As a first time buyer taking that first step on the property ladder is a daunting process. After all it is likely to be the single biggest purchase you have ever made by a long chalk. Committing to such a large investment will carry with it a lot of worry and stress. This article aims to familiarise you with the basic essentials to bear in mind when entering the property market.
The purchase will entail a number of legal costs, some on top of the purchase price. These need to be accounted for when considering your property budget:
A deposit - of the purchase price will be required, you will therefore need some savings up front.
Stamp duty land tax - this is currently payable on property purchases of over £250,000. Currently for first time buyers this is charged at 3% for properties of £250-500,000 and 4% for those over £500,000.
Surveyors' fees - for such a large purchase it is necessary to have the property surveyed to ensure it meets expectations and to uncover any relevant issues.
Lenders fees and charges - For most it is unrealistic to make such a purchase without borrowing (usually through a mortgage).
Land registry fees - These are fees that must be paid for the compulsory registration of your property.
Removal/moving in charges - To get all your precious belongings safely moved to your new home.
Legal fees - For the necessary work carried out by a solicitor relating to the purchase, for example conveyancing.
What mortgage options are available?
The mortgage may be the single most important cost associated with the purchase as it is likely to involve procuring a substantial loan. As such the manner in which this is to be repaid could significantly affect how much you ultimately pay. Which suits you best will depend on a number of factors outlined below.
The two main options are; repayment or interest only mortgages. The former repays monthly sums for an agreed duration until the loan plus interest has been fully repaid; for the latter your monthly repayments cover only the interest on your loan, the loan itself being paid off as and when possible. It is important to note that the longer you take to repay the mortgage the more interest you will pay and the more your mortgage and therefore property will ultimately cost.
Different mortgages will calculate interest in different ways. These are summarised below.
Fixed Rate - here you pay a fixed amount of interest for a set period. It offers surety as you know what you shall be repaying each month. It is a good option if the base interest rate is low since mortgage rates are linked to this. However if rates are high it may not be so desirable.
Tracker - Your mortgage rate will vary in line with any changes to the base rate. This can be more desirable if interest rates are especially high since when they fall you will feel the benefit. However they offer less surety since if the base rate increases so will your repayments.
Standard Variable Rate (SVR) - here the payments are set by your lenders interest rate. This has similar implications to a tracker mortgage.
Which is most suitable will depend on your circumstances and the current economic climate. Ask yourself questions such as how flexible you can be with repayments; and what is likely to happen to the economy in the near future? Good luck with your purchase!
The purchase will entail a number of legal costs, some on top of the purchase price. These need to be accounted for when considering your property budget:
A deposit - of the purchase price will be required, you will therefore need some savings up front.
Stamp duty land tax - this is currently payable on property purchases of over £250,000. Currently for first time buyers this is charged at 3% for properties of £250-500,000 and 4% for those over £500,000.
Surveyors' fees - for such a large purchase it is necessary to have the property surveyed to ensure it meets expectations and to uncover any relevant issues.
Lenders fees and charges - For most it is unrealistic to make such a purchase without borrowing (usually through a mortgage).
Land registry fees - These are fees that must be paid for the compulsory registration of your property.
Removal/moving in charges - To get all your precious belongings safely moved to your new home.
Legal fees - For the necessary work carried out by a solicitor relating to the purchase, for example conveyancing.
What mortgage options are available?
The mortgage may be the single most important cost associated with the purchase as it is likely to involve procuring a substantial loan. As such the manner in which this is to be repaid could significantly affect how much you ultimately pay. Which suits you best will depend on a number of factors outlined below.
The two main options are; repayment or interest only mortgages. The former repays monthly sums for an agreed duration until the loan plus interest has been fully repaid; for the latter your monthly repayments cover only the interest on your loan, the loan itself being paid off as and when possible. It is important to note that the longer you take to repay the mortgage the more interest you will pay and the more your mortgage and therefore property will ultimately cost.
Different mortgages will calculate interest in different ways. These are summarised below.
Fixed Rate - here you pay a fixed amount of interest for a set period. It offers surety as you know what you shall be repaying each month. It is a good option if the base interest rate is low since mortgage rates are linked to this. However if rates are high it may not be so desirable.
Tracker - Your mortgage rate will vary in line with any changes to the base rate. This can be more desirable if interest rates are especially high since when they fall you will feel the benefit. However they offer less surety since if the base rate increases so will your repayments.
Standard Variable Rate (SVR) - here the payments are set by your lenders interest rate. This has similar implications to a tracker mortgage.
Which is most suitable will depend on your circumstances and the current economic climate. Ask yourself questions such as how flexible you can be with repayments; and what is likely to happen to the economy in the near future? Good luck with your purchase!
