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A Complete Guide for First-Time Buyers

A Complete Guide for First-Time Buyers

Buying a property is one of the biggest investments most people will make in their lifetime, and for first time buyers, it can be an especially daunting process. From understanding the difference between freehold and leasehold to navigating the mortgage application process, there’s a lot to learn. In this guide, we’ll provide a step-by-step overview of the key considerations when buying a property in the UK.

Freehold vs Leasehold

The first thing to consider when buying a property is whether it’s freehold or leasehold. Freehold properties are owned outright by the buyer, meaning they own both the property and the land it sits on. Leasehold properties, on the other hand, are owned by the leaseholder for a set period of time, typically between 99 and 999 years. The freeholder, who owns the land, will grant the lease and may charge ground rent and service charges.

When buying a leasehold property, it’s important to check the length of the lease and the amount of ground rent and service charges you’ll be required to pay. These charges can add up and affect the affordability of the property.

Saving for a Deposit

Before you can buy a property, you’ll need to save for a deposit. The larger your deposit, the more options you’ll have when it comes to mortgages, and the lower your monthly repayments will be. In the UK, a typical deposit is between 5% and 20% of the property’s value.

There are several government-backed schemes available to help first time buyers save for a deposit. The Help to Buy ISA and the Lifetime ISA both offer a government bonus on your savings, up to a maximum of £3,000 and £1,000 per year, respectively.

Mortgages

Once you have saved for a deposit, the next step is to find a mortgage. A mortgage is a loan that you take out to buy a property, with interest charged on the amount you borrow.

When choosing a mortgage, there are several factors to consider. These include:

Fixed or variable interest rate: A fixed rate mortgage means your repayments will remain the same for a set period, typically between 2 and 10 years. A variable rate mortgage means your repayments can go up or down in line with changes in interest rates.

Mortgage term: The length of your mortgage will typically be 25 years, although it can be shorter or longer.

Deposit size: The larger your deposit, the more options you’ll have when it comes to mortgages and the lower your interest rate is likely to be.

Affordability: Lenders will assess your ability to repay the loan based on factors such as your income, employment status, credit score, and outgoings.

The Mortgage Application Process

To apply for a mortgage, you’ll need to provide the lender with information about your income, employment, and credit history. The lender will carry out a credit check and may request additional documents such as bank statements, payslips, and proof of ID.

Once the lender has assessed your application, they will carry out a valuation on the property to ensure it’s worth the purchase price. If the lender is satisfied with the valuation and your affordability, they will make you a mortgage offer.

Other Costs

In addition to the deposit and mortgage repayments, there are several other costs associated with buying a property in the UK. These include:

  • Stamp Duty: This is a tax you’ll need to pay on the purchase price of the property. The amount you pay depends on the property’s value, with rates ranging from 0% to 12%. First time buyers are exempt from paying stamp duty on properties up to £300,000, and a reduced rate applies to properties up to £500,000.

  • Legal Fees: You’ll need to pay for a solicitor or conveyancer to handle the legal aspects of buying a property. This can include carrying out searches, dealing with the Land Registry, and transferring ownership.

  • Surveys: Before buying a property, it’s a good idea to have a survey carried out to identify any potential issues. There are several types of survey available, including a basic valuation survey, a homebuyer report, and a full structural survey. The cost of a survey will depend on the type and size of the property.

  • Moving Costs: Once you’ve bought your property, you’ll need to budget for the cost of moving. This can include hiring a removal company, buying packing materials, and redirecting your mail.

Other Useful Information

When buying a property in the UK, there are several other factors to consider. These include:

Location: The location of a property can have a big impact on its value and potential resale value. It’s important to consider factors such as transport links, local amenities, and crime rates.

Energy Efficiency: When viewing a property, it’s worth checking its energy efficiency rating. A higher rating can save you money on energy bills in the long term.

Leasehold Restrictions: If you’re buying a leasehold property, it’s important to check for any restrictions on alterations or subletting. Some leasehold agreements may also require you to pay for permission to make alterations or extend the lease.

In conclusion, buying a property can be a complex process, but with careful planning and preparation, it’s possible to make the process as smooth as possible. There are many factors to consider, but by doing your research and seeking professional advice where necessary, you will find the right property for your budget and needs.

At Interlet, we are committed to providing the best service possible. If you are buying and have questions or concerns arising out of this article, please don't hesitate to call us. We are here to help!

020 7795 6525  | marketing@interlet


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