You can get away with a 5% deposit. If you are looking to buy a new build home, the Help to Buy Equity Loan might be a good option for you. Check out our guide to see all the awesome additional benefits this loan has.
If you are interested in second-hand homes as well, things are looking up for you as well. The Government announced in March 2021, that they would be issuing a guarantee on 5%-deposit mortgages.
The amount of money you can borrow depends on various factors such as your income, your expenses, your credit score, and the money you have saved up for the deposit. Various governmental aid (e.g. the Help to Buy Equity Loan and the recent mortgage guarantee) makes it possible for you to borrow 95% of the house price. Keep in mind though that these schemes do have limitations.
The first step is to choose your mortgage provider. We recommend consulting with a mortgage broker for this. They will prescreen the possible options you have and suggest the best one for your situation. Make sure that the mortgage broker is a whole-market one though.
Next, you need to prepare the necessary documents: your payslips or your P60 form, your bank account statements for the last 3 months, and one of your latest utility bills. Based on these, you need to ask for an Agreement in Principle.
If you found your dream house, it is time to finalize the mortgage offer. The bank will do some background checks including a standard valuation and credit check. They will give you their final mortgage offer. Your solicitor will later be the one to authorize the completion of your mortgage.
After you get your agreement in principle, the mortgage application begins. Filling out the necessary forms should take you only a few hours. From then, the bank will normally require around 2 weeks to complete the necessary next steps including surveying your house and reviewing your finances and credit score.
Within this scheme, the Government lends you a part of the purchase price. The cost of this loan is much lower than your average repayment mortgage, so it is wise to take advantage of the maximum amount. Heads up though, in England and Wales you can only buy properties from registered new build development companies. Please check our guide on the topic for more information.
In England and Wales, you and the person you buy the house with, need to be first-time buyers. In Scotland, this is not a requirement. The property does need to be your main residence, though – you can’t rent out the house until you paid off the mortgage.
In England and Wales, the first 5 years of the Equity Loan are interest-free. From the 6th year, the interest fee rises to 1.75% of the sum you borrowed. This will increase annually in April by the CPI (Consumer Price Index) plus 2%. You also have to pay £1 each month for management fees starting from the month you start the scheme.
The Stamp Duty (Land and buildings transaction tax in Scotland and Land transaction tax in Wales) is the tax you need to pay after purchasing a property or land. It is a progressive tax which means that you pay a different rate after certain price brackets.
The Stamp Duty depends on the region where you want to purchase your house and whether or not you are a first-time buyer. As of July first-time buyers need to pay this tax if their chosen property’s price is above: £300,000 in England, £175,000 in Scotland, and £180,000 in Wales. For more information about the Stamp Duty and its rates, check out our guide on the topic.
The Stamp Duty is paid by the people who just purchased a new land or property. Most often, the solicitor is the one who will pay it on your behalf. However, you do have the responsibility to check whether everything went okay with the payment.
The Stamp Duty needs to be paid within 14 days of the completion. If you fail to do the payment, you might need to pay extra fees.
You are not exempt from the Stamp Duty but you do have some advantages. The price threshold is lower for first-time buyers. From July 2021 you need to pay this tax if the price is above: £300,000 in England, £175,000 in Scotland, and £180,000 in Wales. For more information about the Stamp Duty and its rates, check out our guide on the topic.
The house viewing is a great opportunity to ask questions that the house listing doesn’t tell you. The most important questions you should ask are:
For second-hand homes, consider adding these to your question-list:
The most important factors you should consider are:
Your budget and the location is going to be the biggest determinant of which property you will choose. These factors will decide what features you can afford in your new house.
Each situation is different, but this is what the average house buying process looks like:
It is perfectly fine to hire a solicitor after your offer got accepted for your chosen house. Keep in mind though, that solicitors are expensive, so you might want to ask around beforehand. Get recommendations from people you know and trust.
You need to take out the insurance from the Exchange day.
You can expect to pay these fees and costs in addition to the house price:
The solicitor’s fee largely depends on the area you are searching for a house. You can expect to pay anywhere from £850 to £1,500.
The legal fees usually get paid in stages. In most cases, you will be asked to pay a deposit upfront and pay the rest in increments.
After the completion day, you need to register yourself as the new owner of the house within 2 weeks. Afterward, you will be responsible for paying the council tax. You can choose to pay the annual sum in full or over 10 months (with 2 months where you don’t pay anything).
When you know the bid you want to put in, let the estate agent know. They are obliged by law to notify the seller about all offers.
Your bid will depend on numerous factors. If you know that the area is very up-and-coming or that there are multiple people interested in the house, you will need to bid higher.
A lower bid can be acceptable if the house has been on the house for a while now or the current owner needs to sell quickly.
If all goes smoothly, you can calculate with ca. 6 weeks. Once your offer got accepted, you need to hire a solicitor or conveyancer. You also need to finalize your mortgage application. The bank usually takes about 2 weeks for your offer to be accepted. After the mortgage is approved, the exchange of contracts can take place. The period between the exchange and completion depends on you and the seller. In most cases, 2 to 4 weeks pass between the two.
The exchange of contracts (exchange for short) is the time from which the purchase is legally binding. Both the seller and the buyer have now contractually agreed to make good on the transaction or face legal (and financial) repercussions.
The completion date is made by a mutual agreement between you and the seller. It might take a bit of back-and-forth to settle on a day, so try to start discussing it a couple of weeks before the exchange day.
It takes only a day. The process is longer if there is a chain as there are multiple contracts that need to be exchanged. However, even in a long chain, a day should be enough.
The completion means that the transactions are legally binding from that point. It is also the day when you receive your keys and can move in.
It usually takes 2 to 4 weeks. It depends mostly on how fast you and the seller can arrange to move.
There is no set maximum number of days. We will say that you should be mindful of your mortgage offer. Some of them have an expiration date.
In rare cases, the exchange and the completion happen on the same day. Most commonly cash buyers without a chain can exchange and complete on the same day. We advise against this option as if anything falls through at the exchange, all the organization you did for moving will also be redundant.
The completion day is the day when your solicitor transfers the total house price to the seller. Once the seller’s solicitor confirms that they received the full amount, they will hand over the keys to the estate agent. You can pick the keys up from the agent and then it is moving time!