Buying a property can be daunting process. There are lots of different terms and legal processes to think about when purchasing your new place. As such, we’ve prepared this blog post to help you with what we think you should know before you buy your new home.
#1 – The difference between freehold and leasehold
When purchasing a freehold property, it means that not only do you own the property you are intent on purchasing, but you also own the land the property is built on. As a freeholder, you’ll be responsible for maintaining your property and land, so make sure you have the cash and time to do so.
In the case of a leasehold property, you lease the land your home is built on. Typically, you want to buy a lease that lasts a long time, so something that has at least 100 years or more to run. If the lease has less than 70 years to run, you may have problems securing a mortgage, so you may need to speak to your mortgage advisor about this. Also, with a leasehold property, you will also need to factor in costs to pay the landowner for renting the space your home is built upon and service or maintenance charges which are used to maintain and look after the structure of the building.
#2 – Remember the hidden costs
When purchasing a home, many people forget about some of the hidden costs. We’ve produced a list of some of the common things people miss:
- Stamp Duty – a tax that must be paid on homes that cost over £125,000. The rate of Stamp Duty due depends on the value of your property. You can find out how much you might have to pay by using this tool.
- Moving costs – moving house is an expensive undertaking, so you may have to pay for packing, a moving van or even hire a company to help you move your belongings between properties.
- Surveyor fees – once you have been approved for your mortgage, it is best practice to have a survey done. This is to ensure you do not purchase a property with damage you cannot see. They come in different levels of detail, including full structural surveys and snagging surveys.
- Repair costs – if you decide to take on a property that is damaged, or your survey fails to pick up on damage, you will need to have money set aside to repair your home. You will need to be careful to ensure that these costs do not snowball.
#3 – Consider your credit score
Looking after your credit score is one of the most important things to think about when you’re purchasing a house. In the UK, there are three credit references agencies: Experian, Equifax and CallCredit. Each agency provides you with a different credit score and mortgage lenders will consider them all. The higher the rating, the lower risk you will be considered. This will make it more likely for them to lend you the money you need for your mortgage.
Ensure you always pay your bills on time. Things like mobile phone contracts are easy to slip up on, and if you go into arrears, your credit report will reflect this and make it difficult for you to obtain credit in the future.
If you have a bad credit score you may still be able to get a mortgage. Some lenders will consider lending you money if you have a big enough deposit or a high enough income to stay on top of your mortgage repayments.
#4 – Help to buy is an option
For those that are struggling to get a large enough deposit together for purchasing a property, Help to Buy is an option. In the scheme, the government offers an equity loan of between 10 and 20 percent of the property value.
It’s interest free and payment free for the first five years and represents an opportunity for first-time buyers to get on the property ladder with as little as a five per cent deposit
#5 – Stamp duty changes for first time buyers
In the Autumn budget 2017, Chancellor Philip Hammond changed the way Stamp Duty works for first time buyers. Stamp Duty is a tax that is paid to the government on the completion of all home purchases.
For those that purchase a property under £300,000 they will be exempt from paying stamp duty. For properties up to £500,000 in value, first-time buyers will pay no stamp duty on the first £300,000 – but will pay the standard five per cent Stamp Duty due on the remaining amount. Anything above £500,000 and Stamp Duty will apply to the entire purchase.
Good luck finding your new home
Finding your new home doesn’t need to be one of things that causes stress and considerable grief. It’s something you should take your time with, enjoy and most importantly, ensure you’re completely happy with.
If you’re ready to purchase your home and need a quality conveyancing service, the team at Blackstone Solicitors will be delighted to help you, wherever you are in the country. Call us on 0161 929 0121. For email queries, contact firstname.lastname@example.org or complete our online enquiry form for a callback.