When it comes to buying a house, the process is difficult. You’ll need to understand how to buy a house and the process. Furthermore you need to know how much deposit you need and then the best way to save for that deposit.
House prices in the UK are extremely high and many find it difficult to jump on the property ladder. As people save more and more, the house prices increase more and more. It’s difficult to catch up.
Our guide on how to buy a house also covers the best way for potential buyers to save for that ever elusive deposit. There is also ambiguity for many on how to buy a house and how much cash is needed.
Analysing some of the most common searches on Google that potential buyers search for include:
- 3,300 searches a month: How to buy a house?
- 2,345 searches a month: How much deposit for a house?
- 1,909 searches a month: How do I save for a house?
The volumes of these search terms indicate clearly that help is needed! Our article below covers:
- A guide on how to buy a house
- How much deposit is needed for a house
- Mortgage repayment calculator
- Tips on saving for a house
- Buying to let & letting agent fees
HOW TO BUY A HOUSE
Buying a house involves a number of intertwining steps that are codependent on each other. A delay in one step, can have a knock on impact on other critical steps. Delays can then cause you a financial impact and cause a risk to the purchase of the property.
STEP 1: KNOWING WHAT YOU CAN AFFORD
Before setting off on your journey, you need to know what you can afford. The amount of deposit you need and how much you can afford monthly are key pieces of financial information.
There is no point going to property viewings that are out of your price range. This would be a waste of yours, the property owners & estate agents time. Write down how much savings you have in total.
Then work out all your monthly expenditures, plus the cost of your future mortgage repayments. In your budgeting, ensure you have put in a 15%-20% buffer, should your income be affected for any reason
How to buy a house quick tip: You can quickly work out how much deposit you need and how much monthly payments you can afford, by jumping to our deposit calculator
STEP 2: FINDING THE RIGHT PROPERTY
It’s extremely simple to find properties on sale thanks to the internet. Simply go to Zoopla and enter the postcode & mile radius of where you want to live. Zoopla will then show you a list of properties currently on sale in that area. You can then call the estate agent to arrange a viewing.
How to buy a house quick tip: Make sure you register your personal details with a few agents in your area. Agents commonly call round to people to let them know of an available property before a listing is uploaded. This can get you first dibs on hot properties that sell quickly.
Ideally you want to view a number of properties and not buy the first one you like. This enables you to get a good sense of the market and house price value. You’ll soon be able to get a good understanding of if properties are priced right and what you should be paying.
Unless you’ve found an absolute bargain, it’s important not to rush buying your property. It’s a common saying that we spend more time buying a pair of shoes than looking at a property we intend to buy.
When finding the right property, you need to research into the location you’re buying in as well. Getting the right location that fits your objectives is critical
- Got a family, then are there good schools in the area and parks to play in?
- Buying to move closer to work, how are the transport links?
- If you’re buying as a rental investment, is there an abundance of tenants looking to live there?
STEP 3: PUTTING IN A BID
No how to buy a house guide would be complete without details of how to put a bid in. So you’ve got an understanding of how much you can afford and found your perfect property.
Now comes the difficult part, the bidding. Unfortunately there is no perfect strategy. In times of market growth where house transactions are on the up across the country, it’s a sellers market.
Sellers know that they have an abundance of buyers and can expect bids to supersede the listing price. Under this environment it will benefit you little by putting in a low bid.
However, under market uncertainty such as BREXIT, the market switches to a buyers market.
People aren’t particularly looking to spend. Sellers can’t shift their properties therefore willing to accept lower prices. There is the risk that some sellers just won’t sell and wait out the property market downturn.
However many may not have that option and need to sell. In this scenario, a low bid is crucial to save money.
How to buy a house quick tip: When putting in a bid, demonstrate that you have the deposit available and are ready to move quickly if that is the case. If you have no chain (i.e. not awaiting a sale of your own property) mention that too. A quick sale adds an extra incentive to a seller to accept a lower bid.
STEP 4: GETTING A MORTGAGE
The process of getting a mortgage can be done in 2 parts.
- Getting a mortgage in principle
- Getting the mortgage approved
The mortgage in principle simply means the lender has done some standard checks & you satisfy their criteria of being accepted. The lender will check your finances & credit history. This shows the seller your ability to get a mortgage. Thus, they know you have the financial means to buy their property. Whoever you get a mortgage in principle from, doesn’t need to be your eventual lender.
How to buy a house quick tip: Get your mortgage in principle sorted early in the process. Doing this even before you start looking at properties is a good idea. This gives you time to fix any issues that are impacting your credit history for example.
Once you’ve got a bid accepted, or even as soon as you place a bid, you then need to get your mortgage.
You can tell your lender that your bid is yet to be accepted. But that would like to progress the mortgage as much as possible in anticipation of you buying the house.
You can search the mortgage market yourself, contacting lenders one by one. It’s far more efficient to get a broker to do the leg work for you. Specialists can help you in specific or complex circumstances to ensure you get accepted first time for a mortgage, or assist you in the event that you are or have been refused a mortgage.
Types of mortgages differ per buyer.
You may be buying a property for the first time, it may be a 2nd home or you may be buying it to run as an HMO property
How to buy a house quick tip: Some brokers don’t offer advice and take commissions from some mortgage deals. Be sure to get a broker that offers advice to avoid you being guided towards mortgages that get them the most commission.
STEP 5: GET A CONVEYANCER SOLICITOR
- Take care of the settlement of the property
- Ensure checks on the property are undertaken
- Make sure deeds and property paperwork are transferred
You will need to agree to a completion date. This will be the date you officially get the property on your name!
How to buy a house quick tip: It’s prudent to get solicitor & tax advice before purchasing a property. Experts can advise you on whether you should buy the property as an individual or through a business. There may be some financial gain for you depending on your circumstances.
HOW MUCH DEPOSIT IS NEEDED FOR A HOUSE?
A key blocker for many is the deposit needed to purchase a property. So as we’ve gone through how to buy a house, let’s not jump into how much deposit you’d actually need.
The amount of deposit you need for a house depends on your personal circumstances. If you’re buying a residential property, a minimum of a 5% deposit is usually required.
However with a 5% deposit, you shouldn’t expect the best mortgage deal in terms of the interest rate. The lower the deposit, the higher the risk to the lender. As a consequence, the lender is going to ask for higher profit margins, via a higher interest rate.
Below are a set of search results taken from Money Saving Expert: The rates on offer fluctuate between 1.94%-2.59% If you compare a higher deposit rate of 15% of the properties value, the rates on offer improve substantially. First time buyers with deposits above 15%, can expect a rate between 1.14% – 1.34%
How much deposit is needed for a house quick tip: Your mortgage will come with an initial rate, and then a rate that comes into play after a certain amount of time. This new rate is called a standard variable rate (SVR). The SVR will be substantially higher than the initial rate. Make sure you keep track of how long the initial term is. 6 months before that date, ensure you start looking for a new deal. This will avoid you taking the hit of paying monthly payments against a substantially higher SVR.
If the house you are buying is your 2nd property or for a rental purpose (buy to let), the deposit needed is higher than previously discussed. A deposit of 25% is commonly needed. In addition, a higher interest rate, even with a higher deposit, is to be expected.
MORTGAGE REPAYMENT CALCULATOR
You can use the below mortgage repayment calculator to help you with your property purchase. Simply enter your house value, length of mortgage and interest rate. The mortgage repayment calculator will then show you your monthly payments and an estimate on how much you need to be earning to cover your repayments.
BUYING TO LET & LETTING AGENT FEES
If you’re saving for an investment property, creating an income from the rent, it’s important to consider the ongoing costs of this once you’ve completed your purchase. Costs for creating tenancy agreements, property inspections and insurances can eat into you rental profits. In addition to the costs, there is also the complexity in understanding what’s needed.
- How often does your tenancy agreement need to be updated?
- What are your rights if a tenant doesn’t pay on time?
- When do your gas & electrical certificates expire?
To quell some of these issues, many landlords turn to letting agents & property managers. These types of firms will charge you a fee and take care of the things otherwise you’d need to worry about.
Rentround helps you get the best letting agent by comparing fees & performance of these companies in the surrounding areas of your property. It’s free to find the best letting agent. Simply type in your postcode and a few details about your property. We then show you how much letting agent fees are in your area.
In addition, you’ll see which regulatory bodies agents are associated with and their customer ratings. If you’re a letting agent, then see how we can help with your agency marketing.
Landlords contact us every day looking to compare agents. Make sure you’re agency is included in their comparisons