First Time Home Buyers in UK - An Essential Guide

Buying the first home:

It’s definitely a very special feeling to buy a home. But one thing that’s for sure is whether you are a first time buyer or have bought a house earlier as well, the complexity of the process is never less and there is a lot to consider before jumping to a conclusion.

First Time Home Buyers in UK - An Essential Guide

How to choose a house is a tough question!

Buying a house isn’t about you and your needs alone. You must keep in mind that if ever you want to sell your property, it should fulfill the basic criteria of all types of buyers. Therefore, the first thing to list down is the kind of property you are looking for.

The entire process of saving to moving in your house is a matter of well thought decisions

Before you made up your mind to buy a house you are well aware of your budget and the mortgage or if you have a property for sale. Once done with the budget, make a list of the requirements you have like the number of rooms, parking and other facilities. In case you have chosen an area you are not well aware of, take help of your property broker.

Kind of property you want?

1. New Build Home Benefits:

  • 5 to 10 years of warranty and insurance
  • Shorter property chain, you being at the end of the selling chain
  • Lower Maintenance
  • Incentive scheme offered by the builders

2. Retirement Homes Benefits:

  • With all the benefits of a new build they also offer advanced security features like video entry and alarm cords for circuit breakers, fire and smoke.

The cost of buying a house

While purchasing a house it’s not the upfront cost that has to be kept in mind but the other costs as well have to be taken under consideration like the mortgage as well as the ongoing cost.

Upfront Cost

A few things that you have to keep in mind to get the property of your choice considering these to be the immediate investments you have to make when you decide on a property.

  • Deposit- Whenever you purchase a house, the first thing that you pay is the deposit. Normally, these deposits are as per the discretion of the dealer but 40% of the total amount is an optimal deposit that opens up several options for you to grab the best deal from the mortgage lenders.
  • Stamp Duty and Land Tax- In UK, Stamp Duty and Land Tax varies depending on the country you choose to buy a property in. For eg. in Scotland, buyers don’t pay tax on the first £ 145,000 while in England and Wales the amount is £125,000. As the amount increases the percentage of tax payment increases accordingly.
  • Valuation Fee- Mortgage lenders charge this amount to make an assessment of the value of the property for their understanding if they are equipped to lend you or not. Depending on the value, the mortgage lenders may or may not charge you.
  • Surveyor’s Fee- It’s recommended that before jumping into a decision, it’s always good to know about the property you are planning to purchase to help you overcome sudden unwanted expenditures. Surveyors help you know a lot about the condition of the property like if there is any damp or cracks, the roof is ok, timber or utility related problem. Mortgage assessment is different from this, it is a kind of guarantee for the mortgage lenders that assures that the money they lend you against your property is worth it.
  • Legal Fees- To be legally clear about your property like if it is disputed or not, you need to consult a solicitor or licensed conveyancer. This person can take care of all the legal matters involved in purchasing a property.
  • Electronic Transfer Fee- This is a fee that costs around £40-£50 and takes care of lender’s mortgage transfer cost to the solicitor.
  • Broker Fees- It’s normally difficult to hunt for a property on our own and that’s why one prefers to hire a broker who helps as the middle man between buyer and the lender. These people are associated with several lenders and thus are capable to offer a lot of choices; they normally charge you some fee.

Mortgage Costs

This depends on the property, the lender and the country property laws in which you decide to buy a property except the insurance. Mortgage lenders ensure that your property in insured to safeguard their money. Well but as a buyer you too can add a few causes like contents insurance to keep your belongings safe or life cover to ensure that even in worse circumstances your mortgage could be paid off if anything did happen to you.

Ongoing Costs

  • Insurance- Mortgage lenders ensure that your property in insured to safeguard their money as mentioned above.
  • Council tax- This depends on the valuation of your property and which country of UK you live in.
  • Utilities- It depends on the usage of the utilities like gas, water, electricity, telephone etc.
  • Maintenance and repairs- Well if you had done a property survey then this will be an estimated cost barring the ones you spend for time to time décor changes.

Conveyancing for Buyers

While buying a property it’s a necessity to consult a solicitor or licensed conveyancer to ensure that the property you purchase is legally yours, as discussed in the Legal fee section. Here is an elaborate explanation of the charges and processes.

  • Fixed Fees- it means you and the solicitor at the beginning of the transaction agree upon a fixed amount to be charged for the entire process.
  • Fee Payable only if you move in- In case, you can’t move into the property decided upon initially due to any circumstances the solicitor will help you move into a new property without any additional cost.
  • Second Search Fee- If due to some reason the first property you chose didn’t work out for you for any other reason apart from legal issue and you choose a new property then your solicitor may charge a second search fee.
  • Complete Search Information- This is a detailed search not just about your property but your locality. This search informs you about the planning permissions around the property within 200 meters, amenity information as well as information regarding environmental issues like flooding. AL of these will be substantiated with proper facts and data.
  • Service Legal Agreements- This agreement ensures that you are well aware of all the actions that your solicitor takes and the reason behind them.
  • Helping in receiving your Title Deeds- Solicitors work for you till all the legal formalities are over which includes your title deeds. You may receive the keys to your property but that’s not all. You title deed will take a few months to reach your lender as your solicitor will be working on them. And you can have your title deeds only when you repay the complete mortgage to your lender.

Getting a Mortgage

There are different types of mortgages to begin with:

  • Fixed Rate Mortgage where the rate of interest is fixed for a period of time and later is back to the lender’s Standard Variable Rate.
  • Discounted Rate Mortgage that offers specific amount of reduced rate of interest for a particular time period.
  • Standard Variable Rate is the normal rate of interest that the lender charges. This includes no special discount. This rate is subjected to change depending on the market conditions.
  • Offset Mortgage links your mortgage to your savings or current account according to which the rate of interest is calculated not on the basis of the entire mortgage amount but the difference between the savings and the mortgage.
  • Tracker Rate Mortgage is depended on a particular base rate according to which the mortgage rate of interest fluctuates up and down.

Government Mortgage Schemes for First Time buyers

There are several Government sponsored affordable to support first time home buyers.

Help to Buy:

Those having small deposit can apply for this scheme:

  • First time buyers can avail the Equity Loan Scheme to purchase a new build property. The property cost must not increase £600,000. This scheme allows buyer to borrow minimum 20% of the purchase price interest-free.
  • First time buyers can avail the Mortgage Guarantee Scheme that takes care of the losses of your lender if you are unable to repay. But you have to repay the amount to the Government.
  • Forces Help to Buy Scheme enables eligible personnel from Armed Forces to borrow an interest-free amount up to 50% of their salary (not exceeding £25,000).

Shared Ownership Mortgages

In this case you buy a share of a house with 25% to 75% of the property value and for the rest you can keep paying rent. Later as per your convenience you can buy the rest of the shares of the property gradually.

Right to Buy

Under this scheme eligible council and housing tenants can buy their council home at a discount, not only this but also this scheme offers joint application that may include two or three family members who shared the house with you for past one year irrespective of the fact that they share your tenancy or not.

Starter Home Scheme

For first time buyers under the age of 40, it’s a golden opportunity as per the new government plan. As per the scheme 200,000 new build homes will be sold at 20% off the market price.

Making an Offer

To ensure the offer you make is profitable for you consider a few things:

  • The property and its location is as per your requirement
  • The ongoing, repairing and maintenance cost doesn’t exceed your budget, as in this case you can negotiate
  • If you are a first time buyer, have an old property to sell or a pre-arranged mortgage offer you are at a favorable negotiating position.
  • If the seller’s property is in the market for long or is in a hurry you can negotiate further compared to the ones who have a hot property with no hurry to sell.

But again, this process differs from country to country in UK.

We hope this guide is useful for all the first time home buyers who aspire to buy their first dream house.

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.


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