A new home is a major purchase, and in most cases, buyers will take out a mortgage from a bank or building society. Understanding the different financial steps toward buying your new home can help to reduce the stress of the process and make things simpler.
Before starting the process of buying your new home, it is helpful to get what is called an Agreement in Principle for a mortgage. You should start by speaking to a mortgage advisor or broker to understand how much you can borrow towards your new home. A mortgage advisor will look at your household income and expenditures along with the amount of deposit, you must understand how much you can comfortably afford to borrow.
The Agreement in Principle will give you a budget that you can work with for your new home. It doesn’t mean that you need to borrow the full amount if you don’t need to but it will give you a budget that works for you.
Once you have a budget for your new home and have decided on a style and location for your property, you will normally need to pay a reservation fee to secure the home. This reservation fee, which is usually £500 allows Rowland to take the property off the market and start the sales process. The deposit amount counts towards the final price of the property and will be deducted from the overall total.
A conveyancing solicitor will manage most of the purchase process once you have agreed to buy a property, and it is a good idea to speak to different conveyancers in your area to find one that you are happy to work with.
When banks and building societies lend you money to buy a property, the loan is secured against the value of the home, and as such, they will undertake a valuation of the property to ensure that there is sufficient value.
The valuation process for a new build home considers factors such as your deposit, local property prices and demand as well as market trends, and once complete, the lender will confirm how much they are prepared to loan you. In most cases, the amount that was agreed in principle will be finalised.
When buying a new build home, the house may be under construction during the sale. As such, the exchange of contracts might be carried out before the house is completed, and at this stage you would normally pay a deposit of 10% of the price which commits you to the sale – this process is handled by your conveyancer and the deposit may not be part of the amount borrowed for your mortgage.
On completion day, the house becomes legally yours after your conveyancer has transferred the monies from your lender or sale of your previous property. At this stage, you receive the keys to your new property.
Stamp Duty is a tax paid to the government on the sale of houses. The amount of tax due is based on the property value, and there are exemptions for some people such as first-time buyers, depending on the value of the property. Your conveyancer will oversee the payment of Stamp Duty as part of the purchase process.
The conveyancer charges legal fees. These will depend on the law firm that you use but typically range from £750 to £2,000.
Arrangement fees for mortgages may be added to the amount that you borrow. Usually, mortgage companies will offer a range of products with different interest rates and requirements, and the fee can vary significantly depending on the product that is recommended for you.
Learn more about the range of different options available when buying a property from Rowland including additional schemes such as Discount to Market, Shared Ownership, and Part Exchange that can help you purchase your new home.
