Taking those first steps on the property ladder is a very exciting time for anyone. Whether you are buying alone, as a couple or with friends, there are a few things you need to be aware of. Purchasing a property is not all about choosing colour schemes and buying new furniture; you need to think carefully about your mortgage, the home buying process, and all the other aspects involved in purchasing your first home.
With the government recently announcing further help for first-time buyers, and many schemes already in place to help young people secure their first property, now is the time a lot of first-time buyers are considering all their options. In this mini-guide, we answer all your questions and share everything you need to know about buying your first home.
What Is the Buying Process for First Time Buyers?
Before you set out searching for your dream property or applying for your mortgage, it is crucial that you understand the buying process. Buying a home is a lengthy task, and there are decisions you need to make at every step of the way. A lot of first-time buyers assume that once they have had an offer accepted on a property, everything is ready to go, but there are still numerous checks and procedures that need to happen before the sale is finalised. The basic process for buying a house includes:
• Finding your home and putting in an offer
• Choosing a solicitor
• Securing a mortgage
• Completing necessary searches and surveys
• Reviewing the Contract and legal title and raising enquiries of the seller
• Exchanging the contracts
• Completing and paying any relevant taxes and additional fees
• Registering your new property
Which Searches and Surveys Are Required?
You are probably aware that buying a home involves some searches and surveys on the property. With many different types of surveys available, knowing which you need and which you don’t, can be confusing. Most mortgage providers will require you to take out some searches, including:
• Local authority searches: These look at the local area and highlight things that could affect the property’s price in the future, like planning permission and other nearby changes.
• Water and drainage searches: These will see if your property is connected to mains water supplies and drainage to public sewers.
• Location/property specific searches such as Mining, Cheshire Brine etc
Depending on the property, you may need other searches and surveys as well, such as structural surveys or searches to look at public pipelines and paths nearby. Your solicitor will be able to advise you on which searches you must have for your mortgage and which might be a good idea for your own peace of mind.
Mortgage Guarantee Scheme
The mortgage guarantee scheme was unveiled in the March 2021 Budget and is designed to help buyers with a small deposit to get a mortgage on properties costing up to £600,000. It works in a similar way to the previous Help to Buy mortgage guarantee scheme which ended in 2016, and is scheduled to run from April 2021 until December 2022.
Both first time buyers and homeowners looking to move up the property are eligible for the scheme, and only need to put down a 5% deposit. Lenders are provided with a guarantee from the Government which will compensate them if the property is repossessed or sold for less than the value of the outstanding mortgage.
Under the terms of the scheme, lenders must offer a five year fixed rate within the new product range, which will help buyers looking for peace of mind that their payments won’t change if interest rates go up in future.
Bear in mind that some lenders continue to offer 95% mortgages, even without the Government guarantee. Seek advice if you’re not sure which type of mortgage is likely to suit your needs.
What Schemes Are Available to First Time Buyers?
Help to Buy equity loan
The latest version of the Help to Buy equity loan scheme is available to first time buyers who have a deposit of 5% to put down.
Rather than taking out a mortgage for the remaining 95% of the property value, the Government lends you 20% of the property price, and so you only need a mortgage for the remaining 75%.
If you’re buying a property in London, the Government will lend you up to 40% of the property price. Once your 5% deposit is factored in, that means you only need a mortgage for 55% of the property value.
(Price cap for properties eligible for Help to Buy Equity Loan scheme from April 2021 to March 2023)
North East £186,100
North West £224,400
Yorkshire and The Humber £228,100
East Midlands £261,900
West Midlands £255,600
East of England £407,400
South East £437,600
South West £349,000
If you are preparing to buy your first home and need advice and guidance on the buying process and options available to you, our team are happy to help. Get in touch with Dootsons Solicitors to discuss your new property.