This information applies to England, Wales and Northern Ireland
How much can you afford
The first thing you need to do is decide how much you can afford. You will need to look at how much money you have available yourself and how much you can borrow. There are a number of different financial institutions which offer loans to people buying a property, for example, building societies and banks. You should find out if you are able to borrow money and if so, how much.
Some building societies now provide buyers with a certificate that states that a loan will be available provided the property is satisfactory. You may be able to get this certificate before you start looking for a property. Building societies state that this certificate may help you to have your offer accepted by the seller.
Before finally deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional costs. These include:-
For more information about Stamp Duty Land Tax, go to the HM Revenue and Customs (HMRC) website at www.hmrc.gov.uk/so, or ring the HMRC Stamp Office enquiry line on: 0845 603 0135.
You should be aware that if you start the process of buying a property and then the sale falls through you may have already paid for a valuation and/or a survey. If the solicitor has started any legal work you may also have to pay for the work done.
You should also take into account the running expenses of the property you wish to buy. These may include:-
You will also have to pay a deposit on exchange of contracts, up to 10% of the purchase price, a few weeks before the purchase is completed and the money is received from the mortgage lender.
How to find a property
There are a number of ways in which you could find a property to buy:-
When you find a property you should arrange to look round it to make sure it is what you will need and to get some idea of whether or not you will have to spend any additional money on the property, for example, for repairs or decoration. It is common for a potential buyer to visit a property two or three times before deciding to make an offer.
Is the property leasehold, freehold or commonhold
If the property is freehold, this means that the land on which the property is built is part of the sale and no ground rent or service charge is payable.
A property may be leasehold, which means that the land on which the property is built is not part of the sale. You have to pay ground rent to the owner of the land - who is called the freeholder.
The length of a lease can vary and you should check that the length of the lease on the property you are interested in buying is acceptable to the mortgage lender. You should consult an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.
In addition to ground rent on a leasehold property, you may have to pay an annual service charge. This usually happens with a flat. The service charge covers such items as maintenance and repairs to the buildings, cleaning of common parts and looking after the grounds.
A group of leaseholders living in the same building may have a right to jointly buy the freehold of the building or take over its management.
In England and Wales, you can get further advice about leasehold from:-
The Leasehold Advisory Service (LEASE)
If the property is commonhold, this means that you can buy the freehold of a flat and own common parts of the building jointly with the owners of other flats in the building (known as a commonhold association).
In commonhold a ground rent or service charge is not payable. However, a share of the commonhold association's expenditure on maintenance, insurance and administration will be payable for the common parts of the building.
Further information about commonhold is available from LEASE – see above under leasehold property for details.
When you decide you would like to buy a particular property you do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money.
If the property is being sold through an estate agent, you should tell the estate agent what you are prepared to pay for the property. The estate agent will then put this offer to the owners.
If the owners do not accept the first offer put to them by you, you can decide to make an increased offer. There is no limit on the number of times you can make offers on a property. If you make a written offer it will always be made subject to contract. This means that you will not be committed to the purchase before finding out more about the state of the property. If you make an oral offer this is never legally binding.
When your offer for the property has been accepted you will have to consider the following:-
Once the owners have accepted your offer the buyer may be asked to pay a small deposit to the estate agent. This is usually between £500 and £1000. It is meant to show that you are serious about going ahead with the purchase. It is repayable if the sale does not go ahead.
Arranging a mortgage
If you have not already begun to arrange a mortgage, you should start to do this now. It should take about three weeks from the application for the mortgage to the formal offer being made by the lender. However, this time-scale may vary.
Whoever agrees to lend the money will want to have the property valued. This is to make sure that the lender could get the loan back if for any reason you stopped paying your mortgage and the house had to be sold again. The valuation will be done by a surveyor on behalf of the lender but you will have to pay for this valuation. The fee will be payable in advance, usually when the you send a completed mortgage application form to the lender.
If the amount of money to be borrowed is more than a certain percentage of the valuation of the property (usually 75-80%), your lender may make it a condition of the loan that you take out extra insurance to cover the extra amount. You pay a single premium to your lender which is usually added to the loan. This is known as a higher lending charge (or mortgage indemnity guarantee).
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I am pregnant and have just applied for a mortgage. It has been turned down because they say I won't be returning to work after the baby is born. Are they allowed to do this?
A mortgage lender doesn't have to give you a mortgage. However, they must not refuse to lend you a mortgage, or treat you less favourably than other people, simply because of your race, sex, disability, religion or sexuality.
The mortgage lender is not allowed to turn down your application on the grounds of pregnancy. This is sex discrimination and it is against the law. Get advice from an experienced adviser about what to do.
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Arranging a survey
The valuation which is done for whoever is lending the money is not a survey. You should consider whether or not to have an independent survey carried out in addition to the valuation. The survey would not only consider the value of the property but would also examine the structure of the property and should identify any existing or potential problems.
There are two levels of survey that you can choose between:-
It is possible for you to use the same surveyor who does the valuation to carry out the survey and this may be cheaper. However, you can use a different surveyor if you wish.
If the surveyor reports that there are some problems with the property, you will have to consider whether you still want to go ahead with the purchase or want to negotiate further with the seller about the price. The surveyor will usually advise you as to how any problems they have identified should be dealt with and the likely costs of this. You can find more useful information about property surveys at www.rics.org/Property/ResidentialProperty.
Choosing who is to do the legal work (conveyancing)
The legal process of transferring the ownership of the property from the present owner to the buyer is known as conveyancing. You should decide who you want to do the conveyancing work. You can do it yourself – although this can be complicated – or you can:-
Using a solicitor
Woolliscrofts offer a conveyancing service. Although all solicitors can legally do conveyancing, it is advisable to choose a solicitor who has experience of this work.
If two or more people are buying the property jointly they will be joint legal owners. The agreement of all legal owners is needed if the property is to be sold, although if there is a dispute an owner can apply for a court order.
As well as the legal ownership of property, there is the beneficial ownership to be considered. This means the shares in the property to which the owners are entitled.
There are two types of beneficial ownership - joint tenants and tenants in common. If you are joint tenants, your property cannot be sold without the agreement of both of you. If one of you dies, their share of the property passes automatically to the other. If you own your property as tenants in common, each of you will have a share in the property that you can dispose of as you like. It is up to you to decide how much each share will be. If one of you dies, you can leave your share to whoever you like.
Steps in the legal work of buying a property
Although it is impossible to give a precise idea of how long the legal work involved in buying a property takes, it is possible to offer guidelines. From having an offer accepted to exchange of contracts can take up to seven weeks and from exchange of contracts to completion can take up to four weeks. However, if there are any problems the time taken may be longer.
Enquiries made by the solicitor or, in England and Wales, licensed conveyancer
Once you have instructed the solicitor or, in England and Wales, a conveyancer, the seller’s solicitor or the licensed conveyancer draws up a contract which will eventually be signed by you and the seller. However, before the contract can be signed, your solicitor or licensed conveyancer must make sure that there are no problems with the ownership of the property, rights of way, access, or future developments in the area that might affect the property. This is called ‘making enquiries and searches’. The solicitor or licensed conveyancer makes the enquiries and searches as follows:-
Arranging to pay the 10% deposit
Whilst the solicitor or, in England and Wales, a licensed conveyancer is making the enquiries, you should sort out how you will pay the deposit that has to be made when the contracts are exchanged. This deposit is usually 10% of the price of the home. However, it is sometimes possible to come to an agreement to pay a smaller deposit. If you are also selling a house it is usually possible to put the 10% deposit on the property being sold towards the deposit on the property you are buying.
If you are unable to provide the 10% deposit it is possible to use a ‘deposit guarantee scheme’. Your solicitor or licensed conveyancer can arrange this with an insurance company.
If raising the deposit may be a problem, you should discuss the options with your solicitor or licensed conveyancer.
To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
Alternatively, you could consider borrowing the money for the deposit from elsewhere, for example, from relatives or a bridging loan from a bank. However, the amount of interest you will have to pay for a bridging loan will be high and you should check how much this arrangement will cost.
Insuring the property
You should make sure that buildings insurance is arranged from the date of exchange, because once contracts have been exchanged you are responsible for the property.
You may be able to get information on buildings insurance from your mortgage lender, solicitor or, in England and Wales, a licensed conveyancer.
To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
Exchange of contracts
The final contract between you and the seller is prepared when:-
You and the seller each have a copy of the final contract which you must sign. These signed contracts are then exchanged. At exchange of contracts both you and the seller are legally bound by the contract and the sale of the house has to go ahead. If you drop out, you will lose your deposit.
You should make arrangements for the supply of gas, electricity and telephone service and make sure that the seller is arranging for final meter readings to be made.
Completion of the purchase usually takes place about four weeks after exchange of contracts, although it can be earlier. On the day agreed for completion:-
The solicitor or licensed conveyancer (in England and Wales only) will usually send their account to you on, or soon after, the completion date.
The right to buy and the Statutory House Sales Scheme
Who has the right to buy (or the right to a statutory house sale in Northern Ireland)
As a public sector tenant you will probably have the right to buy if you are a secure tenant of:-
You have the right to buy if you have been a public sector tenant for at least two years. However, if your tenancy began on or after 18 January 2005 (in Northern Ireland, after 12 October 2004), you must have been a public sector tenant for at least five years.
As a tenant, you will not have the right to buy if you are:-
If you are not sure whether you have the right to buy, you should check with your landlord which category you fit into.
If you are a secure tenant of a local authority, you should be given written information to help you decide about the right to buy. You can also get this information from a government leaflet called Your right to buy your home.
This leaflet is available in a number of different languages, including Urdu, Arabic, Gujerati, Bengali and Welsh.
As a tenant with a right to buy, you will get a discount on the price of the property. If you live in a house the discount will be between 32% and 60%, depending on how long you have lived there. If you live in a flat, the discount will be between 44% and 70%, depending on how long you have lived there. The discount will not exceed the regional upper limits, which, in England and Wales, range from £16,000 to £38,000.
In Northern Ireland, if you have been a secure tenant for 5 years you will get a 20% discount, and a further 2% discount for every additional year you have been a secure tenant. The maximum discount you can get is £34,000.
If you exercise the right to buy and then sell the property within a certain period, you may have to repay some or all of the discount – check the rules with your local authority.
To find out more about how this might apply to you, see the government leaflet Your right to buy your home, or get advice from an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
How to pay
As a tenant who wants to exercise your right to buy, you should try to obtain a mortgage from a building society or high street bank. You could also contact a mortgage broker to see if they can arrange a mortgage.
However, if you cannot afford to buy the property outright you can still buy under the rent to mortgage scheme. Under this scheme you can buy a share of the property and make mortgage repayments on the amount you have borrowed for this. The landlord will retain ownership of the remaining share of the property.
How to apply
In England and Wales, if you want to apply for the right to buy you should ask your landlord for the Right to Buy Claim Form (Form RTB1). In Northern Ireland, you should ask for a house sales application form. The landlord must provide it.
The right to acquire (England and Wales only)
As a secure or assured tenant of a registered social landlord, for example, a housing association or a local housing company, you may have the right to buy your home under a different scheme called the ‘right to acquire’. The right to acquire only applies to a limited number of properties, for example, homes built with public funds on or after 1 April 1997.
For more information about the right to acquire, in England you should contact your landlord or the Housing Corporation who can be contacted on telephone number 0845 230 7000 or by visiting www.housingcorp.gov.uk. In Wales, you should contact the Welsh Assembly Government on telephone number 0845 010 3300 (English) or 0845 010 4400 (Welsh), or by visiting www.new.wales.gov.uk.
If you wish to buy a home you may be able to borrow money to do this. This is called a mortgage. The loan is for a fixed period and you have to pay interest on the loan. If you do not keep up the agreed repayments, the lender can take possession of the property.
Types of mortgages
There are several types of mortgage available. The most common are:-
Where to get a mortgage from
A mortgage could be available from a number of different sources. Some of the available options are:-
If you intend getting a mortgage you should make sure you investigate the different options available. If in doubt, you may wish to consult an independent financial adviser. For help with finding a financial adviser you could consult a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
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