgage for a couple of years until you have proven to the lender’s satisfaction that you can pay your mortgage. After this time, you may qualify for a lower rate from a mainstream lender because you have established a track record of making your payments on time.
If you can’t afford a mortgage on your income, you may need to think of other ways of getting the money together – by using a guarantor, buying with friends or siblings or through a housing association, if possible.
Chapter 2
Deciding Whether You Can Afford to Buy and Getting the Timing Right
In This Chapter
Figuring out all the costs involved
Clubbing together with family and friends to raise the cash
Avoiding a property boom – buying during a slump
When you decide to purchase your first home, it’s easy to get carried away with the excitement. But before you start eagerly looking at properties, you need to do a number of mundane, yet ultimately crucial, things.
The first is to consider whether you can afford to buy. Many first-time buyers have been priced out of the market by rising property prices. Those who aren’t waiting until they’ve got a reasonable deposit – at least 5 per cent of the purchase price – may be over-stretching themselves by taking on bigger loans than they can afford. In this chapter I look at the cost of buying your first home and whether you can really afford it or need some help getting started.
Timing is also important: Property prices go up and down; you should avoid buying at the top of the market if possible. In this chapter, I look at how to avoid being caught out by a property market crash.
The Costs of Buying a Home
The property purchase price is undoubtedly going to be your biggest outlay and raising enough cash to cover this will be your main focus. But there are plenty of other costs you need to allow for, most of which must be paid for out of your own pocket – the mortgage only covers the purchase price, less the deposit, unless you’ve opted for a 100 per cent plus loan-to-value product. Extras include:
The deposit
Stamp duty
Legal fees
Fees for local authority and Land Registry searches (if you’re a buying a three or more bedroom house, these are included in the seller’s Home Information Pack [HIP])
Survey
Lender’s valuation
Mortgage arrangement or application fee
Higher lending charge (HLC) (if applicable)
Mortgage broker fee (if applicable)
Other costs to bear in mind include hiring a removal firm (or van if you’re planning on doing it yourself), buying new furniture, and paying for repairs that need doing. Table 2-1 provides a general idea of the costs involved.
Insurance may be the last thing on your mind at this stage, but because you’re investing so much money in your home, it should be high on the agenda. Buildings insurance is compulsory if you have a mortgage – your lender won’t let you borrow the cash otherwise – and you should arrange for your new home to be covered from exchange of contracts. For details of the other types of insurance available, see Chapter 12.
The deposit
How times have changed! First-time buyers used to save up for a deposit of around 10 per cent of the property’s purchase price. But with rocketing property prices and the introduction of 100 per cent mortgages and above, this is no longer necessary. Nevertheless, being able to put down a deposit will stand you in good stead for several reasons:
If you have a decent deposit (5 per cent or more of the purchase price) you’ll get a lower mortgage rate.
You won’t have to pay a higher lending charge (HLC). This covers the lender if you default on your mortgage repayments. It can cost you thousands of pounds so avoid it if possible.
If you can’t raise a deposit on your own, ask family for help. If they are very generous, they may give you the money and not expect it back. But even if they expect it back eventually, you still save money in the long run because of the lower mortgage rate you can get.
Stamp duty
Stamp duty is an unavoidable tax: how much you pay depends on the cost of your property. Duty starts at 1 per cent of the purchase price on properties between £125,000 and £250,000; 3 per cent for properties between £250,000 and £500,000, and 4 per cent on those over £500,000. You don’t pay any stamp duty if your property costs less than £125,000 or if it is in a disadvantaged area and costs less than £150,000. Stamp duty is payable to your solicitor upon completion.
Legal fees
You have to pay a solicitor for handling the transfer of the property from the seller to you unless you do your own conveyancing. Fees and charges vary (see Chapter 19 for more details on conveyancing in England, Wales and Northern Ireland, and Chapter 20 for info relating to Scotland). Legal fees are payable on completion.
Survey and lender’s valuation
It’s worth paying for a survey so you know what state of repair the property is in. If problems are found, you can pull out or use the survey as a negotiating tool to persuade the seller to reduce his price. Two types of survey are available: a Homebuyer’s Report, which is suitable for most properties, and a full structural survey, which is often better for very old properties in poor condition (see Chapter 9 for more details and costs). You pay the surveyor once she has completed the survey and reported the findings to you.
If you take out a mortgage, you also have to pay for the lender’s valuation, which lets the lender or mortgage broker know whether the property is worth what they are lending to you. The lender or mortgage broker arranges this. The cost depends on the purchase price of the property but expect to pay around £220 for a £200,000 property.
The lender’s valuation doesn’t reveal anything about the condition of the property. If you want to satisfy yourself on this score, you must pay for a survey.
Miscellaneous fees
If you take out a mortgage, you may also have to pay the following:
Mortgage arrangement or application fee: Lenders charge a fixed amount of several hundred pounds or a percentage of the mortgage amount for arranging a mortgage. The amount varies between lenders and you usually have the choice of adding it to the mortgage, so you pay it back over the term of the loan.
Mortgage broker fee: If you use a broker to find your mortgage (and I strongly recommend that you do), you may have to pay a fee. This is usually around 0.4 per cent of the mortgage value. Other brokers don’t charge a fee but rely on commission from the lender who receives your business. See Chapter 11 for more about using an independent broker.
Money Talks: Working Out What You Can Afford
Before you start house hunting, work out what you can afford to spend. Unless you’re a Lottery winner, you’ll need a mortgage, and lenders have an upper limit on how much you can borrow. This is based on your income and credit history and, increasingly, your outgoings. You need to know right from the start how much you can borrow: if you wander into an estate agent’s offices with only a vague idea of what you can afford, you won’t be taken seriously.
Work out what mortgage repayments you can realistically afford by figuring out how much you have left over once you’ve subtracted all your outgoings from your monthly income. Make sure that you’re not overstretching yourself.
If the mortgage you need for the property you want is more than you can afford, think about where you can economise. Be sensible: you can’t skimp on council tax or the gas bill, for example. If you really can’t balance the figures, you may have to accept that you’re not in a position to buy a property at this time, or you may need to downscale your ambitions.
Buying On Your Own
The number of single households is rising as a result of divorce and people marrying later. As a result, the number of people buying on their own is also increasing. This makes a huge responsibility an even greater one.
Raising enough money if you’re buying on your own is harder than buying with another person. Lenders tend to grant mortgages on the basis of income or affordability. If you’re buying on your own, expect to borrow around four times income (as opposed to three times joint income if you buy with a partner). If you earn £25,000, for example, you can borrow £100,000. If you buy with a partner who earns the same as you, you can borrow £150,000 – getting you a bigger mortgage.
Some lenders have been criticised for lending buyers more than four times their income. It might be tempting to borrow as much as you can but you will have higher mortgage repayments as a result. And if you fall behind in your repayments, you could lose your home. Don’t overstretch yourself. Calculate what you can afford and stick to it.
Pooling Resources
The problem many single first-time buyers face is that they simply can’t afford to get on the property ladder. Property prices have risen faster than salaries, so even with a generous income multiple from a lender (refer to Chapter 1 for an explanation of this), you still may not be able to buy alone. You may need to pool resources.
Buying with a partner
The easiest way of buying property is with a partner, whether you’re married or cohabiting. You can borrow more cash and are likely to have a bigger deposit if you’re drawing from two sets of savings – and you can divide the repayments between you.
However, there are downsides: You could split up, and if you aren’t married, the law treats you as separate individuals with no rights or liabilities to each other. To protect your legal rights, ensure that you own the property as joint tenants or tenants in common:
Joint tenants: If you’re joint tenants and one partner dies, the deceased partner’s interest in the property passes to the survivor. Married couples usually buy a property as joint tenants.
Tenants in common: If you’re tenants in common, each of you has a distinct share in the property; this can be 50:50 or based on how much each partner contributed to the deposit or mortgage repayments. If you die, your share goes to your estate – not to your partner.
If the property is in your partner’s name, you have no legal claim to it – even if you paid half the mortgage and lived together for 17 years. Get a solicitor to draw up the documents staking your claim.
Getting by with a little help from your friends
An increasing number of first-time buyers are purchasing with friends. This may sound risky – as you could fall out – but if you choose your friends carefully and get a solicitor to draw up a contract, you’ve a good chance of making this arrangement a success.
Most lenders allow up to four names on the mortgage deeds, but many restrict the number of salaries they lend on to two. So buying with a group of friends might not enable you to borrow significantly more money.
Make sure that you have a contract stating that you have an equal share to the property so you’re covered if you do fall out. It should also state what happens if one of you wants to sell up: for example, you may want to include a clause that says no one can sell within the first five years. Or maybe you want a clause letting the other owners have first refusal to buy them out.
Using a guarantor
Parents can be useful if you’re struggling to get on the housing ladder. Even if they can’t afford to throw a few grand your way for a deposit, they may be able to act as guarantors (see Chapter 11). This will make them responsible for your mortgage repayments if you fail to meet them.
Your parents must provide your lender with details of their income and financial commitments. If they are mortgaged to the hilt, your lender may not accept them as guarantors because they won’t be able to meet your repayments as well as their own if you default on your loan. And even if they are accepted as guarantors, they should be aware that it might cramp their style. If they later decide to buy a holiday home on the Costa del Sol, they may find they can’t get a mortgage because lenders see them as being over-committed.
Knowing When to Buy
Once you’ve decided to buy, it’s worth getting an agreement in principle from your mortgage lender. This gives you an idea of how much you can afford and demonstrates to sellers your seriousness. You have six months until this runs out so there is no need to rush into a property purchase. One of the questions you need to ask is whether it is a good time to buy. If you have to move by a certain date because you’re relocating for work, having a baby, or being chucked out of your rented flat, you may have no say in the matter. But if you do have a say, give some thought to the timing.
The property market is busiest in spring and autumn. You can buy in summer or winter but many sellers hold back until the market picks up so they have a greater chance of finding a buyer. The advantage of buying out of season is that estate agents won’t be frantic and can spend more time with you. You may also be able to knock the price down if the seller wants a quick sale.
Buying during a property boom
If you can, avoid buying during a property boom. This is when house prices rise at an extremely fast pace, unlike a normal, healthy market where there’s a gradual, steadier increase in prices. The danger is that over-inflated prices will come crashing down once the boom-time is over. And if you bought at the peak, you may end up in the worst position any homeowner can find himself or herself – negative equity.
Negative equity is when you owe more on your property than it is worth because the market has crashed (which can happen in a recession). If you’re in negative equity, you’re stuck in the property until prices recover, which can take several years and be very disheartening. To avoid this, try not to pay over the odds in the first place. If the property feels over-priced and you’re stretching yourself, it’s not the best of beginnings. You’ll really struggle if interest rates rise or property prices fall.
Friends of mine have hung on in the desperate hope that prices will crash only to find that they keep on going up – and they’ve priced themselves out of the market completely. It’s not unknown for property prices to rise year after year. If you’re ready and able to get on the housing ladder, I suggest you go for it.
Buying during a slump
The best time to buy is during a property slump when prices have already fallen as much as they are likely to. This means that you won’t pay over the odds and you might even be able to get the seller to reduce the price further.
Pay attention to newspaper reports and check out your local estate agents: are prices on several properties being reduced? Are properties taking ages to sell? If so, it’s a fairly safe bet that you will be able to get a good deal on a property.
Although you may be tempted to hang on until prices fall even further, they won’t fall forever. Property is fairly resilient, and prices eventually rise again after a fall. If you buy in a falling market, and prices plunge even further, don’t despair. Prices will eventually rise again.
Chapter 3
Determining What You Want
In This Chapter
Working out what sort of property you are looking for
Researching the locality – before arranging any viewings
When purchasing your first home is no longer an unrealistic ambition (you’ve worked out that you can afford it and that now’s a good time to buy; refer to Chapter 2 for details), you may think you’re ready to rush into the nearest estate agent’s office and make appointments to view lots of properties. But before you do, take time to consider exactly what you’re looking for. Given that buying a house is one of the biggest and most important purchases you will ever make, it’s important to get it right – a vague idea of what you want is not enough.
In this chapter, I focus on all the factors you need to consider when deciding what sort of property you are after. After all, the only way the estate agent will be able to find what you want is if you know yourself.
While you should have an ultimate goal in mind, it’s important to remain flexible, or you may dismiss a great property that meets most, but not all, of your requirements.
Establishing Your Criteria
When you first start property hunting, you may have a vague notion of what you are looking for. But you can save yourself a lot of time and energy if you pinpoint your requirements before arranging any viewings. Questions to ask yourself include:
How many bedrooms do I need? If you’re buying on your own and money is tight, you may decide not to opt for a bedroom at all, but choose a studio flat instead. Or maybe, realising that selling a studio can be a problem when you move out (because they appeal to such a limited number of buyers), you decide that a one-bedroom flat (or a two- bedroom flat with a room you can rent out) is more suitable. If you’re buying with a partner, you are more likely to require at least two bedrooms – maybe three if you are thinking of starting a family in the near future. If you already have a couple of children, you may need four bedrooms.
Do I need a garden? In theory, gardens sound lovely, particularly in summer when you can invite your mates round for barbeques. And if you have children or pets, a garden will be more important to you than if you don’t. But gardens are a lot of work. Consider whether you can be bothered with the upkeep. If not, and you buy a property with a garden, you’ll have to employ a gardener. Properties with gardens also tend to be more expensive.
Do I need a garage or off-road parking?
