A guide to buying your first home – from saving for a deposit and applying for a mortgage to making an offer and appointing a conveyancer.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
If you're looking to buy a home, you'll probably need to apply for a mortgage. It's a loan which is secured against the value of the property.
The mortgage will either be:
With interest-only loans, you need to have plans in place showing how you'll pay back the amount you borrowed when the mortgage ends.
Mortgage lenders assess the amount you want to borrow against the value of a property. This is called Loan To Value (LTV). Most mortgages require a deposit of at least 5% of a property's value, which is a LTV of 95%. The average deposit is usually around 20% to 25% of a property's value which is a LTV of 80% to 75%. You're likely to get a mortgage deal with a lower interest rate if the LTV is under 60%.
To help you put money aside for a deposit,
TSB offer a range of savings accounts
To work out how much money you have available for mortgage payments, add up all of your monthly outgoings and take the total amount away from what you have coming in each month. You should include in your outgoings:
The costs you'll need to set money aside for are:
For the Stamp Duty Land Tax rates in England and Wales, see the
For Land and Buildings Transactions Tax rates in Scotland, see the
You may also want to set money aside for a property survey to check whether the property is in good condition. If the survey points out any major problems you could ask the seller to fix them or ask for money off the property price.
If you have existing debts it may reduce the amount a mortgage lender will lend to you. To increase the amount you could borrow, you could reduce your debts before you apply for a mortgage.
Your credit history will affect the mortgage amount a lender can offer you. You can check your credit history by getting a credit report from credit rating agencies such as
If you have no or little credit history, lenders have little evidence that you can borrow responsibly and may be more reluctant to offer you a mortgage.
It's important you register to vote so your name appears on the electoral register. Mortgage lenders use the register to check your identity. If you're not on the register it's likely that your mortgage application will be rejected.
It's a good idea to write down what you want from a home and order it in terms of priority. You need to think about:
You also need to get a feel for an area to check it suits your lifestyle. Find out about transport links and parking, where shops and green spaces are, how busy the area is and how far you'd be from friends and relatives.
Before you go to view a property, write down a list of questions to ask the estate agent.
Here are some of the questions you could ask:
Before you make an offer on a property, try and find out from the estate agent:
In Scotland, before you express an interest in a property you appoint a conveyancer. Once you find a property you're interested in, your conveyancer registers a 'note of interest' on your behalf so you're kept informed of any closing date for submitting an offer. The seller must give you a copy of the Home Report which outlines what the property is worth, its condition, the repairs required and its energy-efficiency rating.
In Wales, England and Northern Ireland, you can make an offer directly to the estate agent. You can let them know you're serious about buying the property by having a mortgage approved in principle, and want to move quickly. If the seller:
In Scotland, you instruct your conveyancer to make a written offer on a property on your behalf. If the offer is acceptable, the conveyancers agree the conditions of sale through the exchange of formal letters. This process is called 'concluding the missives' and may happen quickly if little negotiation is required. Once the missives are concluded neither you nor the seller can pull out without penalty.
The types of mortgages generally available are:
With most mortgages when the initial period ends, you move onto a standard variable rate set by the lender which could go up and down.
At TSB we currently offer a range of
fixed rate and tracker rate mortgages
for first time buyers in England, Scotland and Wales.
A Mortgage Advisor can advise which type of mortgage best suits your needs. To do this, they'll ask for details of:
If they can recommend a suitable product, they'll talk you through the key features of the mortgage and what the repayments will be. These details will also be given to you in a document called a Mortgage Illustration.
When you put an offer on a property, you can show estate agents you're serious about buying by getting an 'agreement in principle' (AIP) from a lender. The AIP states the amount the lender is likely to lend you. It's not a legally binding agreement as it's subject to a valuation of the property and you sending in any evidence the lender requires, such as payslips.
You shouldn't ask many lenders for an AIP, as it requires a credit check against your credit file. The credit check leaves a footprint which can be seen by other lenders on your file and may affect your ability to get credit.
To make a full mortgage application, you'll need to provide your lender with:
If your lender is happy with the evidence you've provided and the purchase price of the property after a valuation, they'll send you a formal mortgage offer.
A conveyancer deals with the legal side of a buying a property. They sort out the transfer of ownership by:
In Wales, England and Northern Ireland, you appoint a conveyancer once your offer is accepted on a property. In Scotland, you appoint a conveyancer before you make an offer on a property, as they are responsible for placing the offer on your behalf.
A survey should point out any major issues with the condition of the property. If it brings up issues you're not aware of, you could ask the seller to reduce the sale price or fix the issues before exchange of contracts. If they're not willing to do this, you could withdraw your offer.
The different surveys available are:
In Scotland, the seller provides you with a Home Report outlining what the property is worth, its condition, the repairs required and its energy-efficiency rating. You can also choose to instruct your own survey as well.
Your conveyancer will arrange for all the paperwork to be in place before completion date. They will exchange contracts (or conclude missives) with the seller's conveyancer, once you've:
You'll need to have
in place before you exchange in England, Wales and Northern Ireland. In Scotland, buildings insurance must be in place before the completion date known as the 'Date of Entry'.
You're legally bound to buy the property once you've exchanged contracts or concluded missives. If you decide to pull out after this point, you could lose your deposit and may face legal action from the seller.
After exchanging or concluding missives, you'll need to sign the mortgage deed and a document to transfer ownership of the property to you.
Usually, completion takes around six to eight weeks but it may be longer if you're in a property chain. On the day of completion you can move into your new home once your conveyancer confirms the money has been transferred to the seller's conveyancer.
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