F2 - Rent or buy? (part 2)

First of all you will have to get a solicitor to do the legal work involved in buying a property. Try local solicitors firms or recommendations and get quotes from a few different ones. Check whether the quote they give you is a fixed fee or dependent on work involved.

Ask for breakdown of costs and check it includes:

Double check that there are no other hidden charges and check if charges are made if a sale falls through.

Visit some mortgage lenders and see what they can offer you. You could try banks, building societies and specialist mortgage companies. Again visit a few to see what they can offer. Remember they are in competition for your custom.

You need to ask:

There are different types of mortgages. You will need to decide which you want to get (see below).

When you have found a house that you want to buy you will be able to see a copy of the Home Information Pack (HIP) from the seller. This includes an energy performance certificate; a sales statement (explaining who owns what), a standard Local Authority searches document and evidence of the title deeds (confirming the seller actually owns the property). In addition you’ll presumably want to arrange a survey, to ensure the property is structurally sound.

If the survey identifies problems you may need to ask a workman to estimate the cost of repairs in order to decide whether to put an offer in.

The surveyor’s valuation, and the asking price on the house will help you decide how much to offer for it but you should also consider how much you can afford, how long the house has been on the market, the amount of repair work needed and the current housing market.

A key stage in the buying process is exchange of contracts – ie the point at which you have paid your deposit and when both you and the seller have signed contracts and these have been exchanged. Before exchange of contracts you can change your mind and withdraw your offer. Once contracts have been exchanged, even though it may be some weeks before you are able to move in, you cannot then back out of the sale without being liable for compensation. Normally the acceptance contains a number of conditions that must be accepted by your solicitor.

Your solicitor will sort out the paperwork in order to arrange the seller to be paid for the property with the mortgage company’s loan. Ownership of the house will then be transferred into your name. This is called ‘completion.’ Formal ‘completion’ always takes place on a working day and is the day you can move in.

There are different types of mortgages available. Your circumstances may effect which you choose to get.

Fixed

The interest rate is fixed so that repayments are the same every month regardless of UK interest rates.

The amount you pay is dependent on the Lenders standard variable rates (SVR) – these are rates that are set by the lender. They tend to move in line with the UK base rate but they do not have to. Lenders can basically change them however they please.

Rates move up and down according to the Lenders SVR but never go above a set amount within the time period meaning you can be certain of the maximum amount you will ever have to pay.

Tracker mortgages move in line with the Bank of England Base rate which is set monthly. You may get a ‘base rate + 1% tracker’ which means the underlying rate of your mortgage will always be 1% higher than the UK base rate.

Some tracker mortgages have a minimum rate level, an amount below which the rate won’t go.

You may get a discount off the SVR or standard tracker rate. This will be in a percentage off the over all rate for a number of years. For example you may have a ‘base rate + 2% tracker’ mortgage with a 1.5% discount for two years meaning that for the first two years you will pay interest at a rate of 0.5% above the standard bank of England base rate and then after that at a rate of 2% above the base rate.

If you get a fixed rate mortgage you will know how much you have to pay every month and can budget accordingly. You do not have to worry about changing interest rates. If you can only just afford the mortgage repayments and so do not want to be at risk of your monthly amount going up it is best to stick with a fixed rate mortgage.

If you have a bit of money to play with you can go for the cheapest deal. A discount mortgage may well be cheaper but you need to know you could afford the repayments if the rates were suddenly to jump up.