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Other How do you buy a house?

Discussion in 'General' started by Archtronics, 2 Jan 2016.

  1. Archtronics

    Archtronics Well-Known Member

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    So planning on buying a house this year and I have absolutely no idea what I'm doing.

    At the moment I'm focused on getting a deposit together.
    Are there other steps I should be taking towards getting a mortgage now or do I wait till I have a chunk of money as a deposit?

    Generally what advice do you wish someone had told you when you where buying?
     
  2. rollo

    rollo Well-Known Member

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    There is hidden costs as people call them. Inspection for a house that you need to do to get a mortgage. If your buying the house from agent there's some fees that you pay there.

    I'd recommend you have at least a 10% deposit to avoid paying crazy rates. As you can easily save your money back compared to the 5%.

    I'd have at least a few grand spare for general repairs something always crops up that you don't think about or is not noticeable. Decorating can run into the thousands depending on rooms and what you need.

    Generally if I was doing it again I'd have 10% deposit and a £5k contingent for extras as I spent something close to that.
     
  3. Tichinde

    Tichinde Active Member

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    Consider costs of ownership too.
    Council Tax is one I missed when I first budgeted for my first house.

    Step one, talk to your lender about a mortgage, how much you can borrow etc etc.
    Most banks offer a "how much can I borrow" web page for mortgages to give you an idea.
    Then start looking within that price range.

    Most banks will offer complete advice around the process so make an appointment when you're ready.
     
  4. Nexxo

    Nexxo Stopped treating this country as if it was his own

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    Talk to a mortgage advisor about the process (and google it! What do you think the internet is for?).

    Also check out mortgages now. Interest rates are relatively low right now, and if house prices in your neighbourhood rise faster than you can save up a deposit, it may actually make more financial sense to move now (this is what happened in our case: we dove in with a 100% mortgage --available at the time-- because house prices actually rose faster than the amount of money we could save over the same period. When we later sold we used some of the equity as deposit on the next mortgage and got a more favourable interest rate).
     
  5. smc8788

    smc8788 ...at least I have chicken

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    I've just purchased using the help to buy scheme, as you're in the position of not having much of a deposit I'd highly recommend it as you only need a minimum of 5% deposit, then you get an equity loan from the government for another 20% (they own 20% of your property so if the price of your property goes up, then 20% of that is theirs).

    However it massively helps your LTV as a FTB as you would only be getting a 75% mortgage instead of a 95% one so the rates and deals will be much better. You don't have to pay anything on that loan for 5 years then you will need to pay back with interest after that period, although I am told it is better to remotgage and pay off the loan after the 5 years.

    Definitely speak to a mortgage broker/advisor though, they will get you the best rates, guide you through the whole process and submit your mortgage application for you to save you a lot of hassle.
     
  6. theshadow2001

    theshadow2001 [DELETE] means [DELETE]

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    The internet is for porn. But I suppose you could do other things on it as well.
     
  7. Nexxo

    Nexxo Stopped treating this country as if it was his own

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    The internet is mainly for porn. And some other stuff.
     
  8. yodasarmpit

    yodasarmpit No longer the other Brett.

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    Ahh, help to buy - the scheme that artificially increases the price of new builds.


    As had already been mentioned, your first step should be to arrange an appointment with a mortgage advisor. Although they will charge a fee, they tend yo have access to more options than you would including those which would negate their costs.
     
  9. benji2412

    benji2412 <insert message here>

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    My starting point, find yourself a good mortgage advisor and discuss it with them. I'd recommend the mortgage advice bureau, but there are plenty of others to choose from.

    This might not be immediately relevant to you, but some advice from someone who is looking to move out of their 'first time buyer' house after 6 years:

    Make sure it's in an area where you can sell it if you want to move on for whatever reason (we've grown out of it and want somewhere bigger and more rural).

    Our house is underpinned and not in a great area, which sadly is really putting a lot of people off buying it. So much so we're likely to have to pop it on a buy to let mortgage and use that to free some capital for a deposit for another house.

    Some buyers hide things, don't skimp on the surveyor if you think something might be wrong, especially if it's to do with the roof!

    Also, there is a new ISA designed specifically for first time buyers. Link

    Most important thing to remember though is that the more money you get together as a deposit, the better the interest rate and the quicker you'll pay down the debt.
     
  10. smc8788

    smc8788 ...at least I have chicken

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    Heh, you should try living in the south, prices here are artificially high regardless.
     
  11. gagaga

    gagaga Member

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    1. Clean up your spending and reduce outgoing to what is necessary. No toys between now and moving in, try to spend the same each month. Banks work on affordability rather than a simple X times salary now, so only spend what you need. Taking out cash to hide what you spend it on doesn't work either. Keep all credit card statements, bank statements, pay slips etc. It really is like washing your dirty laundry in public - all will want 3 months records, some as much as 6 months of info.
    2. With (1) you can find out what you can borrow - go into lenders and talk to their advisors - often they won't lend as much as the website or independent advisors suggest, so talk to them direct as well. A mortgage broker can be a good move (fees ~ £400) as they will do the leg work/form filling for you ans may have access to deals you don't
    3. Work out what you can afford - 5% deposit can work, 10% much better. Remember stamp duty, solicitors fees and searches ~£1000 (go for a local solicitor first time, saves a lot of hastle as they have local knowledge)
    4. Choose based on what you need and location - the cheapest house on a better street is usualy better than the best house on a cheap street.
    5. The lender will offer a valuation or survey - this is for their benefit, not yours. Take the cheapest (usually a valuation~£200) then get your own homebuyers survey from a surveyor you choose and pay direct (£400-1000 depending on house price).
    6. Make sure you've kept a cash contingency - say £2k as things / extra expenses always crop up during the last stages that can be horrible if you don't have cash to cover it.
    7. Free cast off furniture is much cheaper than shiny new on 0% credit deals
    8. Once in, knuckle down - if you've moved in with a small deposit, you're on a highish mortgage rate.... aim to pay off another 5-10% over your first 2-3 years (whatever mortgage you fixed for). Reason for this is that when the remortgage comes up, with the increase in value and your savings, you can tip to a 10 or 15% deposit mortgage (much cheaper) if you started with 5% or even a 20% or 25% deposit if you started with 10%.

    So basically - find out what you can borrow, choose a lender. Find a home then find a surveyor and a solicitor and that's about all you need first time.
     
  12. yodasarmpit

    yodasarmpit No longer the other Brett.

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    This is some very good advice, although I would caution on point 4 slightly. Location is important, but don't sacrifice too much on what you need to get the right location - you will be living in the house after all.
    That being said, you will learn what compromise is when house hunting.

    I couldn't agree more on putting down as big a deposit as you can afford, it will pay dividends on the rate you get and the monthly cost.
    Same goes for overpaying during your fixed rate period, when it comes to negotiating a new term you will be offered preferential rates, something that I feel will be important as there is a high likelihood that interest rates will begin to increase in the coming months/year.
     
  13. rollo

    rollo Well-Known Member

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    Id say where guarenteed to get a rates rise in the next few months. Which means if your on flexi morgage you could end up having to find a decent chunk of cash extra each month.

    Id say one other thing try to always go fixed rate you pay more when the rates are like they are now but when they go up and they will be this year. You do not have to find any extra.

    Id avoid minimum deposits 5% means you get crazy rates, tripple what 10% is at last check actually. Its the big thing alot of people are unaware off that the 5% to 10% is such a huge saving. You can easily save your money back inside a year.
     
  14. Archtronics

    Archtronics Well-Known Member

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    Great responses thanks, (I have been googling like mad but there's so much conflicting info)

    I'm planning on spending roughly £120k on said house and I'm aiming to have saved 15k for deposit + associated fees. Currently I'm almost half way there.

    Help to buy seem to only be on new build?
    which would get me a 2 bed flat or I could do a shared ownership route but I can't see how that supposed to help folks.

    I roughly decided on Ellesmere port as a location, its not the nicest but its not the worst. 120ish gets me a 2-3 bed terraced or Semi detached house.

    I don't have a credit history as such, so would it be beneficial if I started paying for things regularly with a credit card?
     
  15. Shadow_101

    Shadow_101 Mudkips.

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    If you are half way on the deposit, It probably a little early to need to talk to mortgage adviser. but I'm sure it cant hurt and will probably be able to provide some tips and advice on making your finances the best they can before an application.

    my advice would be keep on doing what you are doing now, and focus on saving - once you start getting close then its worth looking at mortgage products, etc.

    I would in this time really think about the area, or areas you would consider living in, what you might consider compromising on and what is a must have. Zoopla & Rightmove have some great features for researching areas, current sale prices, pictures of property from previous sales, the 'ceiling' prices for street etc - all things worth having a look at and understanding, a few 100m can make a huge difference.
     
  16. Mr_Mistoffelees

    Mr_Mistoffelees The Lunatic on the Grass.

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    This is why companies selling screen cleaning goods will never go broke!
     
  17. Guinevere

    Guinevere Mega Mom

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    After well over a decade in the old place, we sold and purchased, both completing in Oct, here's the best advice I can give:

    * Talk to the mortgage people first and foremost and find out what they will lend you

    * Assume this figure is at least 10% higher than what they will actually lend you. We had direct neighbours who were told one figure and then it was reduced and it stopped them selling and moving. Our mortgage team did the same to us but we were okay. You won't get a final figure to 100% rely on until you have a property in mind, dates etc.

    * Do your own research on everything.

    * Don't underestimate any of the costs. Be realistic and then add some more to be safe.

    * Assume some of the costs are for things you won't get told about until you need to pay them,

    * Leave yourself with a safety net, if you spend every last £K you have you'll run out of money or lose some sleep over it.

    * Be prepared to invest a lot of time into the process

    * Remember that every month of delays is another month of saving where you're not paying the new mortgage!

    * Cut as many costs as you can to get that deposit + safety net together quickly. Our buyers stopped renting and moved in with parents for 18mo to help.

    * Stay chilled.

    * Be prepared for lawyers, sellers & especially estate agents to booger things up from time to time. It'll happen, don't let it freak you out - just get them to sort it.

    * Understand that any estate agent you see is working for the seller and their own commission. They will screw you for every extra £K they can. Don't tell them your maximum budget. Don't tell them anything. Just ask to view the property.

    * Be prepared for the 'new home' costs that will apply to you. New cooker? Fridge? Curtains? Lamp shades? Carpets? How much you spend will depend on the property, what you have and what you need.

    * As any sale progresses we found it helpful to speak to the sellers. They hadn't gone through a selling process in 40+ years and were twitchy as hell.

    As to your "How?" question, we:

    * Went to a local firm of solicitors we liked and got them to handle our sale and purchase knowing that while they would cost more than an internet service we could walk into their office as and when it was needed. They filled in all the blanks and basically told us what we needed to do and when. They messed things up occasionally which was disappointing but it was nice to be able to speak to someone while they fixed things.

    * Used the same mortgage company we'd used previously, but the process would be the same for a new customer.

    * Paid for full detailed searches even though we were only moving 500m.

    * Used one estate agent for both (Pure luck as it turned out, but it helped)

    * Were patient, it took six months from start to finish but that included getting the old place ready for selling, and us pulling out of one purchase as we didn't like what came back from the searches.

    * Did our own packing, but used a local removal company to do the shifting

    And finally we:

    * Moved into a wonderful new home and never looked back.

    Good luck. It's worth the struggle and the wait.
     
  18. d_stilgar

    d_stilgar Old School Modder

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    My wife and I just bought a place. I'll go through the run down.

    We bought a townhome/rowhouse built in the mid 1950s. It was in original condition. Comps in the area were ~$200k (renovated). Our final purchase price was $147k. This gave a healthy buffer for finding problems and getting the place updated. I figure I can put $20-30k into it and still make a healthy profit on the other end.

    We put 5% down and got a 30 year mortgage. Even at 5% down, there are other costs associated with buying a home so the total needed to close was ~$16k (including the 5% down and two months of the mortgage paid up front). There could have been ways to reduce that amount, but not by a lot. There are costs for inspection, escrow, title insurance, realtor fees, taxes, etc. It adds up (and totally sucks as you won't see most of this money back ever).

    Our rent before buying was $1000 a month. Our new mortgage is essentially the same, $981 a month. The mortgage payment includes interest, principal, mortgage insurance and property taxes. Once we have 20% equity on the place the $100 mortgage insurance will go away. This means we should be relatively incentivized to fix it up or make payments early to get the principal down faster. One will reduce the debt. The other will increase the value of the property.

    For us it made sense, even though we chose a 30 year mortgage and only put 5% down. We have a large contingency fund to fix up the property, and it's cheaper than our current rent, so it makes sense. We plan to pay it off as quickly as possible or save to buy a rental property, hopefully in the same area.

    We have be aware to keep money in a fund for normal repairs/maintenance. That's something we didn't have to worry about when renting. The rule of thumb is 1% of the home's value every year for maintenance. Because we want to turn this into a $200k home, this is $2000 a year for us.

    If you want to be frugal/conservative, I wouldn't buy a home that is worth more than 3x your annual salary. That's generally considered "affordable." It obviously doesn't mean that you will pay it off in three years, but it does mean the cost of the mortgage and maintenance will be manageable. This tends to be really difficult because almost nobody follows this rule. In the case of my purchase, we are just a little above the 3x rule. It's a bummer but a reality.

    Not all of this will apply since I'm in the USA, but the general advice should.
     
  19. Xir

    Xir Well-Known Member

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    I saved for 20 years and bought it.....

    But I see that it's not typical. :D
     
  20. yodasarmpit

    yodasarmpit No longer the other Brett.

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    Archtronics could do that, but it wouldn't make as much financial sense as he would be paying rent (most likely at a higher amount than the potential mortgage) whilst having to save at least the same again (or more to compensate for price increases) each month.

    So, whilst I'm not an advocate for getting into debt - a mortgage is by far the most sensible solution.
     

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