I Bought My First Property. Here’s What I Learned
In the middle of the pandemic, in 2020, aged 32, I was finally ready to buy my 1st home in London, UK.
In the UK, it’s usually cheaper to pay a monthly mortgage than to rent privately. This was one of the reasons I wanted to buy, not to mention building the equity for the future and having a place that I can decorate the way I want 🤟🏼
In this article, I’m going to share all those factors that first-time buyers tend to overlook. I hope this will help you on your journey …
3 things to do before buying your home with a mortgage
If you plan to buy your home outright, you can ignore #1 and #2 points below. Lucky you 😉.
#1 Boost your credit score
If you plan to get a mortgage, you need to have a good credit score. A credit score is a numerical value that is used by most lenders and finance providers to determine how good you are at borrowing money. I’ve written all about credit scores here.
#2 Speak to a mortgage broker
A mortgage is a loan that enables you to cover the cost of a home.
Buyers usually pay 10-20% of the house price upfront (known as a deposit) and take a mortgage loan on the remaining 80-90%. Read all about mortgages here.
A mortgage broker is an independent agent that will help you to find the best mortgage deal for your situation.
Some mortgage brokers charge buyers for their services, others get a commission from the bank, and some do both (get a commission from a bank and charge buyers).
I’d say that paying a mortgage broker makes sense if you have a special situation, for example, you are self-employed, a new business owner, or a freelancer. This is because unfortunately, banks are still wary about independent people – not all banks want to lend to people without a guaranteed steady income.
A mortgage broker will also advise on the maximum amount you can borrow on your income.
💁🏻♀️ INSIDER TIP: Please don’t feel pressure to borrow the maximum amount you can. One of the reasons I wanted to buy a home is to reduce my monthly expenses so that I can move away from 9-5 and start my own business, so I borrowed way less than I could.
#3 Work out the true cost of buying & owning a home
There are a lot of costs related to owning a home. Make sure you are aware of these costs before you buy, so you can budget for your lifestyle properly.
Expected purchase costs in the UK (our example):
| CONVEYANCING FEES | £1,659.00 |
| SURVEYORS FEES | £600.00 |
| MISC/ MOVING COSTS | £1,500.00 |
| STAMP DUTY/ TAX (£0 for properties under £125K) | 2%-12% |
| MORTGAGE APPLICATION FEE | £1,312.00 |
| HOME BUYERS INSURANCE (will explain this below) | £63.00 |
| COST OF WHITE GOODS /FURNITURE ETC | £5,000.00 |
Home Buyers’ Insurance protects you against gazumping, that is when the seller changes their mind and either withdraws the offer or decided to sell the property to someone else (usually someone who offers more money). Gazumping can cost buyers thousands of pounds on conveyancing, surveyors, and mortgage applications fees.
Ongoing costs related to owning a leasehold property in the UK (our example):
| SERVICE CHARGES | £1,800 |
| GROUND RENT | £10 |
| COUNCIL TAX | £1,200 |
| MAJOR WORKS (every 7 years) | £8,000 |
| HOME CONTENTS INSURANCE (per year) | £300 |
| BILLS (water, electricity, gas, internet) | £1,300 |
Step-by-step process of buying a property
1. Decide on the neighborhood(s) and types of properties you want to buy
We wanted to live in an up-and-coming area that is close to the centre, like Bermondsey, Deptford and New Cross, so we created automatic alerts for the properties in our price range on the UK’s most popular sites like Zoopla and Rightmove.
If you are based in the US, check out Zillow and Trulia, in Canada check Redfin.
You should have a general idea of what size house you want before you even strat viewing. Figure out a minimum and maximum square footage and the number of bedrooms you’ll need.
💁🏻♀️ INSIDER TIP: If you want to buy in an area you don’t know very well, go and prowl the neighborhood on foot, visit the parks and shops at different times of the day. Speak to local people, Google about crime rates, etc.
2. Get a Mortgage in Principle from a mortgage broker
Mortgage in Principle is a statement from a lender saying that they’ll lend a certain amount to you before you’ve finalised the purchase of your home. Mortgage brokers can grant you with “Mortgage in Principle” which many real estate agents and conveyancers need before moving forward with the home buying process.
3. Start viewing properties you like
We viewed 20 properties before we saw something we liked. I even scrolled sites like Willow.com to daydream about pads in Malibu and homes for sale in Toronto – one of my favourite cities! One day! 😏
When you view properties, pay attention to public transport links, neighborhood safety, and other factors that all contribute to the value of your home.
💁🏻♀️ INSIDER TIP: With some proactivity, you can get a home below the market price. Write a nice letter/brochure explaining you’re keen to buy and post it to homes on streets you like. Not only could you nab somewhere before others hear about it, but the seller may give a discount, as they save on estate agent fees.
4. Make an offer to the seller via their estate agent
You can offer less than the asking price. We did and got it. Think of an asking price as an estimate, because if your solicitor or surveyors finds out that there is some costly damage to the property, you can ask to reduce the offer to cover those costs.
💁🏻♀️ INSIDER TIP: Go and speak to neighbors, they may offer tip-offs on the area or home. Unlike agents and sellers, neighbors will likely be honest about what the area is like.
5. Seller accepts the offer
This may take some time as the seller will probably want the biggest amount they can get. Make sure you negotiate the best deal for yourself.
💁🏻♀️ INSIDER TIP: As soon as the seller accepts your offer, ask them to ‘take it off the market’. This cuts the chance of gazumping, where the seller accepts another higher offer after the sale has been agreed. Until contracts are exchanged, either party can pull out at any time. We’ve insured ourselves against gazumping by paying £63 for Home Buyer’s Insurance.
6. Buyer gets a mortgage offer
Once your offer is accepted, go back to your mortgage broker apply for an official mortgage offer. A mortgage broker will ask you to submit your payslip and bank statement to understand your income and spending habits. If all looks good, you will be granted a mortgage offer from your preferred bank.
7. Buyer instructs the conveyancer and surveyor
Conveyancing is the legal transfer of a property from one owner to another. Conveyancer makes searches about the property ensuring the purchase is legit. They do all the legal paperwork, Land Registry, and local council searches, draft the contract, and handle the exchange of cash.
Surveyor makes a detailed inspection of a property’s condition and tells you if there are structural problems like unstable walls or subsidence. They will highlight any major repairs or alterations needed, such as fixing the roof or chimney chute.
Surveyor is not mandatory but highly recommended, because if there are any issues to the property, you can ask a seller for a house price reduction to cover the costs.
💁🏻♀️ INSIDER TIP: Ask friends to recommend good solicitors and surveyors and DO get maximum quotes in minimum time. DON’T automatically use the estate agents’ firms. It’s probably a commission-based recommendation. DON’T assume solicitors need to be nearby, consider someone from further afield if they are cheaper.
8. Exchange: send the deposit to the conveyancer bank account
The conveyancer combines your deposit with your mortgage loan and holds the whole sum in their protected bank account. This is where you can’t back out without major costs.
9. Completion: the buyer’s conveyancer sends the whole sum to the seller’s conveyance
This is where the deed and keys are exchanged.
Any questions? Please ask in the comments. Let’s help each other.
