Your first home. A guide to buying for the first time

Transcription

1 Your first home A guide to buying for the first time

2 2 Your guide to getting it right You re planning on buying a place of your own at last. It will be your space and no one else s. It s an exciting thought. Although, thinking about everything you need to do can be a little daunting. There are so many forms to fill in and conversations to be had. Most of all, it s a big decision and you want to get it right. Well don t worry, that s how everyone feels. But the basics of what you need to do are quite straightforward. You just need to take one step at a time. So we ve broken the process down, with lots of practical tips. You can also speak to one of our mortgage advisers, they re a great source of information. And in no time at all you ll be making your first cup of tea and wondering which big cardboard box to open first. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

3 3 Simple steps to buying your first home Your 10 step guide Step 1. Set your budget... Page 4 Step 2. Decide where you want to live... Page 4 Step 3. Find the right mortgage for you... Page 4 Step 4. Make an offer... Page 5 Step 5. Apply for a mortgage... Page 5 Step 6. Instruct a licensed conveyancer... Page 5 Step 7. Arrange your insurance... Page 6 Step 8. Get the property surveyed/valued... Page 6 Step 9. Exchange contracts... Page 7 Step 10. Complete... Page 7 Your moving checklist... Page 8 Budget planner... Page 9 Jargon buster... Page 10 Why choose Virgin Money?... Page 11 Want to know more? Call us on * or visit virginmoney.com

4 4 Step 1 Set your budget First things first. How much can you afford to pay? Get an idea of how much you can afford each month Use our budget planner on page 9 or to view this online, visit virginmoney.com Get an idea of how much you can borrow We can give you a quick verbal quote based on your circumstances, which you can write down here for reference: How much can I afford? How much can I borrow? Extra costs to bear in mind Remember that when you buy your home you ll incur other costs. These include valuation/survey costs, legal fees, any insurance that is required and Stamp Duty. (This guide will cover these steps in more detail.) Step 2 Decide where you want to live Start by making a list of your priorities, such as the number of bedrooms, location, type of property, age of property, proximity to schools and transport. Then list these in terms of importance. It s then time to start looking at what s on the market: Search on a property website such as zoopla.co.uk or rightmove.co.uk Visit or call more than one local estate agent to discuss what you re looking for and get on their mailing lists. Look at property ads in local newspapers and magazines. Step 3 Find the right mortgage for you Your mortgage is likely to be the biggest financial commitment of your life, so think carefully about it. There are several different types of mortgage to choose from, and you need to decide whether you want a rate that changes as interest rates move or one that is fixed so you know exactly what you ll be paying each month.

5 5 Step 4 Make an offer So you ve found a home you like. You need to be 100% sure this is the right place and you can afford it. Before you make an offer, consider the following points: What is the maximum you can realistically afford? Do not make an offer that goes over your limit. Decide in advance to what degree you are willing or able to negotiate. Know how much deposit you need for the mortgage you want. Are there any fixtures and fittings you would like included in the sale? If so, make sure your offer is conditional on these being included. Ready to offer? All it takes is a phone call to the seller s estate agent. Remember you can always raise your offer but don t bid over your limit. If your offer is accepted, although you re not legally bound to buy the property (except if you are buying in Scotland), you ll soon be ready to instruct a conveyancer, which means you will start incurring costs. Step 5 Apply for a mortgage Right, you ve had your offer accepted. Time to get your mortgage sorted. There are three main stages: 1. You re given a Key Facts Illustration (KFI). Read it carefully and query anything you don t understand. 2. You receive a Decision in Principle (DIP), sometimes called an Agreement in Principle (AIP), once you meet all of the requirements. We ll need to run a credit check on you to do this. 3. Contact us to make a full application. If you re shopping around, you should be aware that getting too many Decision in Principles may have a negative impact on your credit rating. Step 6 Instruct a licensed conveyancer The legal work of transferring a property is called conveyancing. Your conveyancer guides you through the process, staying in contact with the seller s conveyancer, the mortgage company and the estate agent. They will also arrange for the transfer of the Stamp Duty Tax charged by HM Revenue & Customs. It s best to shop around for a conveyancer. We can help take away the stress of this by getting a quotation for you from one of our trusted conveyancers from our conveyancing panel.

6 6 Step 7 Arrange your insurance It s important to have your new home properly protected. At the very least you ll be required to get buildings insurance as a condition of your mortgage and our advisers can help you here. Why home insurance makes sense Sometimes things will go wrong with your home, or you ll have an accident. If you re covered with insurance it s not a problem. If you re not, it could cost you a lot of money. We can offer you a range of home insurance products which gives you a choice of levels of insurance just ask us for a quote. Mortgage Related Life Insurance It s also worth considering Mortgage Related Life Insurance very carefully, especially if you have dependents. It will ensure your mortgage is paid off should you die, so your partner or family won t have to worry about mortgage repayments. Not something you want to think about, but something definitely worth sorting out for a small sum each month. Step 8 Get the property surveyed/valued Before you formally agree to buying your new place, you need to make sure it s a sound investment. There are three different types of report that do this to differing degrees of thoroughness. Mortgage valuation The most basic. We ll need this to be sure the property is really worth what you ve agreed to pay for it. It s not a comprehensive survey of the property, however. HomeBuyer report This tells you about the condition of the property and includes a valuation. It will point out areas that need urgent attention and ongoing maintenance issues that may affect the value of the property. Building survey The most detailed survey report. It investigates the construction and condition of a property but doesn t normally include advice on value, so you ll still need a mortgage valuation as well.

7 7 Step 9 Exchange contracts The contract is a legal document that describes the legal title of the property and the price, and sets a date for completion. It sets out what will happen if either side fails to do what they ve agreed, and mentions anything you have agreed (e.g. that fixtures and fittings are included in the sale). In Scotland this stage is called concluding missives, but the purpose is the same. Make sure you read through the contract and query anything you don t understand, because once you ve exchanged contracts you re legally bound. This stage is complete once: Step 10 Complete Your conveyancer will have prepared the mortgage deed before completion day, and you ll need to have signed it in advance. But the conveyancer still typically has a lot of work to do on completion day. As a first time buyer you don t have to wait until you receive the money from selling your own property, so that s one less thing to worry about. Once the seller s conveyancer has received the balance of the purchase price from your mortgage lender, the estate agent gives you the keys. You re now the proud owner of your first home. 1. The conveyancer has approved the contract 2. You have signed it 3. The two conveyancers exchange contracts 4. Your deposit money goes to the seller s conveyancer After exchange you are responsible for the property s buildings insurance please ask one of our advisers about this if you d like more information. Talk to a mortgage adviser today Call us on * or visit virginmoney.com

8 8 Your moving checklist Leading up to the move Make sure you ve arranged insurance for your new home Book time off work If you re currently renting, read the meters before you leave so that you re only charged for what you ve used Contact your utility companies to tell them you re leaving and pay any outstanding bills After you ve moved in Let important people know you ve moved such as your bank, GP, family and friends Set up a mail redirect from your old home Read the meters as soon as you move in Contact utility companies and add your name to the electoral register Chat to neighbours it ll help you settle in

9 9 Budget planner It s essential to have a really good, honest idea of how much you can afford to pay for your mortgage each month. Working this out carefully is the only way of knowing for sure what mortgage you can afford. Income Monthly income from employment After tax and National Insurance (include any overtime or bonus) Other monthly income From savings and investments, pension, benefits per month Total monthly income: Don t forget the other costs to consider when you move, such as Stamp Duty, valuation and conveyancer s fees. Spending Utility bills Electricity, gas, water Council tax Telephone, Internet TV & satellite & mobile contract Buildings & Contents insurance per month Travel and transport Car Insurance, tax, MOT, breakdown cover Petrol/Diesel Public transport expenditure per month Personal costs Food Grocery shopping, meals at work, school meals Clothing, footwear, essentials Healthcare Prescriptions, dentist, optician Children Childcare, pocket money, school trips, school/college fees per month Pets Food, vet bills, pet insurance Loan and hire purchase Life and health insurance Pension and savings contributions Credit & store cards Overdraft Total monthly spending: What you can afford To find out the level of monthly mortgage payment you can afford, simply take your total monthly spending from your total monthly income. Please note: this is an estimated amount and may not reflect the amount we will lend you. Your mortgage adviser will be happy to discuss this with you in more detail. Total monthly income: Total monthly spending: Estimated amount left to spend on mortgage:

10 10 Jargon buster To help you understand the terminology you might come across when buying your home, here s a handy mortgage jargon buster. Affordability check Carried out by a lender to determine the amount you can borrow, depending on things like your income and expenditure. Application fee When you take out a mortgage, there may be a fee to pay to cover the cost of arranging your deal. Annual Percentage Rate (APR) The interest you pay per annum on your mortgage. Arrears Someone is in arrears when they have missed mortgage or debt payments. Borrow back A facility offered on Flexible mortgages which allows any overpayments to be returned to the borrower. Change of parties A request to change the people named on your mortgage account. Consent to let A request to let out a property currently on a residential mortgage. Credit check A report on your credit rating. Credit scoring When you apply for any form of credit, the lender will usually credit score your application, to help them decide whether to accept your application. Decision in Principle (DIP) This informs the borrower if, in principle, a lender will provide the money and what amount. Deposit A payment made to demonstrate the intention to fully purchase the property at a later date. Early Repayment Charge (ERC) A charge you may have to pay if you pay back your mortgage early and/or move to another lender while in a special rate period. Endowment An investment plan that you usually pay in to every month which will pay out a lump sum at the end of a fixed period, or on death, whichever is sooner. Equity The difference between the current value (or market value) and the amount of the loan or mortgage that is still outstanding i.e. the notional amount you would receive if the property were sold. Everyday mortgage A simple mortgage from Virgin Money. Fee Saver Option (FSO) A mortgage deal with no product fee to pay, which may mean that you have to pay a slightly higher interest rate. Fixed Rate mortgage A mortgage where the rate of interest is fixed over the term you choose, regardless of changes to the Bank of England Base Rate. Flexible mortgage A mortgage from Virgin Money with additional options such as the ability to make unlimited penalty-free overpayments. Further borrowing An additional amount borrowed, with the mortgaged property as security. Income multiples The factor by which your earnings are multiplied to work out how much you can borrow. Interest rate The amount of interest paid or charged (usually given as a percentage). Interest only mortgage A mortgage where you only pay back the interest charges each month. As the initial loan amount is not being reduced, this will need to be repaid in some other way at the end of the term. Key Facts Illustration (KFI) A document from the mortgage lender in a standard format allowing you to compare their service, product and offer. Legal fees A fee you pay to a conveyancer for their services. Loan A sum of money which is provided with the expectation of being paid back. Loan to value (LTV) The ratio between the size of the loan and the value of the property. Mortgage A loan to finance the purchase of a house. Negative equity When the amount you owe your mortgage lender is more than the value of your home. Outstanding balance The amount left on your current mortgage. Overpayment Any additional payment made on top of the contractual monthly mortgage payment. Part and part mortgage A mortgage where you pay back part of the initial loan and part of the interest charges. When the term ends, you will still need to pay off some of your original loan, but this will have reduced over time. Payment holiday A break in mortgage repayments that may be agreed with the lender and subject to an affordability check. Porting This is the process of keeping your existing mortgage when moving home. Product fee When you take out a mortgage, there may be a fee to pay as part of the mortgage product you select. Remortgaging Moving your mortgage from one lender to another without moving home. Repayment method The three ways you can manage the repayment of your loan - repayment, interest only, or part and part. Repayment mortgage A mortgage taken out where you pay back both the initial loan and the interest charges. Once all of the payments are made, the mortgage will be fully repaid. Repossession A legal process which involves a lender taking possession of a property which was used as the security for the loan. Secured loan A loan (such as a mortgage) with property or other assets as security. Stamp duty A tax on certain house and land purchases and some transfers of property. Standard Variable Rate (SVR) The lender s normal mortgage rate which you will revert to after any discount or special rate period. It moves up or down at the lender s discretion. Term The period over which a mortgage is scheduled to be repaid, often 25 years. Tracker mortgage A mortgage with an interest rate linked to a particular base rate, which it moves up and down with. Underpayment A reduction in mortgage repayments that may be agreed with the lender. Valuation Part of the process of getting a mortgage, involving arranging a valuation report.

11 11 Why choose Virgin Money? A different kind of bank with a fresh, clear approach A wide range of mortgages to meet your needs and great rates Free advice Friendly, helpful customer service UK-based contact centres with knowledgeable staff Useful guides that make everything straightforward What to do now Speak to a mortgage adviser today, or find out more about how else we can help. Call us on * or visit virginmoney.com

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