Guide to home buying
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This guide is intended to help you choose the mortgage that's right for you and guide you through the whole process, right up until you move in.
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Included in this guide...
Introduction - A guide to home buying
1. How much can you borrow and how much can you afford?
2. Where and what to buy?
3. Make an offer
4. Finalise your mortgage
5. Appoint a solicitor
6. Move in
Things to think about
A Guide to Home Buying
A new home is more than just bricks and mortar; it’s something we invest in emotionally, as well as financially. No wonder the journey from viewing a property to putting the key in the door for the first time can seem stressful.
Yet, if you plan ahead and get some help along the way, you could make it a bit less complicated. This guide is designed to act as a starting point to help you take some of the stress out of the home-buying process.
You’ll find tips and information to get you started on everything from budgeting and the buying process, to choosing the property itself, renting it out and paying off your mortgage so you can buy your new home with confidence.
Bear in mind, this guide is not meant to replace legal advice. If there is anything that you are unsure about we recommend that you speak to a legal adviser.
Look below to explore six steps involved in buying a home in England and Wales.
How much can you borrow and how much can you afford?
Before you start looking at properties, it’s a good idea to talk to a mortgage lender to find out how much you might be able to borrow and how much it will cost. The larger your deposit, the more likely it is that you’ll pay a lower rate of interest or maybe less fees.
The amount you can borrow – your mortgage – plus your deposit, gives you a guide to the house you can afford. Your lender should be able to give you an 'agreement in principle' so you can start house hunting.
In the past, how much you could borrow was based on your income. These days, lenders want to know whether you are able to afford the loan, which means they also look at your outgoings and other personal circumstances. With a larger deposit you can often benefit from better mortgage deals, and remember, the more you borrow the more interest you will have to pay. You’ll also have upfront costs such as survey fees, legal costs and stamp duty to consider.
There are lots of free online mortgage calculators that will give you an idea of what you may be able to borrow and afford, you’ll find all of ours at natwest.com/mortgages.
This is also a good time to look forward and think about your plans for the future. Are you thinking of starting a family sometime soon? Will you still be able to afford your mortgage payments if your income was to change? Also, interest rates are low at the moment but will likely start to rise again at some point.
Think about how a rate rise of just 2%, for example, would affect you. Would you still be able to make your repayments? There are different products which could help by fixing your rate and payments for a set period of time to help give you peace of mind.
What it costs
Moving house can be expensive. There’s Stamp Duty Land Tax, which ranges from 1% for properties worth £125,000−£250,000 to 5% on those worth more than £1 million.
You also pay legal fees, valuation fees, lender’s fees and charges, surveyors’ fees and Land Registry fees – all of which add thousands to the cost of buying your home.
There are no fixed rules about costs – it depends on what house you are buying, where you live and your mortgage deal. Some lenders offer free valuation and legal fees to borrowers, some have fee-free loans, while others charge. On top of that, there are your moving costs and other expenses such as home insurance and mail redirection that you have to remember to include in your budget.
It's important to:
- Decide what you’re looking for
- Register with estate agents
- Visit properties you like
Where and what to buy?
Buying a house is likely to be one of the biggest purchases you’ll ever make, so it’s important to spend time researching where you want to live and what sort of property you want to buy. Which areas do you like? What type of house are you looking for?
Some people might say that location is everything, but property type is important as well. So think about access to shops, schools and other services, and how easy it will be to travel to work.
Decide whether this is your ‘forever’ home or whether you’ll live there for just a few years before trading up or down. If you’ll be staying put for a while (the average time is 11 years), ask yourself whether it would still be suitable if things changed, for example if you have a baby and need room for a nursery.
Even if you don’t plan on moving in a hurry, it might still be worthwhile considering how easy it will be for you to sell your new home. For example, are there enough bathrooms for the number of bedrooms? Ideally, a three bedroomed house should have two bathrooms.
You might want to draw up a list of essential features like number of bedrooms, and a list of 'preferables' such as a garage or large garden.
How to buy
Once you’ve decided where you want to live and the type of property you want, try signing up with local estate agents and ask them to send details of suitable properties – also start looking online. Be flexible about what properties you’ll view. For example, the agent may know that the seller is prepared to drop the asking price, so it could still be within your budget.
Make an offer
When you've found the right property, make an offer through the estate agent. Remember, the sale price is what the seller hopes to get, not necessarily what they realistically expect - and you may be able to agree a lower price. Your offer should be 'subject to survey and subject to contract'.
If you’re already a homeowner, you should consider holding off looking at properties until you have agreed on the sale of your current home. If you aren’t selling another property you may be in a strong position to negotiate on the price. This could also apply to having a mortgage that’s ‘agreed in principle’ – what the lender says it will probably give you, based on certain terms and conditions.
Be prepared to walk away. Decide how much you can afford and stick to it. Also, if a survey highlights problems, don’t be afraid to negotiate downwards.
Decide how much you can afford and stick to it. Be prepared to walk away.
Make sure you're protected - think about life, accident and sickness insurance.
Finalise your mortgage
The mortgage that was approved in principle needs to be arranged now. Your lender needs to know what the property is worth, and will arrange for a valuation. You'll have to pay for this. Valuations can be free with some mortgages.
A Standard Valuation is the minimum check we require to progress the mortgage for house purchases and is required by law. A surveyor will inspect the property, highlighting obvious major defects that could affect the value, then compare the property to similar ones, taking age, condition and location into account. This information is used to write a valuation report, called a Standard Valuation.
The Homebuyer’s report is a more detailed report, with advice on defects affecting the property value, and details of any likely future maintenance or repair costs.
A full Buildings Survey (previously called a Structural Survey) is useful for older, larger or non-traditional properties. It provides a thorough inspection and detailed breakdown of the property condition including any structural defects, necessary repairs and maintenance advice.
Think about life insurance as well as accident, sickness and unemployment insurance to cover your mortgage payments. You'll also need to insure your new home and belongings.
Appoint a solicitor
A solicitor or conveyancer will manage the legal transfer of a property from one owner to another and it makes sure that you have proper legal title. They'll also carry out all the necessary land searches to check for past and potential problems.
Three main areas where a solicitor helps:
When the sale is agreed – carrying out enquiries, preparing the contract, negotiating of the moving date, paying money on account and searches
At exchange of contracts – receipt of your deposit, approval of transfer deeds, contract and deposit to seller's solicitor, preparation of transfer and mortgage deeds, arrangement of final searches and preparation of final accounts
On completion – paying the balance of the purchase price and settlements, managing the handover of deeds, paying Stamp Duty and registration at Land Registry
Make sure you're fully prepared before you move, with your possessions boxed up and clearly labelled. You may want to hire a removal firm to help you.
- Tell your old gas, electric, water and telephone suppliers that you're moving out
- Tell your new utilities suppliers that you've moved in
- Let the council know about your move so you don't pay Council Tax at your old address
- Think about having your mail redirected from your old address
Once you've moved in there are a couple of extra things that you should take care of. After the first month, check that you're paying the right mortgage repayment amounts at the right time. And make sure your important documents are carefully filed away. They're your main record of your purchase and your mortgage and you may need them in the future.
At a glance
Things to think about
How much can I borrow?
Do you have any savings? Will the amount cover a percentage of the deposit plus moving costs, including legal fees? How would you make your mortgage payments if you were sick and unable to work?
What type of mortgage?
Do you know what type of mortgage you want? Can you afford it?
How much will home insurance cost?
Have you got insurance for your new property and possessions?
Award winning mortgages
You're in good hands
We wouldn't usually blow our own trumpet like that. But buying a house is a huge commitment. And choosing the right mortgage provider, whether it's your first mortgage, or you're renewing an existing deal, makes a big difference. NatWest has been awarded 'Best Bank for Mortgages' for an impressive 20th time in the past 24 years and for the 5th year in a row we’ve also won 'Best First Time Buyer Mortgage Lender' in the 2013/14 'Your Mortgage' awards.
In addition NatWest has won the 'Best National Bank' for the 3rd year in a row in the 2014 'What Mortgage' awards.
Best National Bank
Best First Time Buyer Mortgage Lender
Protecting your money
We are a member of the Financial Services Compensation Scheme (FSCS). The Scheme can pay compensation to customers if they are eligible and the Bank is unable to pay claims against it. Compensation limits for Mortgage advice and arranging (for business conducted on or after 31 October 2004) - maximum £50,000 i.e. 100% of first £50,000 per person. Further information is available here ( 650K PDF) or visit www.fscs.org.uk.