Tag: home buying

First-Time Buyers: A Jargon Buster

January 27, 2021, By
first-time-buyer-jargon-buster.

When looking into the world of property for the first time, an overload of new terminology can be daunting for first-time buyers. As you go through the process, new terms will become second nature, but to set you off on the right foot, we have collated some of the most common property jargon into this handy guide.

Whether you are in the early stages of seeing how much you could borrow or are looking to put an offer in, it helps to know exactly what people are talking about. Of course, don’t be afraid to ask for clarification from your lender, conveyancer, or estate agent if you aren’t sure. Buying your first home is exciting, but can be a little overwhelming at times. We hope that our jargon buster for first-time buyers will help to give you a base understanding of what’s to come!

The terms are listed in alphabetical order.

Agreement in Principle: An indication from your bank or lender of how much you may be able to borrow for your mortgage by calculating your income and regular spending in conjunction with your deposit amount. This doesn’t affect your credit score. It does not mean you are committed to anything. Equally, it is not a complete guarantee that the lender will lend to you.

Chain / No Chain: A property chain is where buyers and sellers of properties rely on one another’s house sales to go through so that they can all move house. Whether or not a property is in a chain should be specified on the ad. If there is one delay or issue in a chain, there is a knock-on effect to all others involved, so the process of moving could be delayed, or face falling through. First-time buyers have the benefit of not being in a property chain, so could be more appealing for a fuss-free house sale.

Completion: This is the final stage of the moving process. On completion day, the money is transferred and you get the keys. You can finally have a sigh of relief that you have done it once the completion goes through. Your conveyancer will manage the paperwork side of things, and any last documents which need signing or bills that need paying, are settled.

Conveyancing: As a whole, conveyancing encompasses the transfer of property from one person to another. As soon as you have an offer accepted on a property, a licensed conveyancer will take the reins and guide you through the rest of the process. When looking for a property, you should also consider which solicitors you will appoint for your conveyancing. Some firms are more respected and responsive than others, and it is key to have a conveyancing solicitor who is on the ball and will work to complete it as efficiently as possible.

Credit Check: Mortgage lenders will do a full credit check when deciding whether they can lend to you. After all, they need to have confidence that you will be able to make your monthly payments over a prolonged period. There are lots of components which can affect your credit score, both positively and negatively. Experian provides five key ways to improve your credit score here. It is something to be working on from the earliest opportunity so that you can prove you will be a reliable person to lend to!

Deposit: The deposit is the amount of money you have saved up to put down towards the cost of your property. A mortgage will make up the rest of the cost of the property, but you will have to check with lenders as to what percentage of total house price they require a deposit to be. Some ask for 15% to 20%, others more, and there are various government schemes that can allow for smaller deposits. These can change over time so it is worth checking at the start of your property search. This will help you to decide how much you can afford to borrow, and the types of properties within your budget.

Exchange: This is the exchange of contracts, where the deposit is paid and the contract of sale/purchase becomes legally binding. In these contracts, a completion date will be specified. The length of time it can take to exchange contracts can vary largely depending on whether there is a chain.

First-time buyer: Typically if you have never owned a home anywhere in the world, you are a first-time buyer. This applies to individuals or couples where neither has owned property before. Other instances where you are classed as a first-time buyer are if you own, or have previously owned, commercial property i.e. a shop, café or salon with no living space attached.

If you have inherited property, it will be classed as you having owned it, and so it is unlikely that you are eligible for first-time buyer benefits. If you are buying in   a couple and one person has owned property before, as a pair you will not qualify.

Freehold: A freehold property is one where the homeowner owns both the property and the land it is built on. This means you won’t have to pay annual ground rent. If you buy a freehold property, you will be responsible for maintaining the property and gardens or land in its surrounding area.

Gazumping: When another party makes a higher offer on the house that you have already had an offer accepted on. Gazumping can happen at any point until the exchange of contracts, and if the seller wants to accept the higher offer, you will be knocked out of the buying process and have to start your house search again. If, for example, you are taking too long to have a survey done, or if your solicitor isn’t moving at an adequate pace, there becomes more scope for someone to put in a higher offer who is in a position to move through the process faster. With this in mind, it is crucial that you have a mortgage agreement in principle in place, and have a solicitor ready to move when your offer is accepted.

Help to Buy: The Help to Buy ISA is no longer being offered, but those who have one can still claim the benefits until 30th November 2029. Instead, the Government has two Help to Buy schemes: Shared Ownership and the Equity Loan. Each of these schemes enables buyers to put down a smaller deposit by helping them financially, either through lending or by sharing the percentage of the property owned by the government and the buyer. Lots of information on the Help to Buy schemes can be found here.

Home Buyer Report: When you have had an offer accepted, you can get a Home Buyer Report / Survey. This can identify any problems that could lead to damage or future repairs. It helps to provide clarity on the quality of the property, but only checks for easily visible issues on homes which are already in reasonable quality.

Insurance: Home Buyers Protection Insurance can protect in the event of being gazumped, or if the sale falls through for other reasons. There are lots of providers of this insurance, and it isn’t very costly, so it may be worth exploring.

Joint Tenants: if you are buying as a couple, you must let HM Land Registry know what type of joint ownership you want. Joint tenants have equal rights to the property. If one person dies, the property automatically goes to the other, and you cannot pass on your ownership in your will. If you divorce or separate, you can transfer to ‘tenants in common’ – see further down.

Leasehold: In a leasehold, you own the property, but do not own the land that it is built on. You will pay ground rent to a landlord (the freeholder) for the land for a number of years, or decades. There have been recent proposals for reforms to ground rent on leasehold properties which you can find more about here.

Loan to Value (LTV): An assessment of the risk associated with lending a person a mortgage. This is the ratio, or percentage, of the property price that they are willing to lend. The higher the LTV, the higher the risk and interest rate. For example, an 80% loan for a 20% deposit will have a higher interest rate than if you had a 40% deposit and only needed to lend 60% of the total cost.

Mortgage Payments: There are two ways to repay your mortgage. Repayment mortgages will enable you to pay back a small part of the loan and interest each month until the lending term is over, i.e. small, consistent payments every month over 35 years. Interest-only mortgages mean that you only pay the interest each month, and repay the total loan amount at the end of the borrowing term, i.e. a lump sum paid 35 years later. More info can be found here.

Property Survey: A detailed inspection of the property you have had your offer accepted on. It can identify any deep-rooted issues such as structural problems, as well as any areas which may require repair. This helps to provide a transparent view of the property you are buying. There are different levels of property survey, which you can explore in more detail here. You may be able to negotiate a slightly lower price to compensate for issues found in the survey.

Snagging Survey: Snagging surveys are a new build’s supplement to a property survey. Essentially, it is a list of all the issues or ‘snags’ with a new build property, usually defects like damage to paintwork or small unfinished jobs throughout the property. Ideally, this survey should be done before any money changes hands.

Tenants in Common: If you are buying with another person or a group of people, you may choose to register the property with HM Land Registry as tenants in common. You can own different shares of the property; it doesn’t automatically go to the other owners if you die, and you can pass on your share in your will. If you get married and want equal rights to the property you can transfer to ‘joint tenants’.

Title Deeds: These are legal documents showing the chain of ownership for land and property. This can include conveyancing documents, contracts and details of mortgages providing a trail of who has previously owned the property.

Choose your conveyancing solicitor

The keys to helping the home-buying process run smoothly are efficiency and being thorough. Whether you are a first-time buyer or you have moved a few times, there can be different obstacles each time. You want to be able to trust in your conveyancer to rectify any issues quickly but also properly.

Our conveyancing team comes extremely highly recommended for these exact reasons. Find out more what clients have to say about our team on Review Solicitors, and don’t hesitate to get in touch with any questions.

You can call us on 0161 969 3131 or fill in our contact form and one of the team will be in touch.

A Property Lawyer’s top 5 tips for a first time home buyer

May 15, 2019, By
expert home buying tips

Buying your first property and getting yourself onto the property ladder can be a daunting task, so our experienced property lawyers have put together some top tips to make the transaction a lot easier for you.

 

  1. Educate yourself & make the most of online information

Going online and doing your own research is one of the best ways to make sure that buying your first property is as smooth as possible. When planning the purchase, make sure that you look into things such as the local area, recent sold prices in the area, crime rates and lots more, as this will give you a reliable perspective of what life will be like living at the property. Overall, this step is essential when knowing how to buy a house.

Although this is a great way to make sure your first home perfect for you, the virtually endless tools and information available can lead to you easily becoming too picky when choosing a property, so make sure you focus on the things that matter the most to you and don’t let the other factors sway your decision too much.

 

  1. Get the right support

When you are buying your first home, it is vital to make sure that you have the best professional support to hand. Finding a dedicated and experienced Solicitor or Conveyancer to take care of the process is the only way to make sure you’re covered from all angles and all problems are dealt with.

Conveyancers are there to make sure that clarity is maintained throughout the whole process and they are able to work with you to pre-determine any potential issues and provide you with an in-depth account of all stages of the buying process, which makes things much more manageable.

In professional terms, finding the right legal team to deal with the buying process is the best way to ‘protect your investment’, which is vital for the long-term future of your investment.

When you are finding the right experts to support you, make sure to check client reviews and make sure they are regulated by the SRA.

 

  1. Be transparent about fees, expenses & budget

It is common for first time buyers to go online and search for the perfect home. Even though this is the most exciting part of the process for many, it is essential that you know what fees and expenses you will be required to pay throughout the process.

Taking the time to find out what fees you are expected to pay by either contacting your Solicitor or Conveyancer or using online quoting tools to obtain an understanding of what fees are payable and what the fees actually mean and cover would be beneficial, as it allows you to know what budget you have to work with.

Although it may be easy to boost your budget slightly to compromise for the fees, it is vital to make sure that your mortgage payments are manageable, the last thing you want is struggling to manage payments just for the sake of having an extra bedroom or a bigger garden.

  1. Speak to mortgage lenders & get accepted

Once you know what fees you have to pay and what your budget is, get in touch with some mortgage lenders and get a mortgage offer approved as soon as you can. Although many first time buyers leave this dreaded task until they have found a property they are genuinely interested in, doing this as early as possible makes the process much quicker further down the line.

On top of optimising the buying process, being able to prove that you have been accepted for a mortgage plays in your favour when it’s time to contact estate agents or sellers, as they can see that you are a serious and viable buyer.

If you’re finding it hard to get accepted for a mortgage, Martin Lewis money saving expert has some tips for getting accepted.

 

  1. Consider Government Schemes

If you’re struggling to get your full mortgage deposit for whatever reason, Government help to buy schemes make things more manageable. With the growing number of schemes available to new buyers, it is hard to find the right one, which is why we are looking at three of the key mortgage schemes available at the moment.

Help to buy – Equity Loan

This scheme caters to those who have 5% or more of their deposit, with the Government lending up to 20% of the property price. Although they set out to help more people get onto the property ladder, this scheme limits buyers to new build properties, and on top of this, you will have to start paying interest on the loan after 5 years.

Starter Homes

For the Starter Homes Scheme, you have the chance to purchase a home for 80% of the market value, which means that you can either save money on your first home or get more out of your budget.

This scheme may seem perfect, but there are a couple of downsides:

  • You are limited to new build properties
  • You cannot sell or let the property at the open market value for 15 years after buying the property.

If you’re considering a Government Scheme to help you get on the property ladder, make sure you know the ins and outs before you commit, so you can make sure that you don’t get any surprises along the way.

 

When buying your first home, it is important to know the processes behind it and understand what is happening at each point. Although your Solicitor/Conveyancer does most of the work by eliminating any potential problems and making the buying process clear, it is still a good idea to get to know the basics of buying your first home.

If you’re ready to buy your first home and you need a Solicitor/Conveyancer, get in touch with our experienced team today.