Buying a property as a first-time buyer is an exciting and nerve-wracking experience. There’s plenty to consider from working out finances and finding the right property, to protecting yourself from property fraud.
Here are five important lessons to know before you take the leap.
1. Choose the right property
Is there public transport? If so, how much will it cost to get to work? Are there plenty of amenities or is it quiet? Will you be able to park easily? What are the neighbours like? Walk around the area at different times of the day and talk to the neighbours to find out more. Discover whether the crime rate is high or low by finding and comparing statistics online.
The condition of the property
When you view a property take a friend with you as second pair of eyes. Look carefully at the inside and outside of the house. Are the walls cracked or showing signs of damp? Can you smell anything untoward? Are the rooms big enough for you? Is there enough storage space?
Ask the seller how long the house has been on the market. If it has been on the market for more than a few months something might be putting buyers off. Ask them how long they have lived in the property, because a string of short-term owners could indicate a problem.
Your estate agent will give you a copy of the Energy Performance Certificate (EPC). This tells you roughly how energy-efficient the property is on a scale of A-G so you can gauge how expensive your energy bills are likely to be.
2. Work out your budget
There are plenty of costs involved in buying a property which you need to work out as accurately as you can.
You will need to save a deposit of between 5% and 20% of the cost of the property. Research the market in your chosen area to work out how much that is likely to be. The more you save, the wider the choice of cheaper mortgages open to you.
If you’re a first-time buyer purchasing a property for £300,000 or less, you will pay no Stamp Duty Land Tax (SDLT). SDLT is a government tax paid on land and property purchases costing more than £125,000 in England and Northern Ireland.
Other costs you need to factor in are:
- Mortgage arrangement and valuation fees.
- Survey costs and conveyancing fees.
- Buildings insurance.
- Removal costs.
- Furnishings and any home improvements you need to make.
Take advantage of help-to-buy schemes
This government scheme offers an equity loan for newly built properties. If you have a 5% deposit you can apply for a loan of up to 20% of your property. If you live in London you can apply for a loan of up to 40% of the purchase price. The government has confirmed that the scheme will be extended until 2023.
- Rent-to-Own (Wales only)
This scheme enables tenants to purchase the properties they rent. You build up a lump sum for a house deposit by having 25% of your rent paid over the duration of the tenancy.
This scheme helps housing association and council house tenants in England to buy their home with a discount of £82,800 outside London and £110,500 inside London. You must meet certain eligibility criteria such as having lived in your home continuously for three years or more.
- Shared Ownership
Under this scheme you buy a percentage share of a property and a housing association owns the other percentage. You still need a 5% deposit to cover your share. There are several different schemes, depending upon where in the country you live.
Bank of mum and dad
If your parents plan to help towards your property deposit it is wise for you all to sit with a conveyancing solicitor to discuss each of your rights and obligations and to formalize the agreement with a ‘promissory note’. A ‘deed of trust’ could also be set up outlining how the money will be paid back if the property is sold. Mixing finances with family can strain relationships but by setting up arrangements properly from the outset you avoid problems later.
Another option is for your parents to act as a guarantor to your mortgage. This can open up cheaper mortgage options to you. The advantage is that there is no initial monetary outlay, but the disadvantage is that if you fail to pay your mortgage then your parents are liable for repayments. It is very important that you all seek legal advice before going down this route.
To find out more read, ‘Bank of mum and dad: is it better to loan, gift or go guarantor?’ https://www.qualitysolicitors.com/blog/bank-of-mum-and-dad-is-it-better-to-loan-gift-or-go-guarantor
Applying for a mortgage
One way to find the best mortgage for you is to talk to a mortgage broker or an independent financial advisor (IFA). Choose a ‘whole of market’ broker so that you can see all the mortgage options available to you. If your parents are helping you financially tell your mortgage broker because it could have an impact on your mortgage offer.
When you apply for a mortgage the lender will check that you can afford the repayments not just at their current interest level but also if interest rates go up. They will look at your bank statements for the past three months and check your credit history to find out whether you are a reliable borrower. The mortgage lender will assess your affordability by looking at your salary and any other income you receive as well as your general outgoings.
3. Making an offer on a property
Research the sold prices of similar properties in the area so you have an idea of how much the property is worth before you make an offer.
Next decide upon your bidding strategy. You might decide that your first offer is going to be your best offer. The advantage of this is that you show you’re serious and speed up the negotiation process. However, you might end up paying more money than you need to. Instead you could offer a little lower, so you have room to negotiate if your first offer is rejected. Make sure the offer isn’t too low otherwise you might lose the property.
When you call the estate agent with your offer say that you are a first-time buyer with no chain as this puts you in a stronger position than somebody with a chain behind them.
If the seller declines your offer, ask what other bids they have received so you can renegotiate. Never offer more than you believe a property is worth.
If the seller accepts your offer, ask them to take the property off the market because this minimizes the risk of another buyer offering the seller more money and ‘gazumping’ you before you have exchanged contracts. Once your offer is accepted tell your property solicitor.
4. What to look for when choosing a property solicitor
The right property solicitor will efficiently and proactively drive your property purchase through to completion. They will help you to negotiate the best possible deal on what is probably the most expensive purchase you have ever made. They will advise you if any problems come to light as a result of property searches and what to do in case of legal issues. They are experienced in handling property contracts and know what to look for in the small print.
As a first-time buyer it is especially important to find a solicitor who will happily answer your questions. If a solicitor has been friendly and helpful during your initial enquiries you know they are likely to be helpful during the conveyancing process.
Choose a solicitor who is a member of the Law Society of England and Wales and who has been accredited by the Law Society’s Conveyancing Quality Scheme because this demonstrates they have met the highest standards of client service and expertise.
Make sure your solicitor is local so that they know the estate agents in your area and have specific knowledge of the local property market.
5. Protect yourself from property fraud
Fraud is now one of the most commonly experienced crimes in the UK and property fraud is a real threat to home buyers.
Scams to be aware of are:
- Title transfers. Fraudsters attempt to sell a property that doesn’t belong to them by transferring the property into their own name using false documents. Proceed with caution if a property is empty or mortgage-free or the seller wants to rush the sale to completion.
- Email hacking. Fraudsters intercept emails between the buyer and their solicitors changing bank details so money is transferred to them. If your solicitor emails you to say their bank details have changed always call them to check.
- Investment scams. Fraudsters persuade a buyer to hand over money by promising a high return on their investment. They might trick someone into a land banking scheme where the plot doesn’t exist or is virtually worthless. Frauds can also be in the form of buy-to-let schemes on properties that are in poor condition.
Once you have bought a property, you can protect yourself from fraud by registering with HM Land Registry’s free Property Alert Service which informs you by email when activity has taken place in relation to your property.
For more detailed information about property fraud read: ‘How to protect yourself from property fraud’: https://www.qualitysolicitors.com/blog/how-to-protect-yourself-from-property-fraud
Free advice for first-time buyers
Insight Law are always happy to provide friendly, expert advice to first-time buyers. We understand that buying a property can be a daunting experience and so we make sure you understand everything throughout the process.
To discuss how we can help you to purchase your first home, ring our property solicitors on 02920 093 600
 Gov.uk, Stamp Duty Land Tax: relief for first time buyers – guidance note: https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers/stamp-duty-land-tax-relief-for-first-time-buyers
 QualitySolicitors, Help to buy schemes – what you need to know, https://www.qualitysolicitors.com/housing-and-property/conveyancing/help-to-buy-schemes
 MoneySupermarket, Help to buy scheme: everything you need to know, https://www.moneyadviceservice.org.uk/en/articles/help-to-buy-scheme-everything-you-need-to-know
 The Law Society, Find a solicitor, https://www.lawsociety.org.uk/
 The Law Society, Conveyancing Quality Scheme Accreditation, https://www.lawsociety.org.uk/support-services/accreditation/conveyancing-quality-scheme/
 HM Land Registry: Property Alert Service, https://propertyalert.landregistry.gov.uk/
Posted by Insight Law on
3 February 2020