After being left shocked at how little he knew about buying a house, Twitter user Leonard Ihenacho decided to let others in on everything he’s learned about the long, tiring process of purchasing a house that property professionals don’t tell you – and it’s a lot. Unfortunately, there’s much more to buying your first place than just the deposit…
1. The Stamp Duty
The first thing Leonard comes to is, of course, stamp duty. Last year came the good news that stamp duty was being eradicated for first time buyers in the UK – but that ruling has caveats. See, stamp duty has been removed for first time buyers, but only when you’re paying £300,000 or less for your property. Those spending between £300,000 and £500,000 on their first pad (we can all dream, right?), will get the first £300k free of stamp duty, and the rest taxed at 5%. So, if you’re lucky enough to buy your first property at £500,000, expect to pay £10k in tax.
3. The Survey
Then comes the survey. This ensures the property “exists, is worth what you’re going to pay for it, and that it’s structurally sound”. According to Leonard, these can cost up to £2,000, and will be carried out on new builds – even if it doesn’t exist yet.
The cost of the valuation isn’t the only problem – Leonard points out the surveyor visit is a pivotal moment in the buying process, as they determine the worth of the house. “Let’s say you make a decent offer of £500,000 for a house,” he says. “It’s accepted, you apply for the mortgage. It gets granted, subject to the valuation survey. They do it, [and] determine the worth is £410,000 max.”
So, Leonard continues, the bank only lends you £410,000, leaving £90,000 you can’t pay yourself. You got back to the seller and ask if they will accept the £410k the bank agreed to, rather than £500k, but that’s never going to happen. Now you have to start again and find a new place, but you already have a number of debts to pay, including credit card payments. So your new mortgage is refused.
3. The Solicitor’s Fee
Next, it’s solicitor’s fees. They will usually charge up to £1,500 to exchange contracts with the seller’s solicitor. These are always necessary when buying a house, meaning that, so far, your deposit fund will need to expand by about £5k.
4. The Problem With New Builds
If you’re shopping around for a new build, Leonard says this is where things can get complicated. “First of all you need to check whether it is actually an existing building or off plan,” he advises. “Off plan simply means the building doesn’t exist yet.”
With an off plan new build, you have to decide whether to buy based on the images and plans of what the building is due to look like. Leonard advises, while you might be buying a house that doesn’t exist, if you’re buying from one of the big UK builders like Permission, Barratt Homes, or Crest Nelson, you should still go and look at another house in a different location that’s similar to yours. as the plan and the reality can be completely different.
And that’s not the only way you can get screwed over by a new build. Leonard lists a number of questions you should make sure you ask the house builder at your appointment, including which direction the garden faces, where the entrances and exists to the building are, and whether there are any strange community rules to adhere to.
He adds that once you have asked all your questions, “the house buyer MUST show you DETAILED drawings of your plot, discuss wall and fence height with you, discuss who is responsible for maintaining walls and fences should they get damaged”.
5. The Haggling
The next part of Leonard’s plan is attempting to save yourself thousands by being a little bit cheeky. He says you need to tell the house builder they must pay these surmounting property-buying fees he’s been talking about, by insisting there’s a “development down the road [who’s] offering to pay those for them”.
According to Leonard, they’ll be expecting you to make these demands, and while they might not agree to all of them, it’s worth the sheer awkwardness if you can save yourself a bit of money.
6. The Reserve Fee
If you’re set on buying a new build, and you finally have it agreed with the builder, Leonard said you then need to reserve the property, which costs anywhere between £500 and £1000. At this point, you’re locked in a contract to purchase the house, which means if you change your mind you’ll lose your entire deposit. Using a mortgage broker usually costs around £350 to £500, but will make the buying process much smoother – and from the journey you’ve already been on so far, you need it.
7. The Proof
Because the process never seems to end, the next step to buying is proving you can actually pay for a mortgage. When applying for a mortgage, the bank considers your salary, any bonuses you might get, your credit card debt, car finance, student loans, and any other finances you might have. This will apply to both you and whoever you’re buying with. And, as Leonard says, applying with someone else is a huge help, as two incomes are better than one – unless they have a huge amount of debt, that is.
8. The Insurance
Next, it’s time to consider insurance. Leonard advises you get life insurance, building insurance (usually a necessary requirement) and content insurance. Writing a will to decide how you want your share in the property to be distributed will also help if you die unexpectedly.
9. The Buying Options
Leonard points out that, if you’re buying with someone else, there are two ways to actually purchase the house: joint ownership or ‘tenants in common’. The former means you and your partner each own the property 100%, so if one of you dies, the ownership is immediately transferred to the surviving owner. The latter sees each of you deciding how much of the property you own. If you each owned 50%, and one of you dies unexpectedly, you can choose who to give your 50% to – for example, your mum, or a sibling.
10. The Completion
Think it’s over? Think again – you still need to complete. If you’ve bought a new build, and are waiting for it to be built, you could be waiting around six months. But Leonard points out that mortgage offers from the bank can expire after four to six months, so if your build is delayed, and your offer expires, you have to ask for an extension. “If this is denied, then you have to reapply,” Leonard warns. “If your reapplication fails you lose your mortgage. If you can’t get another you FORFEIT YOUR DEPOSIT.”
Gulp. But as long as that doesn’t happen, you’re on the home stretch. Completion is where you pay all those fees that have added up along the way, and you finally get your keys. This will likely be around six months to a year after you started the whole process. Congratulations! You now own a home, and probably need to nap for about a month.
We don’t know about you, but we think Leonard might be our new hero. You can read the whole of his thread via his Twitter, and learn much more about property buying than you ever thought you would from Twitter.
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