The first thing you need to do is decide how much you can afford. You will need to look at how much money you have available yourself and how much you can borrow. There are a number of different financial institutions which offer loans to people buying a property, for example, building societies and banks. You should find out if you are able to borrow money and if so, how much (for information on mortgages, see under heading Mortgages).

Some building societies now provide buyers with a certificate that states that a loan will be available provided the property is satisfactory. You may be able to get this certificate before you start looking for a property. Building societies state that this certificate may help you to have your offer accepted by the seller.

Before finally deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional costs. These include:-

• survey fees
• valuation fees
• land registry fee
• local authority search
• fees, if any, charged by the mortgage lender or someone who arranges the mortgage, for example, a mortgage broker
• the buyer’s solicitor’s costs
• removal expenses
• any final bills, for example, gas and electricity, from your present home which will have to be paid when you move.

On some properties, where the seller has to provide a Home Information Pack (HIP), the seller will pay for local authority searches.

For more information about Home Information Packs, see Selling a home.

You should be aware that if you start the process of buying a property and then the sale falls through you may have already paid for a valuation and/or a survey. If the solicitor has started any legal work you may also have to pay for the work done.

You should also take into account the running expenses of the property you wish to buy. These may include:-

• heating bills
• community charge/council tax
• water rates
• ground rent, if the property is leasehold
• service charges, if the property is a leasehold flat
• insurance costs, including life insurance, buildings and contents insurance.

 

How to find a property

There are a number of ways in which you could find a property to buy:-

• using real estate agents
• looking at the property pages in local newspapers
• contacting house building companies for details of new properties being built in the area
• looking on the internet.

Deciding on a property

When you find a property you should arrange to look round it to make sure it is what you will need and to get some idea of whether or not you will have to spend any additional money on the property, for example, for repairs or decoration. It is common for a potential buyer to visit a property two or three times before deciding to make an offer.

Ask if there’s a Home Information Pack (HIP). This will give you important information about the property you’re thinking of buying, including an energy performance certificate, local authority searches and evidence that the person selling the property is entitled to do so. Not all properties will have a HIP - it depends on how many bedrooms they have and when they were put on the market.

For more information about Home Improvement Packs, see Selling a home.

Is the property leasehold, freehold or commonhold

Freehold property

If the property is freehold, this means that the land on which the property is built is part of the sale and no ground rent or service charge is payable.

Leasehold property

A property may be leasehold, which means that the land on which the property is built is not part of the sale. You have to pay ground rent to the owner of the land - who is called the freeholder.

The length of a lease can vary and you should check that the length of the lease on the property you are interested in buying is acceptable to the mortgage lender.

In addition to ground rent on a leasehold property, you may have to pay an annual service charge. This usually happens with a flat. The service charge covers such items as maintenance and repairs to the buildings, cleaning of common parts and looking after the grounds.

A group of leaseholders living in the same building may have a right to jointly buy the freehold of the building or take over its management.

Commonhold property

If the property is commonhold, this means that you can buy the freehold of a flat and own common parts of the building jointly with the owners of other flats in the building (known as a commonhold association).

In commonhold a ground rent or service charge is not payable. However, a share of the commonhold association’s expenditure on maintenance, insurance and administration will be payable for the common parts of the building.

Further information about commonhold is available from LEASE – see above under leasehold property for details.

Making an offer

When you decide you would like to buy a particular property you do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money.

If the property is being sold through an estate agent, you should tell the estate agent what you are prepared to pay for the property. The estate agent will then put this offer to the owners.

If the owners do not accept the first offer put to them by you, you can decide to make an increased offer. There is no limit on the number of times you can make offers on a property. If you make a written offer it will always be made subject to contract. This means that you will not be committed to the purchase before finding out more about the state of the property. If you make an oral offer this is never legally binding.

Can a seller refuse to accept my offer just because I’m a certain religion, color etc..?

Someone who sells a property directly to you, without going through an real estate agent, can decide they don’t want to sell to you because you are a certain religion, color, etc. They could also not refuse to sell to you because of your race, sex, disability or sexuality. However, if someone uses an real estate agent to sell the property, they can’t refuse your offer just because you’re a certain religion, color, etc, or discriminate against you for any other reason.

When the offer has been accepted

When your offer for the property has been accepted you will have to consider the following:-

• whether a holding deposit is payable
• arranging a mortgage - see below
• whether a survey is necessary - see below
• who will do the necessary legal work - see below
• whether you want to buy with someone else - see below.

Holding deposits

Once the owners have accepted your offer the buyer may be asked to pay a small deposit to the real estate agent. This is not usually more than $500. It is meant to show that you are serious about going ahead with the purchase. It is repayable if the sale does not go ahead.

Arranging a mortgage

If you have not already begun to arrange a mortgage, you should start to do this now. It should take about three weeks from the application for the mortgage to the formal offer being made by the lender. However, this time-scale may vary.

Whoever agrees to lend the money will want to have the property valued. This is to make sure that the lender could get the loan back if for any reason you stopped paying your mortgage and the house had to be sold again. The valuation will be done by a surveyor on behalf of the lender but you will have to pay for this valuation. The fee will be payable in advance, usually when the you send a completed mortgage application form to the lender.

If the amount of money to be borrowed is more than a certain percentage of the valuation of the property (usually 75-80%), your lender usually makes it a condition of the loan that you take out extra insurance to cover the extra amount. You pay a single premium to your lender which is usually added to the loan. This is known as a higher lending charge (or mortgage indemnity guarantee).

I am pregnant and have just applied for a mortgage. It has been turned down because they say I won’t be returning to work after the baby is born. Are they allowed to do this?

A mortgage lender doesn’t have to give you a mortgage. However, they must not refuse to lend you a mortgage, or treat you less favorably than other people, simply because of your race, sex, disability, religion or sexuality.

The mortgage lender is not allowed to turn down your application on the grounds of pregnancy. This is sex discrimination and it is against the law. Get advice from an experienced adviser about what to do.

Arranging a survey

The valuation which is done for whoever is lending the money is not a survey. You should consider whether or not to have an independent survey carried out in addition to the valuation. The survey would not only consider the value of the property but would also examine the structure of the property and should identify any existing or potential problems.

There are two levels of survey that you can choose between:-

• a full structural survey. This is suitable for a property which is large, more than 80/90 years old or in doubtful condition
• an intermediate or ‘house/condo/flat/apt/coop buyers report’ that gives a report on the condition of the parts of the house that are easy to see and to get at and may recommend further tests or investigations, for example, a specialist check for woodworm. This is particularly suitable for properties built this century which appear reasonably sound. It is much cheaper than a full structural survey.

It is possible for you to use the same surveyor who does the valuation to carry out the survey and this may be cheaper. However, you can use a different surveyor if you wish.

If the surveyor reports that there are some problems with the property, you will have to consider whether you still want to go ahead with the purchase or want to negotiate further with the seller about the price. The surveyor will usually advise you as to how any problems they have identified should be dealt with and the likely costs of this.

Choosing who is to do the legal work (conveyancing)

The legal process of transferring the ownership of the property from the present owner to the buyer is known as conveyancing. You should decide who you want to do the conveyancing work. You can do it yourself – although this can be complicated

Buying with someone else

Legal ownership

If two or more people are buying the property jointly they will be joint legal owners. The agreement of all legal owners is needed if the property is to be sold, although if there is a dispute an owner can apply for a court order.

Beneficial ownership

As well as the legal ownership of property, there is the beneficial ownership to be considered. This means the shares in the property to which the owners are entitled.

There are two types of beneficial ownership - joint tenants and tenants in common. If you are joint tenants, your property cannot be sold without the agreement of both of you. If one of you dies, their share of the property passes automatically to the other. If you own your property as tenants in common, each of you will have a share in the property that you can dispose of as you like. It is up to you to decide how much each share will be. If one of you dies, you can leave your share to whoever you like.

 

Steps in the legal work of buying a property

Although it is impossible to give a precise idea of how long the legal work involved in buying a property takes, it is possible to offer guidelines. From having an offer accepted to exchange of contracts can take up to seven weeks and from exchange of contracts to completion can take up to four weeks. However, if there are any problems the time taken may be longer.

Arranging to pay the 10% deposit

Whilst you should sort out how you will pay the deposit that has to be made when the contracts are exchanged. This deposit is usually 10% of the price of the home. However, it is sometimes possible to come to an agreement to pay a smaller deposit. If you are also selling a house it is usually possible to put the 10% deposit on the property being sold towards the deposit on the property you are buying.

If you are unable to provide the 10% deposit it is possible to use a ‘deposit guarantee scheme’.

Alternatively, you could consider borrowing the money for the deposit from elsewhere, for example, from relatives or a bridging loan from a bank. However, the amount of interest you will have to pay for a bridging loan will be high and you should check how much this arrangement will cost.

Insuring the property

You should make sure that buildings insurance is arranged from the date of exchange, because once contracts have been exchanged you are responsible for the property.

Exchange of contracts

The final contract between you and the seller is prepared when:-

• you are satisfied with the final outcome of all the enquiries
• any surveyor’s report has been received and any necessary action taken
• the formal mortgage offer has been received
• arrangements about the payment of the 10% deposit have been made
• the date of completion has been agreed.

You and the seller each have a copy of the final contract which you must sign. These signed contracts are then exchanged. At exchange of contracts both you and the seller are legally bound by the contract and the sale of the house has to go ahead. If you drop out, you will lose your deposit.

You should make arrangements for the supply of gas, electricity and telephone service and make sure that the seller is arranging for final meter readings to be made.

Completion

Completion of the purchase usually takes place about four weeks after exchange of contracts, although it can be earlier. On the day agreed for completion:-

• the mortgage lender releases the money
• the deeds to the property are handed over to your solicitor or licensed conveyancer
• the seller must hand over the keys and leave the property by an agreed time.

Discounts

As a tenant with a right to buy, you will get a discount on the price of the property. If you live in a house the discount will be between 32% and 60%, depending on how long you have lived there. If you live in a condo, the discount will be between 44% and 70%, depending on how long you have lived there.

How to pay

As a tenant who wants to exercise your right to buy, you should try to obtain a mortgage from a building society or high street bank. You could also contact a mortgage broker to see if they can arrange a mortgage.

However, if you cannot afford to buy the property outright you can still buy under the rent to mortgage scheme. Under this scheme you can buy a share of the property and make mortgage repayments on the amount you have borrowed for this. The landlord will retain ownership of the remaining share of the property.

Mortgages

If you wish to buy a home you may be able to borrow money to do this. This is called a mortgage. The loan is for a fixed period and you have to pay interest on the loan. If you do not keep up the agreed repayments, the lender can take possession of the property.

Where to get a mortgage from

A mortgage could be available from a number of different sources. Some of the available options are:-

• building societies
• banks
• insurance companies. They only provide endowment mortgages (see above)
• large building companies might arrange mortgages on their own new-build homes
• finance houses
• specialised mortgage companies.

Using a broker to get a mortgage

Instead of going directly to a lender such as a building society for a mortgage, a broker could be used. A broker may be an estate agent, or a mortgage or insurance broker. They will act as an agent to introduce people to a source of mortgage loan to help them buy a home.

A broker may be used when it could be difficult obtaining a mortgage directly from a lender, for example:-

• the mortgage required is particularly large
• the property is unusual in some way
• more than two people wish to jointly purchase the home
• the applicant is self-employed and their income fluctuates.

There are rules about how much a broker can charge for their services. Also, brokers must not discriminate against you because of your race, sex, disability, religion or sexuality when they are offering you their services.

Making a complaint about a mortgage lender

If you want to complain about a mortgage lender or broker, you should first discuss the problem with them, and then consider making a formal complaint. If you think the mortgage lender or broker has discriminated against you, you can complain about this as well. Each lender or broker should have its own internal complaints procedure.