Guide to Buying
19 September, 2014
It doesn't matter whether you're a first time buyer, upgrading, or Buy To Let, surely you'll have a couple of questions. So here, we'll attempt to answer a few of the biggest head scratchers.
First Time Buyer: How long will it take me to buy my first property?
Ah good, a nice nebulous question to start! The honest truth is that there is no golden number when it comes to home buying timescales, but there are plenty of ball park figures that can inform you on the best and worst case scenarios.
At the moment, if you're looking for a property in London, it's very likely that you will have to make some compromises when it comes to finding your first home. There are an estimated 8-10 people looking for every home in the capital, so if you're searching for the perfect dream property, you may be on the hunt for some time. You have to think about where you want to live, and if it's a specific area, how determined are you to stay there?
“How much work are you willing to do to a property upon moving in? How quickly are you in need of moving? – do you need to move now or can you bide your time?†Asking yourself these questions will give you a much better idea of what you're facing, while also providing an indicator of how long you'll be on the prowl. You might find yourself in that stopgap property in as little as a month, or you may still be searching this time next year.
For the average buyer, finding a home will take between 3 – 8 months, which might seem like a long time, but when you do finally find your property, things will speed up quite dramatically because you'll have to move fast.
Assuming you make an offer and it's accepted (this could happen in minutes!), you will then have to secure your mortgage. This should take no longer than four weeks, and to ensure it's a quick as possible, you should make sure you have certain things in place. Get a mortgage advisor and solicitor before you start looking for a house in earnest - it's good practice, and a great psychological box to tick that reminds you that this is really happening.
Work out the maximum amount of money you can afford to pay on your mortgage every month, then obtain an agreement in principal from your lender. This means that in theory your bank or other mortgage provider is there to provide the money when you come to the crunch. Total time to get a mortgage? Four to five weeks.
Then you have to exchange contracts, which, provided everything is in order on both sides of the contract, should take another 4-5 weeks. This is because both parties solicitors will be called in to carry the deal through to completion. Delays can often occur at this point as the solicitors go through the deal in minute detail. Because solicitors will often speak directly to each other during this stage, you may feel like everything has gone quiet, but don't panic, it's ticking along fine and you'll be alerted in due course when everything is ready. At this point, you'll be asked to pay your deposit, so that needs to be ready to go to further speed things up and ensure a smooth exchange.
Finally, you've nearly completed the sale, and if you're lucky, this will happen very quickly, but it's advisable to keep cool and patient anyway. You don't know when the current occupiers are moving out, you have to pack, book removal men, find a window at work to take a few days off, but then, eventually, you will have done it.
Second Time Buyers: When will I be ready to upsize? Another question which has a great deal of variables, and another decision which shouldn't be made until you've sat down with a pen, paper and a calculator to do some sums and ask yourself some serious questions.
Why are you looking to move? The most likely answer is that you're about to find your family has grown, either with your first child, or perhaps a second, and there simply isn't enough space left for you to begin raising a family. If this is the case, your budget will be the first order of the day. It's no secret that children are expensive, so whether it's your first, second or even third child, you need to factor in these additional outgoings when finalising your budget before approaching banks and mortgage lenders.
If you're looking to change location, or you're simply looking to move into a bigger property thanks to a promotion or new job, perhaps, you can be ever so slightly more relaxed. But even so, finding a place on the second step of the ladder can be just as frustrating as the first.
“ Finding a place on the second step of the ladder can be just as frustrating as the first.â€
So assuming you know why you're moving, it's time to start from scratch, like a first time buyer, and work out the why, where and how much of your prospective new home. This in turn will help you decide on your budget. Hopefully in your time at your current property you'll have made enough improvements that upon valuation you find that the value of your property has increased – if it hasn't, what have you been doing?
In London the rising house prices – a survey from Nationwide building society in April this year said the average price of a London home had increased by 18% over the year and by 5.3% in the past three months alone – means that you'll likely get a decent return on your previous investment.
Life on the property ladder is a linear path, but not a straight forward one. There are plenty of pits and traps to fall in, but playing it right, may very well mean a financial careless pension. ▾ Now let's assume at this point that you haven't paid off your mortgage, so like the cat, it will be coming with you to your new home. Most mortgages these days will be considered ‘portable' – a survey from MoneySupermarket.com in 2012, found that of the 2,599 mortgage products available on the market, only 199 did not allow you to move your mortgage - which obviously make them sound lovely and convenient. Despite this, your mortgage lender will reassess you as if you were a first time buyer all over again, which can be frustrating, but makes sense when you acknowledge that the lender is simply checking that your financial status has not changed radically. Your mortgage is more than likely to increase with the size of your property, so the lender will pour over your outgoings to make sure you have enough in the kitty to pay the bills. It's also worth remembering that if you do get a top-up loan in order to buy your next property, your interest and fees will be in line with current rates, even if your original mortgage was signed some years ago. It's unlikely, but if your original mortgage provider does decide not to offer you a mortgage on your new property, it isn't the end. Contact your mortgage provider, or go and meet one if you haven't already and ask them to contact a specialist lender. But be prepared to pay a premium. Landlords: I want to buy a second property as Buy To Let, where do I start? So you're in the lucky position of having enough cash free to invest in a Buy to Let property, the first thing is to realise that it's not simply a case of buying another property and putting it up to let. Think about why you're renting, and if it's the right thing for you. If the goal is to make some more money, for example, then thisismoney.co.uk says that in recent years a high-rate saving account would offer a better return than the majority of properties. However, many would argue that there is no better, or more secure, investment for your money than bricks and mortar. If you decide to follow the latter route, then you need to think about where you want to buy this new property. If you're London based, it does make sense to buy the property in the capital if you can, but that still doesn't mean it's the best investment, especially if your budget won't stretch to a London property. In Wales, for example, landlords are achieving a 6.7 per cent yield (rent measured as a percentage of property price) on their properties, according thisismoney.co.uk. Whether you choose to buy in London or not, make sure you choose a promising area. This doesn't just mean the most expensive, or the cheapest, but rather somewhere that people will want to live, and will continue to be desirable for many years to come. Once you've done this, you need to sit down and do the maths to work out exactly what you can afford. The majority of Buy to Let lenders typically want the rental income to cover 125% of the mortgage repayments, so you need to think about who you're going to rent to in order to make mortgage payments and a profit, or if you're going to use 100% of rental income to pay off the mortgage quicker. To work out your annual return on investment, you need to subtract your annual mortgage cost from your yearly rent and then work this out as percentage of your original deposit. There's a lot to take into account. These were just three questions of an infinite number that will be buzzing around your head, whatever your reasons or stage of buying. If you have something you'd like answered, contact us on twitter at @BrikLondon.
At the moment, if you're looking for a property in London, it's very likely that you will have to make some compromises when it comes to finding your first home. There are an estimated 8-10 people looking for every home in the capital, so if you're searching for the perfect dream property, you may be on the hunt for some time. You have to think about where you want to live, and if it's a specific area, how determined are you to stay there?
“How much work are you willing to do to a property upon moving in? How quickly are you in need of moving? – do you need to move now or can you bide your time?†Asking yourself these questions will give you a much better idea of what you're facing, while also providing an indicator of how long you'll be on the prowl. You might find yourself in that stopgap property in as little as a month, or you may still be searching this time next year.
For the average buyer, finding a home will take between 3 – 8 months, which might seem like a long time, but when you do finally find your property, things will speed up quite dramatically because you'll have to move fast.
Assuming you make an offer and it's accepted (this could happen in minutes!), you will then have to secure your mortgage. This should take no longer than four weeks, and to ensure it's a quick as possible, you should make sure you have certain things in place. Get a mortgage advisor and solicitor before you start looking for a house in earnest - it's good practice, and a great psychological box to tick that reminds you that this is really happening.
Work out the maximum amount of money you can afford to pay on your mortgage every month, then obtain an agreement in principal from your lender. This means that in theory your bank or other mortgage provider is there to provide the money when you come to the crunch. Total time to get a mortgage? Four to five weeks.
Then you have to exchange contracts, which, provided everything is in order on both sides of the contract, should take another 4-5 weeks. This is because both parties solicitors will be called in to carry the deal through to completion. Delays can often occur at this point as the solicitors go through the deal in minute detail. Because solicitors will often speak directly to each other during this stage, you may feel like everything has gone quiet, but don't panic, it's ticking along fine and you'll be alerted in due course when everything is ready. At this point, you'll be asked to pay your deposit, so that needs to be ready to go to further speed things up and ensure a smooth exchange.
Finally, you've nearly completed the sale, and if you're lucky, this will happen very quickly, but it's advisable to keep cool and patient anyway. You don't know when the current occupiers are moving out, you have to pack, book removal men, find a window at work to take a few days off, but then, eventually, you will have done it.
Second Time Buyers: When will I be ready to upsize? Another question which has a great deal of variables, and another decision which shouldn't be made until you've sat down with a pen, paper and a calculator to do some sums and ask yourself some serious questions.
Why are you looking to move? The most likely answer is that you're about to find your family has grown, either with your first child, or perhaps a second, and there simply isn't enough space left for you to begin raising a family. If this is the case, your budget will be the first order of the day. It's no secret that children are expensive, so whether it's your first, second or even third child, you need to factor in these additional outgoings when finalising your budget before approaching banks and mortgage lenders.
If you're looking to change location, or you're simply looking to move into a bigger property thanks to a promotion or new job, perhaps, you can be ever so slightly more relaxed. But even so, finding a place on the second step of the ladder can be just as frustrating as the first.
“ Finding a place on the second step of the ladder can be just as frustrating as the first.â€
So assuming you know why you're moving, it's time to start from scratch, like a first time buyer, and work out the why, where and how much of your prospective new home. This in turn will help you decide on your budget. Hopefully in your time at your current property you'll have made enough improvements that upon valuation you find that the value of your property has increased – if it hasn't, what have you been doing?
In London the rising house prices – a survey from Nationwide building society in April this year said the average price of a London home had increased by 18% over the year and by 5.3% in the past three months alone – means that you'll likely get a decent return on your previous investment.
Life on the property ladder is a linear path, but not a straight forward one. There are plenty of pits and traps to fall in, but playing it right, may very well mean a financial careless pension. ▾ Now let's assume at this point that you haven't paid off your mortgage, so like the cat, it will be coming with you to your new home. Most mortgages these days will be considered ‘portable' – a survey from MoneySupermarket.com in 2012, found that of the 2,599 mortgage products available on the market, only 199 did not allow you to move your mortgage - which obviously make them sound lovely and convenient. Despite this, your mortgage lender will reassess you as if you were a first time buyer all over again, which can be frustrating, but makes sense when you acknowledge that the lender is simply checking that your financial status has not changed radically. Your mortgage is more than likely to increase with the size of your property, so the lender will pour over your outgoings to make sure you have enough in the kitty to pay the bills. It's also worth remembering that if you do get a top-up loan in order to buy your next property, your interest and fees will be in line with current rates, even if your original mortgage was signed some years ago. It's unlikely, but if your original mortgage provider does decide not to offer you a mortgage on your new property, it isn't the end. Contact your mortgage provider, or go and meet one if you haven't already and ask them to contact a specialist lender. But be prepared to pay a premium. Landlords: I want to buy a second property as Buy To Let, where do I start? So you're in the lucky position of having enough cash free to invest in a Buy to Let property, the first thing is to realise that it's not simply a case of buying another property and putting it up to let. Think about why you're renting, and if it's the right thing for you. If the goal is to make some more money, for example, then thisismoney.co.uk says that in recent years a high-rate saving account would offer a better return than the majority of properties. However, many would argue that there is no better, or more secure, investment for your money than bricks and mortar. If you decide to follow the latter route, then you need to think about where you want to buy this new property. If you're London based, it does make sense to buy the property in the capital if you can, but that still doesn't mean it's the best investment, especially if your budget won't stretch to a London property. In Wales, for example, landlords are achieving a 6.7 per cent yield (rent measured as a percentage of property price) on their properties, according thisismoney.co.uk. Whether you choose to buy in London or not, make sure you choose a promising area. This doesn't just mean the most expensive, or the cheapest, but rather somewhere that people will want to live, and will continue to be desirable for many years to come. Once you've done this, you need to sit down and do the maths to work out exactly what you can afford. The majority of Buy to Let lenders typically want the rental income to cover 125% of the mortgage repayments, so you need to think about who you're going to rent to in order to make mortgage payments and a profit, or if you're going to use 100% of rental income to pay off the mortgage quicker. To work out your annual return on investment, you need to subtract your annual mortgage cost from your yearly rent and then work this out as percentage of your original deposit. There's a lot to take into account. These were just three questions of an infinite number that will be buzzing around your head, whatever your reasons or stage of buying. If you have something you'd like answered, contact us on twitter at @BrikLondon.