Buying a property for the first time, can be a daunting prospect, even second or third time buyers can find the process stressful. Being prepared is essential, as you will need the help and advice from a number of professionals. Preparation and obtaining as much information upfront will also make you feel more confident.
We have set out a few key considerations below. Every purchase is slightly different and our list won’t cover every eventuality, however, the list will assist with a framework of items to think about.
How much deposit will I need to pay, and when?
Usually a 10% deposit is required. Some sellers will accept a 5% deposit, however, if less than 10%, this will need to be negotiated directly with the seller or agent before agreeing to buy the property.
You will pay your deposit directly to your lawyer, who will pay this sum to the seller’s lawyer upon exchange of contracts. Do not pay any monies directly to the seller and ensure you speak to your lawyer about this, if any direct payments are being requested.
Who are you buying the property with?
Prior to purchasing the property, consider as to how the property will be held on the legal title. You will need to speak to your lawyer in detail about this as your relationship with any co-owners will usually dictate whether the property will be held as joint tenants or tenants in common. You will receive an explanation of the difference from your lawyer at the beginning of the transaction.
Are any family members or friends contributing towards the purchase price?
There may be relatives or friends who will provide financial contributions to the purchase price to help you on to the first rung of the ladder. These individuals will not necessarily be on the legal title, and simply may wish to assist. You will need to be clear with your lawyer and your mortgage lender as to the exact amounts being provided and also whether they are being treated as outright gifts or whether they are actually loans. Being clear about this at the outset is important and will prevent any confusion or further questions at the point of exchange of contracts.
Is the property freehold or leasehold?
It is easy to assume that all houses will be freehold; however, this is not the case. Houses can be held on long leasehold interests. If this is the case, then you will need to consider whether there is to be any ground rent payable or even service charges for any commonly used areas. Also, there may be restrictions in the leasehold as to relating to any alterations to the property and further regulations relating to the property’s use.
It is advisable to check with your lawyer at the outset of the purchase as to whether the property is freehold or leasehold.
Remember to budget for other costs
Prior to making an offer on a property, it is advisable to make a list of the further costs which may need to be paid, and which can easily be forgotten:
- Survey costs
- Lawyer’s fees
- Removal costs
- Valuation fees
- Buildings insurance
- Furnishings and decoration costs
Affordable home-buyer schemes
There are a number of government-backed schemes to help people on to the property ladder, such as help to buy and shared ownership schemes. Check as to whether you qualify for the schemes prior to looking for a home to buy.
Stamp duty relief
Stamp duty relief is available for first time buyers purchasing properties within England, Wales and Northern Ireland.
First time buyers paying £300,000 or less for a residential property will pay no stamp duty land tax. First time buyers paying between £300,000 and £500,000 will pay stamp duty land tax at 5% on the purchase price above £300,000.
However, if you are a first time buyer purchasing for more than £500,000 you will not be entitled to any relief and will need to pay stamp duty at the normal rates.
If you require further information, please do not hesitate to contact me or a member of the Residential Property team.