Swindon      01793 524444
Gloucester 01452 260729

Your Local Independent Specialist Insurance, Mortgage and Commercial Finance Advisors

Guide to buying and owning a property

A complete guide to buying your home from your local independent specialist mortgage advisor

Buying a property is a big step so think hard about what you can afford. You will need to consider what you may be able to afford on a new mortgage. For most people buying a property the biggest on going cost is the mortgage and if you don't keep up the repayments the lender can repossess the property.

What's the amount I can borrow?

The first step in buying a home is to find out how much you can borrow. We will be able to tell you the amount by taking into account your income and, if relevant, your partner's income. Often, lenders will subtract from the amount you can borrow, any financial commitments you have that are fixed, for example a personal loan, car purchase plan or credit card repayments. Lenders offer different incentives to the borrower where certain charges can be added to the loan, for example your legal fees or mortgage arrangement fee. Some lenders may rebate these fees upon completion of your mortgage. A lender may charge a Mortgage Indemnity Guarantee (MIG) fee if you are borrowing an amount over a certain loan to value percentage, often 75%. Some Lenders increase this to 90% or even 95%. What term can my Mortgage be over? The mortgage payment term has often been 25 years, but in recent years may people have been extending the term to 30 or even as long as 40 years. The length of the term will affect the total amount of interest to be paid and the amount of your monthly payments over the lifetime of the loan. Most lenders will ask to see proof that a borrower applying for a loan going beyond the borrower's normal retirement date, can afford the repayments in retirement as well as during employment. Be careful, as changing the term of a mortgage can often incur extra charges, especially if the mortgage is in the early years or has an outstanding incentive period, for example a fixed rates, or discounted trackers, capped rates  and cashback, offset mortgages, banks vs building societies or private banks even foreign currency options.

Getting a mortgage

There is no doubt that mortgages can be confusing. With so many products available, it is difficult to know which is best suited to your needs. And that is where the danger lies - a wrong decision could end up being a very costly error.

Of course, the best course of action it to seek independent professional advice before making any decision. Your mortgage adviser will discuss your needs and circumstances with you before recommending the most suitable mortgage for you. They'll give you a Key Facts Illustration that sets out the loan’s total cost and gives essential information like whether you add fees to your loan. You will need to consider which valuation survey you want which the lender will required to be carried out. Most people have a basic property valuation and the least expensive type of report. You could ask for a Survey and valuation that gives you guidance on the essential things you may need to know about the property, such as defects and problems that are serious or that may significantly affect the value.

How will you repay your mortgage?

There are three different ways of repaying your loan. These are repayment, interest-only, and a combination of repayment and interest-only, but generally now a days there is just one as lenders have put many additional requirements in place to make it very difficult to obtain an interest only mortgage. Repayment mortgages are also known as 'capital and interest' mortgage you gradually pay off the amount you borrowed over the term of the loan (the 'capital'), together with interest. You make one payment each month to your lender. In the early years, most of your mortgage payment goes towards repaying the interest, with a small part allocated against the capital. Over time, the balance switches, so you're paying off an increasing amount of the capital each month. As a result, you may find that you don't pay off much capital for the first few years. A repayment mortgages guarantee that the whole loan is repaid by the end of the term.MMB Finance repayment mortgage graph

Interest-only mortgage you pay the interest charges you don't pay off any of the loan amount. With an interest-only mortgage, you'll need to repay the loan at the end of the mortgage term. You're responsible for regularly checking that your investment plan remains on track to repay your mortgage. If your plan does not give you enough money to repay your mortgage at the end of the term, you may have to sell your property.

It's possible to split a mortgage between repayment and interest-only. This means that at the end of the mortgage term you'll still have an amount of the mortgage to pay off, which you'll need to do using a lump sum. So, as with an interest-only mortgage, you'll need to make sure you've a plan to repay this amount at the end of the term.

What about stamp duty?

You won't pay any stamp duty on the first £125,000. You’ll then pay 2% on the portion up to £250,000, and 5% on the portion up to £925,000. Between that point and £1.5 million, it’s 10% then 12% on anything over £1.5 million.

What extra costs could I pay?

The additional costs that might be incurred does depend on the type of mortgage that you choose. Below is a summary of the type of costs that you could have:

Buildings and Contents - Your lender will require the property to be covered by buildings insurance and in some cases mortgages are conditional on the buildings and contents insurance being taken with the lender.

Life insurance to cover your mortgage a decreasing-term life insurance policy. If you have a family it's worth considering adding family protection cover.

Accident, Sickness or Unemployment (ASU) Insurance - you may decide to take out an ASU policy to ensure that you would be able to continue to meet your monthly mortgage payments in the event of any of these conditions occurring.

Solicitor’s fees and service

Whenever you buy, sell, arrange finance or make agreements about your house it is likely that you’ll need a legal solicitor or licensed conveyancer. Take a look at our Online Conveyancing service. With most of the documentation required sent to you by email, 24/7 case updates available, use of text messaging and other online services our aim is to deliver the most efficient, progressive & convenient conveyancing service possible. What does a conveyancer do? Effectively they transfer of ownership of real estate from one person to another. The preparation, execution, of numerous legal documents and investigating the title of the property is one of the most important elements of conveyancing.

Whether buying or selling, you should be aware of anything affecting the property such as proposals by government departments, illegal buildings, or outstanding debits.

When buying a home you will need to consider the different types of old and new property, purpose-built flats or conversions, or a shared ownership or shared equity scheme.

The most common is freehold property title, If the property is freehold, then you own the property and the land it’s built on. We don't lend on freehold flats in England and Wales or Northern Ireland.

The other is Leasehold property, then you own a temporary right to occupy the property and the land it’s built on. The property and the land are owned by someone else and they lease them to you for a number of years. Leases can last for decades or centuries. There is usually an annual charge for the lease, called a ground rent.

New-build or converted properties a property that has been built or converted within the last ten years must be part of a building standards indemnity scheme. This gives a ten-year warranty against material defects. There are a number of acceptable schemes, but the main one is run by the National House-Building Council (NHBC).

You may want to buy Shared equity property this can take different forms but usually you own 100% of the property but pay a reduced amount to the builder, for example 75% of the property value. You own 100% of the property so there is no rent to pay. The builder holds a 25% stake in the property and registers this interest in your property at the Land Registry. At a later date, when you can afford to, you can buy the remaining 25% from the builder at a cost of 25% of the value of the property at that time. If you decide to sell the property, you must give the builder 25% of the sale proceeds. There are currently two Help to Buy schemes, Equity Loan and Mortgage Guarantee.  Both require a 5% deposit and are available to first time buyers and existing homeowners.

Another way to buy a home is through a Shared ownership scheme. A Shared ownership schemes are usually offered by registered social landlords or local authorities. With this type of purchase you buy a share of a property, say half, and pay a reduced rent for the rest to the registered social landlord or the local authority. The share you first buy may be as little as 25%, but if you wish you can buy more shares later until you own the property outright.

If you an investor you may be looking at a Buy to let purchase. A buy to let mortgage is a loan you can take out to buy a property that you intend to rent out to tenants. The most you can borrow is linked to the amount of rental income. These mortgages aren't available to first-time buyers.

Dealing with estate agents when buying a house

Some estate agents specialise in particular types of properties, but remember they are working for the seller on the buyer so don’t matter how nice they are they are not your friend. Never let them know your maximum price. Otherwise the chances are you’ll end up having to pay it.

Don’t be pressed into using their mortgage advisors. Some estate agents put pressure on people to use their mortgage service, saying they will get preferential treatment or, worse, claiming they are unwilling to work with them unless they do. Putting undue pressure on you in this way is illegal.

Estate agents are likely to have a far narrower selection of mortgages products, there may be an upfront charge for their advice whereas MMB Finance can give you mortgage advice for free.

Making an offer

Once you have found the perfect property, haggling over the price, you then need to decide how much you want to pay for it.

Be aware of how much similar properties in the area, and how quickly they sold. Put in you offer start low and work your way up,  and remember by law estate agents have to pass on every offer they receive to the seller, however ridiculous. As with all negotiations, a good rule of thumb though is to offer 5% to 10% lower than the asking price If the seller is interested in your offer then the negotiations start. These are conducted via the estate agent working on their behalf, while the buyer is left to their own devices.

While negotiating for a house can seem daunting, keep in mind that the seller is also probably pretty worried about getting the price they want.

Don’t be overly influenced by other things thrown in with the deal. For example, unless very new, second hand white goods are usually worth very little and its often less hassle to sell them with the house than move them.

The offer has been accepted Once a seller has accepted your offer, ask them to take the property off the market, which they should do if they are serious about accepting your offer. They do not have to, but if they do this will prevent other potential buyers butting into your purchase.

Next telephone us on Swindon (01793) 524444 or Gloucester (01452) 543531 and we will sort everything else out, working with the agent, you new mortgage lender and solicitors to complete you purchase as smoothly as possible.

 

Your home may be repossessed if you do not keep up repayments on your mortgage. Not all buy-to-let mortgages, or loans and debt services are regulated by the Financial Conduct Authority. Think Carefully before securing other debts against your home.