HOUSE BUYING GUIDE

Appointing a Solicitor

When an offer on a property has been accepted, the seller’s estate agent will need your solicitor’s details. Your solicitor handles all legal aspects of purchasing a property, this is known as conveyancing. You have to pay all solicitor’s costs so it is quite in order to obtain quotes from a number of solicitors to decide which firm you wish to use.

Finalising Mortgage Arrangements

Once your offer on the purchase has been accepted you need to finalise your mortgage arrangements. The lender will usually want to see evidence of your earnings (recent pay slips), P60 and bank statements. Most lenders will also carry out a valuation on the property to determine whether the property is suitable as their security. You can pay for a more detailed survey that may point out any defects with the property. A homebuyer’s survey and valuation provides a report on the general state of repair of the property. A full structural survey is more expensive as the surveyor covers all accessible parts of the property. The lender will only use a surveyor to obtain a valuation survey. It will not cover the purchaser in the event of any structural or other faults. If you have any doubt as to the state of the property it is incumbent on you to obtain a survey of your own, which you have to pay for.

Exchanging contracts

Once your solicitor has carried out all necessary searches and the contract terms have been agreed, the contracts can be exchanged. Once each party has signed the contracts and they have been exchanged, they are binding. The contracts will include a completion date, which is the date that the property becomes yours. At exchange of contracts any deposit required has to be paid. At exchange of contracts you need to arrange buildings insurance so that the property is insured from that day. Usually, if you have one, your present insurer will cover this new property free of increased premium until the completion date.

Completion

This is the day when your solicitor will have completed the purchase on your behalf and the property is vacant for possession. The Transfer Deed, the document confirming you as the owner, will then be sent to the relevant registry for an update to the title showing you as the new freeholder.

Moving In

The property is now yours and you can move in. You may need to arrange for a firm of professional movers to help you. Once you are in your new home you have a legal responsibility to advise the local authority (rates), the statutory utility suppliers, the Inland Revenue and you will need to tell others as necessary (telephone, other suppliers, any outstanding creditors, relatives, friends etc).

What are the costs involved?

Deposit

When contracts are exchanged a deposit is usually required and paid through your solicitor. This is a percentage of the purchase price arranged with agent and vendor – usually between 5% and 10%.

Valuation / Surveys

To ensure that the property is an acceptable security for a loan, the mortgage lender’s surveyor will need to inspect and value the property. The cost, if any, of this valuation depends upon which lender you choose.

Legal Costs

Usually a solicitor or licensed conveyancer needs to be appointed to deal with the legal aspects of purchasing a property. This will incur costs. You can ask for an estimate of these costs before you instruct the legal expert.

Local Authority Search

Your legal adviser will carry out a local authority search to discover if there are any plans for future developments that could affect the value and purchase of your chosen property.

Land Registration

This verifies legal ownership of the property and registers the owner at that address.

Stamp Duty

This is a government tax based on the property’s purchase price and is calculated as follows:
Up to £60K – Nil, £60K - £250K – 1%, £250K - £500K – 3%, £500K+ – 4%.

Arrangement Fee

Most lenders charge an arrangement or application fee for a mortgage. Some lenders will allow you to add this to the mortgage and the fee varies depending on the lender chosen and the mortgage offer.

Mortgage Indemnity Guarantee - (Also known as Mortgage Indemnity Premium or High Lending Fee).

This is an insurance policy designed to protect the lender against losses incurred if the property needs to be taken into possession because of arrears. This insurance is commonly used for high loan to value mortgages, where the value of the property is not much more than the requested amount of the loan. This charge is usually passed on to the borrower but it is important to remember that this is insurance for the lender, not the borrower, but paid for by you.

Insurance

Lenders insist that the property is adequately insured with a suitable buildings insurance policy, covering against the usual risks. In addition to this you will need contents insurance to cover theft, fire, damage etc.

Another form of insurance is a mortgage payment protection plan that is designed to offer income protection against unemployment, sickness and redundancy.

Life Assurance

Most lenders require Life Assurance to be taken out to cover the value of the loan if you die.

One of the following is usually necessary.

Term Assurance is the cheapest and simplest form of life cover, providing life assurance for a fixed term only. The sum assured is payable only if the life assured dies within that period. There is no investment value to the policy at any time.

Level Term Assurance the sum assured does not change during the term of the policy. Such policies are generally used to repay a loan on the death of the borrower (the life assured). Level Term Assurance is most suitable when the loan has a fixed capital value that remains unchanged throughout its term. Policies can be written on a single life or on a joint life basis.

Decreasing Term Assurance policies are ones where the sum assured decreases over the term of the policy in step with the reducing balance of the loan. This type of policy is commonly used to protect a capital & interest repayment mortgage, where the outstanding balance reduces each year.

People to notify once you have moved

Once you have moved into your new home there are a number of people you need to notify of your change of address. These include the following:
Family
Friends
Employer
Business contacts
Bank / Building society
Credit Card Company
Loan Company
Insurance Company
Pension Provider
Inland Revenue
HP Companies
Royal Mail
Cable / Satellite Company
Gas Provider
Electricity Provider
Water Provider
Telephone Company
Mobile Telephone Company
Television Licensing
Council Tax Office
Dentist
Optician
Doctor
Schools
Library
Vet
Clubs and Societies
DVLC