Taking steps to buy a home is an exciting moment for you but can be confusing because of all the processes you have to go through. However, if you can get around the basics about how everything works, it can save a lot of headaches and surprises that you may find along the way, making your house-buying experience on this website much simpler.
If you are a first-time buyer in the UK in March 2021, the Government of the UK gave home movers and first-time buyers a new mortgage 95% guarantee scheme. The scheme means that if you buy a home, the government offers a guarantee to banks to encourage them to give you a 95% mortgage, which allows you to buy a home with a 5% deposit. The mortgage scheme was set to run from April 2021 to December 2022 for all existing and new properties ranging up to £600,000.
So let us look at how the mortgage scheme can help you pay for a house and how to go about buying a house in the UK.
Start by saving for the deposit.
If you want to buy a home, you initially need to save up to 5% of the deposit. However, with the housing price rally being fuelled by government incentives and low-interest rates finding low deposit mortgages is even harder. Lenders are holding out on offering people, especially first-time buyers, low deposit mortgages because it’s not profitable for them, especially with the pandemic.
With houses averaging around £262,000 in England and double that in London, coming up with the 5% deposits also is not easy, especially with the pandemic, Brexit, and rising unemployment. To get a mortgage plan, you will even need to aim for a higher deposit.
If you want to get a good mortgage plan, the rule of thumb is to save for a higher deposit. This is because it will make it easier for you to get an affordable mortgage. You can look for a deposit of 10% of the asking price, and if you can go higher to even 25%, that will open many opportunities for the best financial deals.
The mortgage your lender will give you will depend on your deposit, credit score, and income. If you are buying the property with a spouse or other people, the lender will also consider their financial situation.
Work out all other costs of buying a home.
When buying a house, you won’t just get the mortgage and move in; there are also other expenses that you need to account for. Here are some of the fees that you will need to pay;
Stamp duty – buying a house in the UK that costs more than £125,000 requires you to pay tax on the initial price and stamp duty. However, if you are a first-time buyer, there are stamp duty reliefs available.
Mortgage arrangement fee – you will be required to pay your lender a mortgage arrangement fee. The price may vary, but it usually averages around £1000. The mortgage arrangement fee is non-refundable even if the purchase doesn’t go through.
Legal fees – most lenders will contribute to the legal fees. However, you will have to use a solicitor who they approve. If you choose to pay for your conveyancing, it will typically cost you around £300 – £500, depending on the purchase price.
Valuation fees – this fee is what lenders usually pay to check if the house exists and that it provides sufficient security to provide you with a loan. Valuation fees will vary from lender to lender and will also be determined by how much the house costs. But on average it may cost you around £300.
Survey costs are among the costly fees for any purchase and may cost you an upward of £500, and it may take you two or three.
Other costs may include moving fees, home repairs if the house needs paintwork, done sinks, and the like.
Do thorough research of the area you’ve chosen to buy a house
If you wish to move to a new city or are looking to buy in a neighborhood you’ve never explored before, it would be great to do thorough research about the areas. The research will determine whether the neighborhood is fit for you. If you need to be near a school or a hospital shopping mall, how long will it take you to commute to work and the like?
You wouldn’t want to find the perfect house, but it’s far from areas you will be frequenting it may cost you more in transportation.
View houses in person
You’ll probably spend a lot of time viewing houses online but extend due diligence and go to see the houses physically. Go through every room and the entire space in the house before signing on the dotted line.
Viewing houses will give you a more detailed perspective of their potential. If you are buying with a spouse, go together and view the house. It also doesn’t hurt to view the house more than once, and at different times of the day, this will make you notice potential problems and if the house has enough natural lighting if that’s what you are going for.
Make an offer on the house.
When viewing the house for the first time, avoid being all excited and showing the agent that you are happy about the house. This will make it difficult to negotiate lower than the asking price. However, if the house has many potential buyers, you may have to match the asking price or offer a higher price.
Before settling on how much you will bid for the house, you should research and check how much similar properties in the neighborhood are worth. Once you have a number, you can tell the agent over the phone, but it would be great also to get it in writing. If you are a first-time buyer, mention it because it puts you in a better position than others.