In this homeowners guide to buying a house, there are tips and advice to help you make an informed selection of choices and avoid some of the pitfalls, so that you can enjoy your new home and be confident that you have managed to secure a good deal on your property in more ways than one.
Knowing when to buy
This is a question that creates a great deal of anxiety among potential home buyers. Your timing can be crucial and will so much press coverage about house prices either rising or falling, depending on what you read, it can be hard to decide when the time is right to enter the market.
House prices will fluctuate according to sentiment and reaction to the economic outlook in general but it is actually much better to concentrate on the affordability aspect of buying, rather than reacting to news stories and trying to buy simply because you think you might be missing out.
Very few so-called financial gurus were able to predict the end of the last house boom in 2007 so it is a thankless task to try and predict when it’s a good or bad time to buy a property. This is why your number one priority should be to on protecting your financial security rather than run the risk of getting into difficulties by panic buying for fear of missing out.
The financial landscape has definitely changed when it comes to getting a mortgage and new affordability rules mean that it is currently harder to get the finance you need that it was before.
Although lending criteria has tightened, there are schemes available to help you buy a property that are backed by the Government. Schemes such as Help to Buy have had the effect of broadening the choices available to borrowers who only have a 5% deposit to put down.
Small differences in the amount that you borrow can have a massive impact on your finances so you need to select your mortgage product carefully. It should be remembered that borrowers will often pay a premium rate for their mortgage if they only have a minimal deposit.
Being able to put down between 10%-15% as a deposit will give you access to cheaper mortgage deals and to get some of the best rates on offer, you will need to be able to put down at least 25% as a deposit.
Budget for extra costs
It is far too easy to get your mortgage arranged and not actually pay attention to the true cost of borrowing that money, which can result in leaving you more out of pocket than you envisaged.
The true cost of borrowing needs to be calculated so that you know exactly what you are letting yourself in for. This means that you need to budget for paying an arrangement fee which is typically going to be around £1,000 and then there is often an arrangement fee to pay as well as the valuation fee, which is to pay for a check on the condition and suitability of the property as security against the loan.
When you factor in the legal costs as well as the removal fees and any work you need to do as soon as you move in, you can soon accumulate a large amount of extra charges to find on top of the deposit.
In addition to the various fees already listed, you will almost certainly have to pay Stamp Duty on the purchase.
The amount in tax that you will have to pay varies according to the purchase price of the property and the current rate is 1% for properties under £250,000 and 3% or more once the price goes beyond £250,000.
It is worth bearing in mind that you are paying stamp duty on the property itself and not the fixtures and fittings so it would be worth negotiating on the price or paying for fixtures and fittings separately if the purchase is close to this first threshold.
If you paid £250,000 for the property, you would pay £2,500 in Stamp Duty, but any figure above that limit would mean that your tax bill immediately jumps from £2,500 to at least £7,500, so it would actually save you a fair amount of money to negotiate a deal that avoids this hike, if you are close to a £250,000 purchase price, but slightly over it.
Taking great care with your finances and only buying a property that you can truly afford, should be your main focus rather than worrying about what house prices are doing.
Scott Baker is a property investment consultant. He enjoys helping people get on the property ladder and his articles mainly appear on home ownership and property investment websites.