Buying a house isn’t something that should be taken lightly, it’s one of the biggest purchases (if not the biggest) you’re likely to ever make in your life. You need to make sure you’re saving money everywhere you can, as often as you can without losing the quality of your new potential home.
There’s so much to think about when considering a new home; What’s your budget? What location are you looking at? Are you going to take out a mortgage or do you have the money? What other costs are you likely to encounter? Is it cheaper if you move elsewhere?
Take a look through our ‘Complete Guide to Buying a New Home’ and you’ll know everything there is for you to know in no time.
Should You Buy or Rent?
The biggest question you need to ask yourself is, ‘In the current market, is it better to buy your own home or rent one instead?’. It’s a tough question to answer, because who doesn’t want to own their own home? While, at the same time, renting seems so much easier given the asking price of houses across the UK. It’s important to consider the benefits of both and which is going to be worth it given your unique situation.
A few things you should consider regardless of whether you’re planning to buy or rent are:
- How long will you ive in the home? – This is dependant on the market, but the longer you live in a house, the better, because you’re spreading the cost out over a longer period of time.
- The cost of housing in the area – In most cases, people decide to rent over buying because houses are too expensive now. However, this of course all depends on the market in your area. If renting is extremely costly in your area, it might be more affordable to buy your home.
- The opportunity cost of your taxes and insurance – What kind of long-term return could you potentially get if you decided to invest the money in something else instead?
- The opportunity cost of your down payment – How much of a return could you get if you invested that lump sum instead?
Some of the unique benefits of buying and renting are:
- Once you’ve paid off your mortgages and other costs, the house is yours and you no longer have to worry about housing costs.
- If your home increases in value, you could use the equity to help buy a bigger home or fund a comfortable retirement.
- You can spend money on imporvements without asking a landlord.
- You own your house, but you pay quite a bit in interest and taxes.
- Renting isn’t throwing money away – It gives you a nice place to live.
- Buying has an opportunity cost – the amount you can invest and earn on the down-payment, taxes, insurance payments and interest.
- You don’t have to pay for maintenance and repairs, or any other issues that come up.
The average cost of a house in the UK is at an all time high, costing an average of around £220,000 in September 2017 compared to £150,000 back in January 2005. It has been estimated that by 2027, the average house price could rise to around £347,000.
We took a look at some of the cities around the Britain and the average house price you’d be paying if you decided to purchase a property there; compared to the average wage you’d also earn working in that location.
The Average Price of a House in Dublin (£)
The Average Price of a House in London (£)
The Average Price of a House in Belfast (£)
The Average Price of a House in Edinburgh (£)
The Average Price of a House in Cardiff (£)
Location of Housing
Average price (2017)
Average Wage (2017)
What Can You Afford?
How much you can afford to spend on your new house, depends on a number of things. Firstly, are you looking to purchase your new home yourself, or are you going to acquire a mortgage in order to make the purchase. If you’re looking to get a mortgage in order to fund your new home, the it is important to make sure you know how a mortgage works.
A mortgage is a loan from your bank or building society against a property you’re looking to buy. In order to get a mortgage you will need to put down a deposit and if the lender accepts you for a mortgage they will then put up the remainder of the cost, charging you interest as you repay the debt over a set time period. The set period of time is usually 25 or 30 years, but many lenders offer shorter or longer terms. You’re expected to keep up monthly repayments to the lender and if you fall behind there is a risk that your property could be repossessed.
While most mortgages span over 25 years or more, you will most likely not have to pay the same interest rate over the whole period. Mortgages usually start with a deal period of between two and five years where you pay a defined rate, then at the end of this deal period your mortgage will usually switch to a standard variable rate – the common term for default rate that a mortgage moves to at the end of an initial deal, this rate which can move up or down depending on your lender.
It’s impossible to truly determine how much a bank or building society is willing to lend you without you actually speaking to them but we have a few tools (mortgage calculators) from some of the biggest lenders that might help you determine where you stand.
[contact-form-7 id=”915″ title=”New First Time Buyer Calculator”]
The Money Advice Service – Mortgage Calculator
The Money Advice Service – Mortgage Affordability Calculator
Halifax – Mortgage Calculator
Santander – Mortgage Calculator
Nationwide – Mortgage Calculator
Lloyds – Mortgage Calculator
HSBC – Mortgage Calculator
Where Do You Want to Live?
While this is a simple question and answer for most, it’s an important one to ask yourself. House prices can jump hundreds of thousands dependant on location. So, while you might want to live in a certain location, your budget might not allow it, are you willing to compromise on location in order to stay within your budget? Some of the most expensive places to live in the UK include; London, Cambridge, Dublin, Oxford and more. While Hull, Bradford, Swansea, Belfast and others are the least expensive.
Decide where you’re willing to live and be prepared to make a few compromises as house prices can change hugely depending on location.
Arrange a Home Survey
Only 20% of all people buying a new home actually get a professional survey done, while they are costly to have done, they can potentially mean avoiding even more costly repairs if anything is found to be wrong with the home once you’ve made the purchase. If you’re looking to buy your home using a mortgage you’ll likely have to have a mortgage valuation; These are not actually surveys, instead these are cursory looks at a property to evaluate it’s worth, along with a note about any major works that might be necessary and would affect the value of the property. Usually the lender will insist on using people they trust to conduct a mortgage valuation to ensure the property is security enough for the loan.
Example of a Home Survey
A home survey however, is a detailed inspection of a property’s condition. The surveyor will inspect the property and tell you if there are any structural problems like walls almost falling down, major repairs needed, or expert commentary on the property, from the type of wall to the type of glazing. A home survey is always a good idea before purchasing a new home, as if you find the home has problems and might require £20,000 worth of repairs, then you’re able to put this forward in your final price offer for the house, removing £20,000 from their asking/your offering price.
Arrange a Solicitor
When buying a new home, hiring a solicitor or conveyancer is a great idea, as they will handle all the legal aspects of buying (and selling) your property on your behalf. A good one will keep you up to date with everything that’s going on during the process of you buying your new home as well as give you a point of contact and support in what is one of the biggest purchases of most people’s lives.
When putting in an offer for a new home you’ll likely be asked for the contact details of your solicitor or your licensed conveyancer. Conveyancing is the legal term for transferring ownership of a property, whether you’re buying or selling. A solicitor or conveyancer will handle all your contracts, give you legal advice, carry out council searches, handle the transfer of funds to pay for the property and more.
A solicitor is more expensive than a conveyancer as they’re legally qualified lawyers and so can deal with a huge range of legal services while a conveyancer is only specialised in property.
Negotiate on Price
You’ve found the perfect house, it’s in the right location, it has a great garden, there’s plenty of room, but there’s one problem. The price is just a little more than you’d like to pay or perhaps have available.
Your ability to negotiate on price all depends on a lot of things; has the house been surveyed? Did the surveyor find any problems? Have these problems already been taken into account with the asking price? As well as whether or not the home owner is willing to accept a lower price than they originally listed the house for.
The best place to start when trying to get your dream home for as little as possible is to down play the amount you have to spend when talking with an estate agent. Estate agents tend to show you houses just outside your price range, and if they’re not aware you actually have more to spend this will give you the upper hand during negotiations. For example, if you have a budget of £350,000 for a new home, you’re likely to be presented with homes costing more as they’re looking to have you pay as much as possible (it’s their job after all). Where-as if you approach the estate agent and tell them you have a budget of £320,000, once again you’re likely to be shown houses costing a little more (But your real budget is £350,000, so these houses aren’t actually outside your price range), you can use this to your advantage.
Spotting Problems With the House
If you hired a surveyor or conveyancer, you’re likely to have already been notified of any problems with the house. However, if you opted against hiring someone to create a report on the house, you could potentially miss costly problems. While something might not seem to be a problem to the seller, it may still be an off put to you as a buyer. A few things to look out for when viewing a property (Providing you didn’t hire a surveyor or conveyacer) are:
- Are there any damp problems? – The main giveaway signs for damp are a mould smell, flaky plaster and watermarks on walls and ceilings. While it seems obvious to look out for these things, they can be quite easily missed.
- Is the building structurally sound? – If you feel there could potentially be problems with the structure of the house then you’re best course of action is to call a surveyor to look at everything in detail.
- Which way does the house face? – While this might seem like a silly thing to look out for, you’ll likely notice the difference in the summer. When the sun is out and shining, the direction the house faces can be the difference between a warm and light house or a dark and cold house.
- Have you been fooled? – Often when selling a house people will set up staging and present the house in the best way possible. They manage this by strategically placed mirrors, lighting, great smells and more. All of this is aimed at making the house seem better than it is and hopefully tempting you into buying the home.
- How old is the roofing? – While you’re not likely to be able to take a look at the roof and inspect it first hand, you can try to take a look around for any tell tale signs of damage or leaking. Roofing is expensive to replace and so if you find problems after moving in, they suddenly become your expensive problems.
It is recommended you hire a surveyor or conveyancer to ensure any and all problems with the home are found and don’t end up costing you in the long ruin.
Other moving Costs to consider
When buying a new home many people only focus on the price of the house and the cost of actually moving . While these costs are of course great to remember and consider, they’re not the only costs you’re going to run into during the process. You need to also consider upfront fees as well as mortgage costs, solicitor fees, insurance and more.
Major Upfront Costs
When considering buying a new home there are many upfront costs to consider:
Stamp Duty is a government tax paid on homes that cost over £125,001. Since April 2016, there is a 3% increase on top of current rates if you’re buying an additional residential property above £40,000 such as a second home or buy-to-let property. If you’re unsure about how much you would pay when buying a property in England, Wales or Northern Ireland, you can use this stamp duty calculator.
The mortgage lender assess the property you intent to buy so they are able to establish the amount they’re willing to lend you. You’ll usually have to pay for this valuation (Some lenders might not charge you, depending on the mortgage product you select).and the fee can be anywhere from £150-1500. This valuation isn’t the same as the assessment from a surveyor and so might not identify all repairs and maintenance that might be required so be sure to have a surveyor also look the house over.
While we’re talking about surveyors, you’re also going to have to pay for this survey. This is a vital assessment of the house that will help you identify any problems with the home before you buy. These can usually cost between £250 for a basic survey to around £600 for a full structural survey. While this might seem expensive, it’s worth the money as it can save you from finding potentially costly repairs once you’ve bought and paid the house.
Your deposit is the amount you put towards the cost of the property when buying your home. On average, you need at least 5% to 20% of the total purchase value.
You’ll usually have to hire a solicitor or conveyancer to handle all the legal aspects of buying your new home. These legal fees are typically £850-1500 as well as a VAT charge of 20%.
Your mortgages fees usually include a booking fee of between £99-250, an arrangement fee of up to £2,000, and a mortgage valuation fee which usually costs around £150. These fees can be paid upfront or added to your mortgage. If you choose to add them to your mortgage you’ll be paying interest on them for the remainder of your mortgage.
General Running Costs
To estimate your general running costs you’re best asking the sellers how much they spend on utilities like gas, electric and water, annually. Charges such as your phone, TV packages and broadband all depend on which supplier you choose.
The average repair bill for new home owners is around £5,500. If you don’t have a survey done by a professional surveyor you risk potential missing more costly repairs that may need completing.
If you applying for a mortgage you’ll be required to take out buildings insurance to protect you new home against damages like fire, flooding and more. Insurance can cost various amounts depending on who you choose to go with.
The amount you pay is dependent on the location of your property and it’s valuation band (Northern Ireland rates are set individually).
Make an Offer
So you think you’ve found the perfect property! Congratulations! While it’s not yours yet, you’re certainly one step closer to owning it! Now you just have to decide on a price, make the offer and maybe haggle back and forth with the owner a little. There are a number of things to consider and remember before you make the offer.
Before making an offer remember the following:
- Downplay Your Spending Limit – You’ll be shown houses over your ‘limit’ so be sure to downplay it slightly.
- Don’t Fall in Love – If you find the perfect house and you love everything, don’t show that emotion or the seller might try and make you pay more.
- Watch the Market – Watch the sale prices and time it takes for other houses in the area to sell, you can use this to your advantage.
How Do You Put in an Offer?
- Speak to Your Estate Agent – By law estate agents have to pass on every offer they receive for a property.
- Confirm in Writing – Put your offer in writing. Make your offer via phone and then follow it up with an email to avoid confusion etc.
- Negotiate – If the seller is interested in your offer, you can then start to negotiate with the estate agent on behalf of the seller. If you’re worried about having little knowledge you can appoint a buying agent.
Should I Start With a Low Bid or go Straight in With a High bid?
Starting out with a very low bid is probably not advisable but it’s definitely recommended to start out your offer a little below the asking price. A low (low end of asking price or slightly lower) bid is likely to be accepted or considered if:
- How Long – If the property has been on the market for a while it suggests they’re having trouble selling the property. Has the asking price been reduced since it was first listed for sale?
- Circumstances – If the seller is looking for a quick sale due to certain circumstances this could work in your favour.
- Only Hope – If you’re the only buyer that has shown interest, a low offer likely has a good chance of being accepted.
- Not in a Chain – If you’re a first time buyer or have already sold your house, the seller may consider a lower bid as they won’t have to wait for the sale of your house first etc.
It’s done! The day is here for you to finally move into your new home! After all your hard work and stress, you only have one job left to do. That’s move. If you have a definite move in date you can plan everything in the weeks, days or months before hand! Here’s how we recommend preparing to move.
Two Weeks Before Moving
You only have two weeks before you’re finally ready to start your new life in your new home.You should now be confirming all the last little details of the move.
- Finalise details with your removal company.- confirm arrival times, phone numbers, parking and directions. Make sure everything is perfect.
- Arrange for pets and children to be looked after so you can focus on packing and the move.
- Use up frozen foods and other perishable items.
- Cancel local services and settle outstanding bills – Newspapers, gardeners, windows cleaners etc.
One Week Before Moving
Your final week is here. It’s starting to get exciting but you’re also kind of nervous, what if something happens or goes wrong?!
- Start packing important documents and letters away from your other items, these might be needed and it’s handy to have them ion hand whenever possible.
- Finish up as much packing as you can.
- Gather keys to windows and doors of your current property ready to hand them over to their new owner when you leave.
- Defrost your freezer and fridge within this week, make sure they’re ready to go!
- Arrange mail to be sent to your new address.
- Book a time to collect your new keys from the estate agent!
One Day Before Moving
It’s the last night you’ll be staying at your old home, tomorrow you’ll be picking the keys to your new place up and moving in officially.
- Make sure you have everything packed and ready to go.
- Make sure you have the keys to your new house.
- Charge your phone etc. as you might need them during the move.
- Speak to friends and relatives and let them know when you;re moving, just in case you need any extra help.
You’re Moving Today!
So today’s the day! Time to move into your new home! You’ve worked hard and been through plenty of negotiations for this moment.
- Record all utility meter readings for water, electric and gas. Photos are better if possible.
- Make sure all windows are closed and locked.
- Leave all sets of keys for the new owner, however you arranged for them to be left.
- Keep copies of contracts and details for your estate agent, removal company etc.
- Make sure there is nothing left to pack and you’;re not going to leave anything behind.
After You Move In
It’s all done! You’re now the proud new owner of a brand new house!
- Get the kettle on! Unpacking is tiring for everyone.
- Confirm where things need to be taken with the removal company, this means all the correct boxes go in the correct rooms.
- Read the utility meters in your new home. Note the readings down. Again, photos are good.
- Check all the keys work and everything locks and unlocks properly – Maybe even consider changing all the locks, just in case.
- Start unpacking asap. Make your new house, a home
That’s it! You successfully bought your new home and you’re now working on making it your own. Congratulations!
*Figures May Vary.