Are you buying your first home?
At Gardner Leader, we understand how complex the house buying process can be, so we have put together our Top 5, which we hope will break things down for you.
1. Jargon: Busted
The purchase process is littered with legal jargon. Here are some of the most common words you’ll come across, explained in plain English:
- Freehold: one of the two ways properties are owned. Most houses are freehold. You are buying the land and any buildings on it
- Leasehold: the other way properties are owned. Flats are always leasehold, but you will sometimes come across a leasehold house. You are buying a lease to own the property in the building for a set period
- Share of Freehold: the flat you are buying comes with a share in the company that owns the Freehold but it is important to understand you are still buying a leasehold property
- Source of Funds: your solicitor will need to see documents showing your source of funds (where the funds are now) and your source of wealth (how those funds have built up over time). Anyone gifting money to you will have to provide this information too
- Deposit: for solicitors, this means the exchange deposit, which is 10% of the purchase price. A deposit of 5% is sometimes accepted in certain circumstances
- Searches: a set of searches we order that are required by mortgage lenders
- Survey: an independent report on the condition of the property that you arrange directly with a surveyor. It is separate to the work your solicitor will do
- Exchange: the point at which you legally commit to buy a property on an agreed completion date
- Completion: the date you can collect the keys and you become the owner of your first home!
2. Money, Money, Money
How will you fund your purchase? Purchase monies often include:
- Mortgage
- Your contribution: for example savings, Lifetime ISAs, Help to Buy ISAs, inheritance
- Gifted Deposit
3. Other Payments
Paying for the property is one thing, but a purchase will involve other costs to consider, such as:
- Legal Fees (including ID)
- Search fees
- Stamp Duty Land Tax: you will have to sign a return even if you are not paying tax in order to claim First Time Buyer relief. SDLT will be payable if you have owned property before and the purchase price is above £125,000, or if you are a First Time Buyer and the purchase price is over £300,000
- Land Registry costs (completion searches and registration fee)
- Leasehold fees: if you are buying a leasehold property, there will be fees payable to the management company/landlord on completion
4. Shared Ownership
Shared Ownership properties can be a more affordable option. They are a special type of leasehold property with the following features:
- You buy a percentage share of the property via a lease, the remainder is owned by the Housing Association which you will pay rent on
- Your monthly payments will include your mortgage, rent to the Housing Association and service charge to the Housing Association
- You can increase your percentage share of the property by a process called staircasing. Staircasing will include the following costs:
- A payment for the extra share you are buying
- Mortgage lender costs (if you need to fund the payment by remortgaging)
- Legal fees
- Land Registry fees
5. Process
You’re ready to get started with your purchase, and your offer has been accepted but what does the legal process look like?
- ID & Source of Funds: the first step is for us to take your ID and carry out our source of funds checks
- Contract Review: we will review the contract papers and raise questions (enquiries) about the documents with the seller’s solicitor
- Order Searches: we will order searches for the property
- Mortgage offer review: we will review our copy of your mortgage offer and check the property meets the lender’s requirements
- Review survey: if you obtain a survey, we will look at the section for the legal adviser to see if we need to get more information from the seller’s solicitor
- Report: once the solicitor is happy with the contract, replies to enquiries, searches and your mortgage offer they will send you their final report explaining the legal background of the property and points you should be aware of, and asking for the exchange deposit
- Signing: we will arrange for you to sign the contract, transfer, mortgage deed, and SDLT return ready for exchange and completion
- Exchange: we formally exchange contracts with the seller’s solicitor, for completion on a date agreed between you and the seller.
- Completion: we send the purchase monies to the seller’s solicitor, and, upon receipt, they will confirm completion of your purchase meaning you are the legal owner and you can collect the keys
- Registration: we will apply to the Land Registry to notify them of your purchase and ask them to register your purchase and your mortgage.
Buying your first home can feel overwhelming, but you do not have to navigate the process alone. If you would like tailored advice on your purchase, please contact Cate Beavis and Vicky Lee, who will be happy to guide you through every stage of your property journey.