How to buy a house in England and Wales: a stress-free guide
Buying a property can seem like a daunting prospect, especially if it’s your first time. Here’s our handy checklist to help you navigate the process as easily as possible
Buying your own home is such an exciting time. Whether you’re doing it on your own or with someone else, there are lots of steps to get through before you get the keys. Here’s where to start and how to make sure everything goes smoothly.
A guide to the house buying process
How much deposit do I need to buy a house?
Whatever the type of property you are looking to buy, you will need a deposit so start saving now. Typically, it needs to be at least 5% of the total purchase price. So for instance, a home costing £150,000 will need at least £7,500 deposit and a house for £200,000 will need £10,000. The bigger the deposit, the more your options open up when it comes to the mortgages you are offered – usually with a lower interest rate. Once you’ve got your deposit, the rest will rely on you borrowing from a mortgage lender.
How do I apply for a mortgage?
Shop around to see what various banks and building societies are offering on mortgages right now. Look at the interest rates and the different types of mortgages available, such as variable rate, tracker, fixed and discount.
To put you in a good position for viewing houses, it’s wise to apply for a mortgage agreement in principle (AIP), which is confirmation from a lender that they would, in principle, be willing to lend you a certain amount. This is based on your income, outgoings, any other loans and credit score and is also called a decision in principle (DIP) or mortgage promise. If you’re self-employed you usually need two or three years of business accounts. You can make an appointment to see the lender in person at your local branch or apply online.
If you feel daunted by the whole mortgage process it is worth making an appointment with a mortgage broker
How much do I need to budget for fees?
As well as the deposit, monthly mortgage payments and ongoing household bills once you’ve moved in, there are also a few other fees to budget for before you buy.
The biggest cost is the Stamp Duty. You don’t pay anything up to a purchase price of £125,000 (or £300,000 for first-time buyers) then it’s 2% for anything between £125,001-£250,000; 5% for houses between £250,001-£925,000 and 10% for anything between £925,001-£1,500,000. There’s a helpful calculator at moneysavingexpert to give you an idea.
Other costs will include a valuation fee to your mortgage lender, which will be between £150-£1,500 depending on the value of the house, the cost of having a survey done, which varies between £250 for a basic home condition survey to £600 plus for a full structural survey. Then there are the legal fees to your solicitor or conveyancer and these are around £850-£1,500 with local searches at around £250-£300 on top to check for local plans or problems (your solicitor will do these).
What to research when looking at areas
If you have somewhere specific in mind for the new property that’s great and saves a lot of work. If, however, you are hoping to move somewhere new, take some time to do your research on the local area. Much of it can be done online and can include checking online maps, whether there are any planning applications in the vicinity, local house prices, crime stats, news items and things on social media.
Visit the area at different times of the day and during weekends when it will be busier and walk around to get a feel for it. Check out the shops, cafés, bars restaurants, doctors, dentists, schools if applicable and other local amenities. You can always spend a night in an Airbnb or hotel to really get an insight into what it’s like to live there.
Do I need to show proof of mortgage to estate agents?
This isn’t a requirement as such until you make a formal offer on a property though some estate agents may ask to see proof of funds or an agreement in principle from a mortgage lender to determine that you are a serious buyer. In a hot market where demand outstrips supply, it’s a good idea to have all your ducks in a row and be ready so that you stand out against competing buyers. This is to prevent time wasters and to ensure the seller is only dealing with those who are ready to proceed.
Is there any help for first-time buyers?
There are some government schemes to help you get a foot on the housing ladder. These currently include a Lifetime ISA, Help to Buy, Right to Buy and Shared Ownership.
How do I make an offer and how much should I offer?
Every house on the market has an asking price and if you are certain that the one you have seen is for you, think carefully about what you want to offer in terms of how much you are willing to pay. Many people start by offering 5-10% lower than the asking price though this will depend on the current state of the market. When property is selling quickly, most go in at the full asking price – and it can also go to sealed bids if there is a lot of interest, where the price can go over the asking.
Find out how long the house has been for sale and look closely at the fabric of the building and its overall condition. Does it need a lot of money spending on it? Pricey jobs will include the roof, windows, boiler, electrics, plumbing and a new kitchen and bathroom. Other things like flooring and decoration are much easier, and cheaper, to change. Bear in mind your maximum budget in terms of your mortgage and deposit.
To make a formal offer, start by calling the estate agent and tell them that you would like to make an offer and how much you are willing to pay. Make sure you let them know your position in terms of whether you are ready to move quickly, especially if you don’t have anything to sell, which means you are chain-free.
Next, put your offer in writing – an email is quicker than the post – and include the words ‘subject to contract’. Include the name of the seller, the address of the sale property, the names of anyone who will be on the title, the purchase price you are offering, the deposit and mortgage in principle.
What do I do when my offer is accepted?
Congratulations, your offer is accepted. The first thing to do now is ask the estate agent to immediately take it off the market with no more viewings, in person or online. This is to prevent anyone else gazumping you and coming in with a higher offer.
Next, let your mortgage lender know, as they will need to arrange a mortgage valuation to ensure the property is around the same amount as the agreed purchase price. This is another reason why it’s best to get your mortgage agreed in principle, so you are ready to go once your offer is accepted.
Find a solicitor
Now comes the legal part. You’ll need a conveyancer to carry out searches, draw up and check contracts, deal with the Land Registry and pay any stamp duty and other fees on your behalf. To find one who specialises in property, ask your estate agent, lender, mortgage broker or an Independent Financial Advisor if they can recommend anyone. Alternatively, ask local friends who they used and always make sure they are a member of the Law Society of England and Wales.
Arrange a survey
A property survey will look at the condition of the house you wish to buy and detail any building or structural defects or concerns. Make sure you choose an RICS regulated surveyor and again, ask local friends for recommendations if you’re staying in the area. Whilst getting your own survey done isn’t a legal requirement, it will help you budget for any repairs and flag up anything that could be a deal-breaker such as major structural subsidence or expensive roof work. In some cases, you could renegotiate your purchase price if there is a lot of expensive work to do.
What survey do I need when buying a house
There are three levels of survey to choose from – a Home Survey Level 1 (previously called a Condition Report), Level 2 (previously called a HomeBuyer Report) and Level 3 (Building Survey), all of which are separate to - and in addition to - your mortgage lender’s valuation survey.
Whether you choose the basic Level 1 or the more in-depth Levels 2 and 3 will depend on the age of the property, its condition and whether you are keen to do any significant work or have any concerns. As a guide, properties up to £249,000 will cost around £500 for the Level 1, £600 for Level 2 and £750 for Level 3.
Get your building insurance sorted
Once the property is yours, you need to make sure you’re covered with buildings insurance, which protects you financially in terms of its structure, as well as contents insurance to cover all your possessions.
Buildings insurance will be based on your home’s rebuild cost if it were ever to be destroyed, which tends to be a lot less than its market value and you can find this figure on your survey or mortgage valuation.
If you already have contents cover you should be able to transfer it to the new property, so get in touch with your provider for more info. The premium may go up or down depending on the house, its location and any extras you wish to add onto the policy such as new furniture, appliances or electricals.
You should arrange for buildings insurance to be in place on the day you exchange contracts, as this is when you are legally responsible for the property and most mortgage lenders will insist on it. If the house is going to lay empty for some time (while you’re doing it up for instance) then you need to tell your insurer. Make sure the new policies are in place before you cancel any old ones.
You may also want to look at mortgage payment protection insurance and/or life insurance so ask your provider or an independent financial advisor for advice.
What happens when we exchange?
This is when you and the seller exchange signed contracts and you pay your deposit. Before this can happen, the conveyancer will have done all their searches and you will have your written mortgage offer, an agreed completion date and buildings insurance in place from the day of exchange.
Once you’ve exchanged, you have a legally binding contract to buy the property at the agreed purchase price and you can breathe a sigh of relief. The conveyancer now lodges an interest in the property and applies to the Land Registry to transfer the deeds to your name and anyone else whose name is to be on the title deeds.
When do you complete?
After exchange comes completion and this usually takes around two weeks later. If you need a shorter or longer time you can usually agree a convenient date with your conveyancer. Completion day itself can be a bit stressful, as this is when the rest of the money is transferred to the seller, via your conveyancer, and you get the keys to your new home. At this point you will probably be loaded up with your removals van and ready and waiting around the corner from the estate agent to collect the keys once you are given the thumbs up.
How does buying a house differ in Scotland?
The above information relates to England and Wales. For Scotland the rules are different. For instance, sellers need to provide buyers with a home report (excluding new-builds and recent conversions) where a single survey details a valuation and assessment of the condition of the building, an energy efficiency rating and a property questionnaire that includes things like parking and council tax band.
Properties tend to be marketed and sold by solicitors rather than estate agents and are advertised at a fixed price or for ‘offers around’ or ‘offers over’ a certain price. For the latter two, a closing date is set and any interested buyers need to submit sealed bids before the deadline. The seller then chooses the offer they wish to accept. For conveyancing, visit the Law Society of Scotland to find a qualified solicitor.
Find more information on the process of buying a property in Scotland here