The big question on everyone’s lips at the moment, whether they are looking to invest in the property market or find their new home… Should I buy a property?
With a market that has seen so many ups and downs over the last 3-4 years, it is understandable that buyers are becoming more cautious when considering their next step (or maybe even their first step) on the property ladder.
Kirstie Philpott’s series of residential property blogs “Should I buy a property?” answers your questions about buying property in today’s market, including where to get started, what considerations you should make before offer and how to assess your financial position. The series looks at all property types including houses, flats and new builds.
You’ve registered your interest with agents, you’ve been to view a new build show home, you’ve set up an email alert with Rightmove for the kind of properties you are interested in… but you keep asking yourself “Can I afford it?”.
The UK housing market is a thriving one and demand for certain property types drive prices to an all-time high, so it’s important that you have complete visibility on your finances and what is within your budget; both at the outset of a purchase but also month on month payments too once you have moved in.
Raising Funds to Buy
At the outset you will want to consider how you are going to make up the total purchase price, this could be through a number of ways…
Selling
If you have a property to sell, you should speak to an estate agent about a likely valuation so you have an idea of equity available from that sale. When calculating likely net sale proceeds you should also be mindful of any mortgage you have to redeem, early repayment charges to your current lender, estate agent fees, legal fees and any tax liability you could have on the sale of that asset, such as Capital Gains Tax.
Mortgage
If you need a mortgage to assist with the purchase, you should contact a mortgage broker to advise you on what type of mortgage would suit your needs. They are likely to ask you questions about your other finances, what equity you have in any current property, what your loan to value ratio will be, what other debts you currently have, evidence of your current income etc.
Gifts
You might have some very kind relatives who are gifting you some money to assist with your purchase. It is important that you make your mortgage broker and solicitor aware of this so they can investigate the source of funds and report to your mortgage lender to confirm that another third party is providing funds to add in the purchase.
Other Fees
Don’t forget, it’s not just the purchase price you need to raise funds for, you also need to consider fees and costs for your solicitor, estate agent, mortgage broker, surveyor and removal company. You should also run a calculation for the likely Stamp Duty Land Tax you are liable for on your purchase. If your property is new build or leasehold it is also likely that there will be additional fees payable to management companies on completion, your solicitor will be able to confirm these to you.
Budgeting for Property Ownership
Raising funds for the purchase of a property is one hurdle in itself but you should also think about the monthly payments when you own the property, especially if you are a first time buyer or if this property is a higher value than the property you owned before.
Be Organised
It’s a good idea to create a spreadsheet of your finances, offsetting your income against your expected monthly outgoings. The following are things to consider for your expenses:
- Mortgage repayments
- Bills; electricity, gas, water, internet, council tax etc.
- Ground Rent and Service Charge (for leasehold or new build)
- Travel
- Insurance
- Food
- Childcare
Speak to your Mortgage Broker
Your mortgage broker will need to run checks as to your affordability for your lender if you are obtaining a mortgage and when doing so they will ask for full visibility on your predicted expenses when you own the property. Your mortgage broker will also confirm what the expected monthly repayments are under your intended mortgage.
If you require any further information, please contact our Residential Property Team on 0345 646 0406 or fill in our online enquiry form and a member of the team will be happy to assist you.