BUYING YOUR

FIRST HOME
A simple guide to follow every step of the way.

By Hilary Osborne
Independent Financial Journalist.
A MESSAGE FROM IAN BULLOCK
GENERAL MANAGER - SALES AND MARKETING AT YORKSHIRE
BUILDING SOCIETY

“I remember buying my first home - and people aren’t

kidding when they say it’s one of the most stressful things
you can do.

An easy, no-nonsense guide would have made my life a

lot easier then, so I’m delighted to introduce this one now.
And it’s because so many of us remember how daunting it
can seem that we at the Yorkshire take extra care to make
first-time home buying as clear, simple and painless as
possible. I wish you luck in the hunt - and much happiness
in your new home.”

ABOUT THE AUTHOR

Hilary Osborne started her journalistic career in consumer

magazines and has previously edited ‘What Mortgage’ and
‘What Investment’. She currently writes on all aspects of
personal finance for the Guardian Money website.

Call 0845 1200 100

www.ybs.co.uk/firsttimebuyer
Where do I start?
You’ve decided the time is right to buy your
first home - a big decision, but only the first
of many in what could be a long and stressful
process.
There are so many things you need to
remember, and so many things you need to
get right, that at first glance the whole
process can seem daunting.
However, by taking things one step at a time,
and thinking carefully about your options, you
can make the path to your first home a
● Find out how much you can afford
● Register with estate agents
● Go househunting
● Find the property you want
● Make an offer
● Have an offer accepted
● Choose and apply for a mortgage
● Instruct a conveyancer
● Provide the lender and
conveyancer with requested
paperwork

smooth one.
● Exchange contracts & pay deposit
● Get ready to move
It doesn’t matter how much you intend to
● Complete the deal
spend, or where you intend to buy, the route
you take to your home should look something
● Settle conveyancer’s bills

like this:
● Move in - and relax!

Contents
How much can I spend 2 Buying costs 17
Mortgage choices 4 The final stages 19
Agreements in principle 8 The move 20
Househunting 10 Insurance 21
Making an offer 12 Buying in Scotland 24
Applications 13 Glossary 26
The conveyancer 14 Checklist for first time buyers 28
The valuation/survey 15 Budget Planner/Notes 29
 How much can I spend?
There’s not much point looking for a property until you know how much you can afford to
spend. Unless you are lucky enough to have cash to buy a property outright, most of your
budget will be in the form of a mortgage – so you need to get an idea of how much you
can borrow.

The first question any lender will ask is how
much you earn, and this will form the basis of
any mortgage offer. Many lenders use standard
salary multiples which vary depending on your
income but in general lenders offer three to
three-and-a-half times your salary to single
borrowers, while for joint borrowers the rules
vary. For joint borrowers some lenders offer
a multiple of the total income, while others
multiply the first salary and then add the
second. Many offer a choice so you can opt for
the method that gives you the biggest loan.
Outstanding debts
Any debts you have may reduce the amount
you can borrow. Monthly repayments on a
credit card or personal loan may be deducted
by some lenders from your salary before the
calculations are done.
For example, if the first-time buyer earning
£24,000 is repaying a student loan at a rate of
£100 per month, the lender may multiply this
repayment by 12 and subtract this from their
income. This effectively reduces their income

Most lenders determine how much they are
prepared to lend using a combination of how
affordable the repayments are to the borrower,
and income multiples. To do this they look
carefully at evidence of the borrower’s income
and outgoings over a period.
The following example should give you an
idea of how much you can borrow:
A first-time buyer who earns £24,000 and
chooses a lender who works on an income
multiple of 3.5 times income will be offered a
mortgage of 3.5 times x £24,000 = £84,000.
by £1,200 to £22,800 and limits the mortgage
they can get to £79,800.
If you have outstanding credit card debts the
lender may take the minimum monthly
repayment - usually 5% of the debt - and
multiply this by 12. This total will be subtracted
from your income.
As you can see, any debts could have an
impact on the amount you can borrow so, if
you can, it may be better to settle them before
you apply for a mortgage.

If the buyer’s partner earns £18,000 and the

lender offers joint borrowers 2.5 times their
combined income, the pair could borrow
2.5 x £42,000 = £105,000.

2

Your budget
When you have worked out how much you can
borrow, add the amount you have available for
a deposit and you have the total amount you
can afford to spend on your home. Make sure
you don’t allocate all of your savings to the
deposit as there are other costs associated with
buying a home that you’ll need to cover.
See p 17 for details.
Loan to values
All lenders have an upper limit on how much
they will lend on a property. This is usually
referred to as the maximum loan to value (LTV).
The LTV is the proportion of the property’s value
the lender is willing to lend, expressed as a
percentage of the value of the property.
If, for example, a lender is willing to offer a
mortgage up to 90% LTV on a property valued
at £110,000, this means you can borrow up to
£99,000, providing your income is big enough.
This means you need to find a deposit of at
least 10%. In general, the larger your deposit the
lower the LTV you need and the better the choice
of mortgage product.
Self-employed?
If you work for yourself most lenders will base
the amount they are prepared to lend on your
last year’s earnings. You will be asked to
provide two or three years’ audited accounts as
proof of your income, but most lenders will
use only the last year’s take home pay in their
calculations. This is good news if your business
is growing, and bad news if your last year’s
earnings were unusually low.
If you don’t have audited accounts, or you don’t
think your accounts fairly represent how much
you can afford to spend on mortgage
repayments, you could take a self-certification
deal. Here the lender bases its calculations
on a statement from you of how much you
earn. You will not be asked to provide any
proof, but it’s important to be completely
honest otherwise you may find yourself being
prosecuted for fraud as well as being unable to
repay your loan.
3
 Mortgage choices
At this point you can start thinking about what type of mortgage you want. You’ve probably
seen adverts for some of the following types of deal, but which should you choose?

Fixed-rate mortgages Tracker mortgages

This kind of mortgage offers a fixed interest
rate for a set period. Whatever happens to the
lender’s Standard Variable Rate (SVR) or Bank
of England Base Rate during that period, the
interest rate you pay will remain the same,
which makes this type of mortgage ideal for
people on a tight budget.
Fixed-rate pros: You know exactly the rate of
interest payable on your mortgage for a set
period. Your interest rate will not change.
Fixed-rate cons: You won't benefit from any
fall in interest rates during the fixed rate period
Tracker deals tend to have rates at a stated
margin above the Bank of England Base Rate,
although there are sometimes deals with rates
below this rate.
The Base Rate is set by the Bank’s Monetary
Policy Committee each month and if it is
increased or reduced the interest rate on a
tracker mortgage rises or falls by the same
amount. However, some lenders have lower
and upper limits on the interest rate often
called capped mortgages (see the next page) -
ask about these before you sign up.

Variable rate mortgages

Most lenders link the rates they charge on
mortgages to an underlying mortgage rate,
usually referred to as their Standard Variable
Rate (SVR). Many deals that have special rates
in the early years revert to the SVR once the
deal ends.
The SVR is subject to change whenever the
lender chooses. Although most will not change
the rate unless the Bank of England Base Rate
changes they are within their rights to do so
whenever they want and by as much,
or little, as they choose.
Most lenders offer trackers for a short period
and rates then revert to the SVR, however
there are some deals available that track the
base rate for the whole mortgage term.
Tracker pros: Any Base Rate reduction is
passed on in full immediately.
Tracker cons: Your repayments could change
every month or several times a year. Any Base
Rate increase is passed on in full straightaway.
Discount mortgages
For a set period, usually one to five years,
the lender offers a reduction on its SVR.
For example, you might be offered a discount
of 1.5% over three years. However much the
SVR rises or falls during the discount period,
you always pay a rate 1.5% below it.

4
Stepped rate products are available - again
there is a set discount period but the size
of this discount reduces as time goes on.
For example, a lender may offer a 2.00%
discount for a year, followed by 1.00% in the
second year. This can be good news if you
think you will be strapped for cash in the first
year of home ownership.
Capped-rate mortgage
This option offers a happy medium between
fixed-rate and discount mortgages.
The capped rate mortgage offers a limit to
how high the interest rate can rise but the
rate you pay can move up and down below
that level. There are, however, very few
capped-rate deals on the market and the
caps on the deals that are available tend to
be higher than the fixed-rates on offer.
Mortgages with flexible features
Flexible loans offer borrowers the chance to
make overpayments, underpayments, take
payment holidays or borrow back money
they have overpaid.
Flexibility suits borrowers who have
fluctuating incomes - for instance self-
employed people and those in seasonal jobs.
When money is coming in they can overpay
and get ahead on their payment schedule
and in periods when business is slow they
can make smaller mortgage repayments or
even, overpayments funds permitting, take
a month or two off. Lenders have different
rules about underpayments and payment
breaks so make sure you check these out
before choosing a deal.
Mortgages with flexible features are also
good for borrowers with spare money
to pay into their account. Making regular
overpayments can help you reduce the length
of time it takes to repay your mortgage and,
as a result, the total cost of your borrowing.
You don’t necessarily have to choose a
mortgage with flexible features to get some
or all of these features - many lenders allow
some degree of overpayment on all the
mortgages in their range.
5
 Mortgage term
When you take out your mortgage you
will be asked how long you want to take
to repay it. Most lenders offer mortgage
terms of between 5 and 35 years or more,
although many borrowers originally opt for
a 25-year term.
The shorter the term the higher your
monthly repayments, but the lower the
total cost of the deal. Borrowers who take
out a mortgage with flexible features can
schedule the repayments over 25 years
but pay more than the calculated payment
each month. By overpaying in this way you
can get ahead of schedule and repay your
mortgage in a shorter time and at a lower
cost.
6
Offset mortgages
An offset mortgage allows you to link
your savings and/or current account to
your mortgage. You don’t earn any
interest on your savings but you don't
pay interest on the part of your mortgage
equal to that amount of your savings.
Therefore the balance in your account
effectively reduces your payments and
the mortgage could be paid off quicker. To
get the benefit of this type of deal you do
need to have enough savings to make a
difference to your mortgage debt.
A number of lenders now also offer a
facility on their offset accounts which
allows you to link the savings of family
and friends to your mortgage. This
enables them to help reduce your
mortgage payments, whilst retaining full
control of their savings.
Early Repayment Charges
With some mortgage products, if you repay
your loan in full, make larger overpayments
than are allowed or transfer your loan to
another of the lender’s products, you may face
an early repayment charge. The size of the
charge depends on how much you owe and
the deal that you have with the lender.
Charges are usually a percentage of your loan,
rather than a flat fee. Some lenders charge a
percentage of the outstanding balance of your
loan, while others charge a percentage of your
original loan, which will be more expensive.
Early repayment charges are often found on
fixed-rate and discount mortgages and are
usually only applied during the special rate
period, but some have charges beyond that so
read the small print before signing up.
Daily interest
Look out for mortgages which offer daily
interest calculations. For almost all
borrowers these offer a cheaper deal
than loans with annual interest
calculations because any monthly
payments and overpayments
immediately reduce your outstanding
debt and the amount of interest you are
charged overall.
Repayment and interest-only
Whatever type of mortgage you choose you
need to decide how to repay it. Choose a
repayment mortgage and each month your
payments to the lender pay off some of the
capital you owe along with the interest.
Your monthly repayments are calculated so at
the end of your mortgage term your debt will
be cleared completely provided you have paid
the required payment on the due date.
Opt for an interest-only deal and your monthly
payments will be lower but these only pay
off the interest you owe. At the end of your
mortgage term you will need to repay the
capital you borrowed as a lump sum.
How you achieve this lump sum is up to you
- most borrowers take out an investment like
an individual savings account (ISA), a personal
pension or an endowment, but you may be
expecting an inheritance, or intend to sell the
property.
Your attitude to risk will to a large part
determine whether you choose interest-only or
repayment. Cautious buyers should consider a
repayment deal which will definitely be paid
off at the end of the term, while those who are
happy to take an investment risk can
consider an interest-only loan. Some lenders
allow you to run part of your mortgage on a
repayment basis and part on an interest-only
basis (often called part and part) which may
be an option if you want to cut your monthly
payments and are prepared to take some risk.
7
 Agreements in principle
You now have a choice: go househunting with an idea of your budget and the type of
deal you intend to apply for, or apply for an agreement in principle. This is a statement of
how much a lender could be willing to lend you, based on your salary, credit history and
monthly outgoings.

There are some advantages in applying for an However there are reasons why you might
agreement in principle: decide against an agreement in principle:

● You won’t spend time looking at properties ● There’s no guarantee the lender will lend on
only to discover you can’t get a mortgage the property you decide to buy. They may
or can't borrow enough to afford some say no, meaning you may have to go back to
properties the drawing board.

● You can find out if there are any problems ● By the time you find the right property a
with your application or if you have any different lender may be offering a better
paperwork missing and sort this out before deal so you will have to go through the
you find a property. entire application process again.

● You look like a serious buyer - if the seller It may be useful to apply for an agreement in
is faced with two offers they may take yours principle if you think you may have problems
more seriously and think you can move getting a mortgage - if you have had credit
quicker. problems, or are self-employed, for example.

8
 Househunting
At last it’s time to start househunting.
If you have internet access you could
begin by visiting property websites
like www.propertyfinder.com,
www.findaproperty.com or
www.rightmove.co.uk. These have details of
homes for sale through estate agents around
the country. Using the search tools you can
focus on a particular area and price bracket,
and get contact details for local estate agents
so you can call and find out about properties
before they are posted online.
Registering with estate agents is free and
they should be able to send you details of
new properties as they come onto the market.
However, if the area you wish to buy in is one
in which properties move quickly don’t be
afraid to keeping calling, otherwise your details
may end up at the bottom of a pile of potential
buyer's details.
10
You may find prices in the area in which you
want to buy are higher than your budget.
If so, you may need to make some
compromises. You may be able to find a
smaller property or one without a garden in
the location you favour, or may be able to find
the type of property you want further from
transport links or shops. Different people have
different priorities and if you are buying with
someone else you need to discuss what
you are prepared to compromise on before you
start your search. Otherwise you could waste a
lot of time looking at properties that don’t fit
the bill.
Registering with an estate agent
When you first register with an estate
agent, make sure you tell them exactly
what you are looking for, that way they
won’t waste your time with unsuitable
properties.
Be clear about your budget and the sort
of property you’re looking for. If you
want a garden or a garage, for example,
say so. When they have shown you
round a property tell them what you
liked or disliked about it, that way they
know exactly what you are looking for.
What to look for
As you arrive at a property look at the condition It is worth taking paper and a pen on your visit
of neighbouring homes - if these are falling so you can make notes of anything you
into disrepair they may reduce the value of the particularly like or dislike as you look round,
property you are seeing. Inside the property this way you won’t confuse properties when
look out for signs of damp and for cracks in the considering your options later in the day.
walls - these can indicate subsidence. Also pay
If you do like a property, try to visit it again at
attention to the condition of window frames
a different time of day. A street that is quiet
and the age of the central heating system.
during the day may be a popular short cut in
These are all things that if they go wrong could
the rush hour, and a quiet-looking pub may be
cost hundreds of pounds to repair.
busy, and noisy, at night. When after a second
- or even third - visit to a property you are still
You should find out if there are any associated
convinced you want to buy, it’s time to make
costs with owning the property such as
an offer.
ground rent, maintenance and service
charges. Typically these are found in leasehold
properties like most flats and apartments.

Don’t be afraid to ask questions - about the

property and any work the current owner has
had done. Ask if there are guarantees for work
and for any fitted appliances.

Always ask to see a copy of the Home

Information Pack. This provides valuable
information such as a sale statement, local
searches and evidence of title. The pack also
includes an Energy Performance Certificate
that contains details of the energy rating and
environmental impact of the property.
It's also useful to establish what the current
owner will leave when they move out. 11
 Making an offer
When you have decided to make an offer you need to contact the estate agent.
Remember the agent is acting on behalf of the seller and will receive a fee based on the
price the property fetches, so bear this in mind if he or she gives you advice on how much
to offer.
However, the estate agent is obliged to pass on
any offer you make so they can’t prevent you
making an offer lower than they have advised.
When deciding how much to offer, consider the
following:
● What do you know about the seller’s
position? If they are keen to move they may
take a low offer for a quick sale.
● How much are similar properties in the
area? If they are generally on the market
for less you have a good argument for not
offering the asking price. You can now check
the actual prices houses have sold for in
most areas of the country through websites
like www.nethouseprices.com.
● Have you noticed any problems with the
property? Take the cost of remedying these
from the asking price.
If the seller refuses to accept anything other than
the asking price, ask if they are prepared to leave
any appliances, curtains or carpets, that will save
you the cost of buying new things.
12
In a slow market you can have several attempts
at making an offer. However, if properties are
moving quickly and another buyer has the one
you want in their sights you may be keener to
secure the purchase than you are to save
money. The key thing is to decide if you can find
something you like as much for the price. If you
want to ensure you get this property there’s
nothing wrong with offering the asking price,
providing it is within your budget; if you
genuinely think the property is over-priced, make
a lower offer and if it isn’t accepted look
elsewhere. Don’t get caught up in a bidding war
unless you really want to live there.
The estate agent will let you know if your offer
has been accepted. If it hasn’t, you can make a
higher offer or look elsewhere. If it has, in the
next few days you should receive confirmation
from the agent that your offer has been
accepted. This doesn’t mean the property has
been taken off the market, though, or that you
have to buy it. The sale is only confirmed when
contracts are exchanged.
This way of doing things only applies in
England and Wales. For information on the
Scottish buying process, see p 24.
Applications
Having had an offer on a property accepted you need to get the mortgage wheels in motion.

If you have an agreement in principle and
you want to take a mortgage from the same
lender, contact them and let them know you
have had an offer accepted. Otherwise contact
your chosen lender and make an application.
The lender will also request the names and
addresses of the estate agent handling the
sale, your employer and your current landlord.
Once you have instructed a conveyancer you
will have to pass their details to the lender too.

At this point you will have to fill in a full
application form. This will include questions
about your income and outgoings,
employment status, credit history and current
rental payments. If you are buying with a
second person they will be asked to provide
the same information.
When the lender receives your application they
will get hold of a copy of your credit file and
check your history of handling debt. Using this
record, and the information you have provided,
the lender will decide whether you are likely to
be a good borrower.

The form will also ask for information about the

property you intend to buy - its age, number of
bedrooms and what materials it is made out of,
among other things.

The information you provide about yourself will

have to be backed up with paperwork. This
will usually be three months’ bank statements,
three months’ pay slips - or three years’
accounts if you are self-employed - and an ID
such as your passport or driving licence.

13
 The conveyancer
When you apply for a mortgage you should find someone to deal with your conveyancing.
Conveyancing is the legal work involved in the
transfer of ownership of a property from the current
owner to you, the buyer. It can be done by a
solicitor or by a licensed conveyancer.
If your lender approves your chosen conveyancer,
they will represent the lender as well as you in the
buying process. Otherwise you will have to pay for a
conveyancer to work on your lender’s behalf, as well
as paying someone to work for you.
The best way to find a conveyancer is to ask family
and friends for recommendations. However, if
no-one is able to suggest a conveyancer you could
contact the Law Society or Council for Licensed
Conveyancers and ask for addresses of local firms,
or use an online conveyancing service. You could
contact several firms and ask for quotes.
The conveyancer will contact the seller’s
conveyancer and ask for a draft contract. They will
also check over the information contained in the
Home Information Pack (HIP) provided by the seller,
and undertake any extra searches they think might
be needed. The HIP should contain Local Authority,
drainage and sewage searches.
14
The Local Authority search checks for any planning
permission relating to the property and any
alterations that have been done to it. It also checks
on any plans for new roads within 250 metres of
the property. It doesn’t however tell you of plans for
new buildings on adjacent land.
The drainage and sewage search will check that
the property is connected to the sewer system
and make sure that there are no pipes under the
property that the water utility company will want
access to. The other searches which may or may
not be necessary check there are no mining works
underneath or near the house.
If you are buying a leasehold flat the conveyancer
will get a copy of the lease and check there are no
terms in the lease that could spoil your enjoyment
of the property or have a negative impact on your
lender. The conveyancer is likely to charge more for
handling the purchase of a leasehold property than
for a freehold one.
When the conveyancer has the contract and the
results of the searches, they will advise you of
any problems. If everything is OK they will let you
know when the exchange of contracts can take
place. If there are problems with the contract the
conveyancer will renegotiate it with the seller’s
conveyancer.
The valuation/survey
The valuer/surveyor has an important role to play in your house purchase. What he or she
finds when they inspect the property will decide whether or not you go through with the
purchase.
When you apply for your mortgage your
lender will commission a valuer to carry out
a valuation. This is a basic assessment of the
property and is designed simply to ensure it
is worth as much as you intend to spend on it
and that the lender is assured it offers suitable
security for the loan. The valuer carrying out
the valuation will focus only on obvious faults
that may affect the value of the property.
Based on this visit the lender will say yes or
no to the mortgage, or may offer you a smaller
mortgage than you requested. They are not
obliged to pass on details of the valuer’s report.
To find out more about the property you need
to commission a Homebuyer’s Report. This can
be carried out by the lender’s valuer at the
same time as the valuation or you can arrange
your own surveyor. Having both jobs done at
once is likely to cost less.
To produce a Homebuyer’s Report the
surveyor will spend much longer in the
property and will look more closely at
potential problems. They are unlikely to move
furniture or pull up carpets, but will examine
window frames and exposed flooring, and
assess the state of the roof from ground level.
The report you receive will detail any problems
and anything you should look out for in a
property of its type or age. If the surveyor
thinks major works need doing they will
suggest you get a quote before you buy -
this way you may be able to renegotiate the
price with the seller.
A Homebuyer’s Report will provide enough
information for most buyers to decide whether
to continue with the purchase. If, however,
you want a better idea you could consider a
Building Survey. This is a much more thorough
survey and as such is much more expensive.
However, anyone buying an unusual or old
property would be well-advised to spend the
extra money. The Building Survey will involve
the surveyor spending much more time in the
property and producing an extensive report.
Valuation/Survey costs
The cost of any type will depend on
the value of the property, but budget to
spend the following:
Valuation: from £260
Homebuyer’s Report: upwards of £500
Buildings Survey: from £600 upwards
15
Buying costs
These are some of the costs you could encounter when buying your home.

Cost How Much? When Paid?

Application fee anything upwards of £999 on application or on completion

depending on lender
Broker’s fee
(if applicable) up to 1% of the property value on completion
Lender’s valuation upwards of £260 on application
Higher Lending Charge usually £1000-£2,000 on completion
Homebuyer’s report upwards of £500 on instructing a surveyor
Stamp duty land tax 0% on properties valued up to
£175,000 (until September 02 2009
inclusive)
1% on properties valued
between £175,001 and £250,000;

3% on properties between
£250,001 and £500,000;

4% on properties
over £500,000 on completion
Land Registry fee upwards of £40 - usually £100-£150 on completion
Legal fees upwards of £250 on completion*
Buildings insurance upwards of £150 prior to exchange
Moving costs upwards of £100 on completion
Bank transfer fee approximately £30 prior to completion

* The conveyancer may request a deposit upfront to cover some of the costs of searches and their work

17
 Higher Lending Charge (HLC)
As a first-time buyer you may have to pay a Higher Lending
Charge (HLC). Not all lenders charge these and those that
do tend only to charge borrowers with a deposit of less
than 10% of the purchase price. However, some lenders will
charge HLCs on any loans over 75% LTV.
The HLC protects the lender against you defaulting on your
loan and offers you no protection at all, yet you will foot the
bill for the cover. The size of the HLC varies but it can easily
cost many hundreds of pounds. Some lenders will let you add
the fee to your mortgage, but remember if you take this route
you will be charged interest on it so it will cost even more.

Incentives
Some lenders offer special first-time buyer packages which
cut the upfront cost of arranging a mortgage. Incentives
vary - some lenders offer a free valuation, others waive the
product fee, and some have HLC-free deals. You may
also be offered free insurance for a period.

Sometimes lenders offer cashback mortgages. These offer

a lump sum on completion which you can spend as you
wish. The amount you can take as cashback will depend on
your chosen deal and could either be a fixed amount or a
percentage of the loan. Interest rates do tend to be higher to
reflect the cost to the lender of paying the cashback.

18
The final stages
The searches are fine, you’re happy with the survey and you have received your mortgage
paperwork.
You’re well on your way to moving in, but
before you can start planning the move you
need to exchange contracts. This will take place
on a day that suits everyone in the chain, so if
someone further up the chain is not ready, you
may have to wait.
When everyone is ready your conveyancer will
contact you and give you a date for contracts to
be exchanged. You need to sign the contract on
or before this date.
On the day of the exchange you pay a deposit
to the seller. This will usually be
10% of the purchase price, but if you
are borrowing more than 90% LTV your
conveyancer should be able to negotiate for you
to pay less at this point. The money will need
to be in cleared funds in your conveyancer’s
account by the exchange date so you should
arrange a bank transfer or write a cheque
several days before.
On the day of the exchange you usually
become responsible for insuring the property so
make sure you have set up an insurance policy
to start on the right date.
Once contracts have been exchanged you are
obliged to go through with the purchase and
the seller is obliged to sell you the property.
If either party wants to pull out, they will have
to compensate the other.
Completion will usually take place two to four
weeks after exchange. In the time between
exchange and completion, the conveyancer will
undertake a Land Registry search to make sure
that details of the property haven’t changed in
the time since you put in the offer. On behalf
of your lender they will undertake a bankruptcy
search to check your financial position. Your
conveyancer will send you a statement advising
how much you need to pay before completion
and let the lender know when they need to
release your mortgage advance. This will be
paid to your conveyancer who will transfer it
to the seller’s conveyancer, along with any
outstanding balance of the purchase monies.
Once the mortgage advance is released and
the purchase completed you will be able to
get hold of the keys. The whole process from
agreeing a purchase price is likely to take
around 12 weeks, although any complications
along the way could slow things down.
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 The move
Most people like to move on the day they complete. If this is your plan, make sure you ask
your conveyancer to tell you as soon as the deal has completed and the keys are available -
you don’t want to find yourself sitting outside your new home waiting for the conveyancers
to finish their work.

You can start planning the move once contracts
have been exchanged. As a first-time buyer
you may not have much furniture to move.
If this is the case, and you are moving locally,
it is likely to be much cheaper to move
things yourself in a hired van than to hire
professionals. If you are planning a long-
distance move, make sure you are able to drop
off the van near your new home.
Buyers with more furniture may want to use
a removal firm. Contact a few companies to
get quotes and ask whether they can supply
packing materials and what kind of insurance
cover they have. Book the company well in
advance, particularly if you are intending to
move on a Friday or during the school
holidays - these are very busy times.
At this point you will need to give notice to
your landlord if you are renting.
connected for when you move in. If someone
still lives there it may be worth contacting
them and asking them to transfer the
telephone to your name - this will save you
paying to have the service reconnected.
You should contact your financial services
companies to notify the change of address.
If you have a car, arrange for the insurance
to transfer to your new address on the day you
move, and transfer any television licence.
If you fear something will slip through the net,
you could arrange to have your mail redirected.
Royal Mail charges around £16 to redirect post
for three months.
It’s a good idea to start packing sooner rather
than later. It may well take longer than
expected and it will be less stressful if you
don’t leave it to the last minute.

Two weeks before the move you should

notify the utility companies of your move.
If the property you are moving into is
currently empty, arrange to have utilities

20
Insurance
You don’t want to lose your new home so it’s worth considering the following types of insurance:
Life insurance
You can set up term insurance which can offer
cover just for the length of your mortgage
term. This can be ‘level term insurance’ which
covers the same amount for the entire term
or ‘decreasing term insurance’ where the sum
assured reduces as the years go by. Level term
insurance is more suitable if you have taken
an interest-only mortgage - the outstanding
debt is the same at the end of the term and
so is the insurance payout. Decreasing term
insurance is cheaper and is an option if you
have a repayment mortgage. The level of cover
would decrease as you pay off your mortgage.
With all life insurance you pay monthly
premiums and the payout comes in the form
of a lump sum payable on your death.
The monthly premiums are based on your
age, sex and whether or not you smoke, and
a number of other factors. You can choose
whether your premiums are fixed or reviewable
over the term.
Critical illness cover
This type of insurance pays out if you are
diagnosed as having one of a range of
specified serious illnesses including cancer and
heart disease. The payout is in the form of a
lump sum which you can use to pay off your
mortgage, or to provide you with an income
while you are unable to work.
When you buy the insurance you can decide
which illnesses you want to cover and how big
you want the pay out to be. Usually this will be
your mortgage debt, plus some extra to spend
on running your home. You also need to decide
how long you want the cover to last - it makes
sense for this to be at least as long as your
mortgage term.
21
 Mortgage payment protection insurance
(MPPI)
This is also known as Accident, Sickness and
Unemployment (ASU) cover, a name which
explains more clearly what it covers. For a
monthly premium related to the mortgage
repayment you want to cover, you get cover
against losing your job, having an accident or
being too sick to work. Premiums are around
£5 per £100 covered, so if your mortgage
repayments are £500 per month, your monthly
premium would be £25. For that money your
mortgage repayments are covered for up to a
year in the event of you falling sick, having an
accident or being made redundant.
Before buying this type of cover it’s
important to check out the exclusions and
when any payout would begin. Some
policies don’t payout until you have been out
of work for several months.
Buildings insurance
If you have a mortgage you have to have
buildings insurance. The lender will insist this
cover is in place before releasing the mortgage
advance and will probably try and sell you its
own cover. You may be able to find a cheaper
deal by shopping around, however you need to
always check you are getting the right level of
cover for your individual circumstances.
22
The amount of cover you want will be the
amount of the rebuild cost - this will be
outlined in the Homebuyer’s Report or you can
ask your lender how much it should be.
Buildings insurance will pay out if there is any
damage to the fabric of the building and any
permanent fittings - the bathroom suite and a
built-in kitchen.
Contents insurance
Your lender won’t insist you take this cover
but you would be well-advised to consider it.
This insurance covers all your possessions -
your furniture and electrical equipment, CDs
and clothes, even the contents of your freezer.
You can opt for different sorts of cover -
you may choose a basic policy that protects
you against theft and damage outside your
control, or you may want to add accidental
damage cover. This means you can make a
claim if, for example, you spill paint on your
sofa while decorating.
The premium will be based on your postcode
and the sum insured. Make sure your
estimate of how much your belongings are
worth is realistic - in the event of a fire that
destroys everything you own, you don’t want
to discover your insurance is not enough to
enable you to replace everything.
 Buying in Scotland
The process of buying a home in Scotland is quite different from that in England and Wales.
In most areas solicitors also act as estate agents so they will be involved in the sale at a
much earlier date.
Properties are usually advertised at the lowest
price the seller hopes to get, rather than the
highest price, and the final price could be much
higher than that advertised. Some properties
may be advertised at a fixed price, often for a
quicker sale.
Having found a property you want in Scotland,
you can ask your solicitor to note your interest.
They will inform the seller’s solicitor that you
like the property, but you will not be obliged to
go through with the purchase. You could follow
this up with an offer, but at this point most
buyers will be better off instructing a surveyor.
There are two types of offer - a conditional
offer and an unconditional offer. The conditional
offer can be put in before you have a survey
done and is conditional on the results of this
survey. An unconditional offer shouldn’t be
put in until the survey is done, so if you like
a property you need to quickly arrange to
have it surveyed. An unconditional offer still
has conditions - the seller’s solicitor must
provide proof the seller owns the property, and
searches must be clear.
24
When a seller accepts an offer, a legally
binding contract is drawn up and work is
started to clear up the finer points of the sale -
for example, what items the seller may be
leaving in the property. This legal work starts
much more quickly than it would in the rest
of the UK, and this means the seller will incur
costs much earlier. They will be keen to have
an unconditional offer which is more likely to
result in a sale before the solicitors start work.
Once the solicitors have completed their
correspondence - known as missives - and
both parties are satisfied, the contract is
unconditional and there is no longer room for
negotiation. This process is usually quicker than
that in England and Wales.
From December 2008, buyers in Scotland will
be given a Home Report for any property they
are interested in. This is Scotland's version of
the Home Information Pack and will include a
survey of the property, an energy report and
property questionnaire filled out by the seller.
 Glossary
Annual percentage rate (APR) - a figure
lenders must quote when referring to their
deals. It is designed to show the total yearly
cost of a mortgage loan, including the price
paid for the valuation and application fee,
as well as the interest rate on the loan.
Arrears - the term “in arrears” describes a
mortgage account if a borrower has failed to
keep up with their repayments.
Credit scoring - how many lenders assess
whether to give you a mortgage. Each lender
has a different way of scoring the information
on your credit file and whether or not you
get a mortgage offer will depend how you
measure up on their scoring system.
Early Repayment Charge - the amount a
lender will charge you if you repay your
mortgage or make larger overpayments than
are allowed during a specified period. For
example, a deal may have early repayment
charges of a percentage of the loan amount for
the first two years.
26
Higher Lending Charge (HLC) - insurance
for the lender against you defaulting on a
loan. Usually charged on high loan-to-value
mortgages.
Home Information Pack (HIP) - compulsory
document provided by the seller which gives
basic information about a property. By law, this
must contain an energy performance certificate,
a sale statement, evidence of title and the
results of basic searches.
Lending criteria - the rules a lender has
covering things like how much you can borrow
and what type of property it will lend on.
Loan to value (LTV) - the amount of your
mortgage compared to the value of the
property. This is shown as a percentage.
Mortgagee - another name for the lender.
Mortgagor - another name for the borrower.
Mortgage offer - if your application is
approved the lender will make a mortgage
offer. This is subject to conditions and can be
withdrawn at any point before completion.
Negative equity - if your house falls in value
so that it is worth less than the mortgage
you have on it you have negative equity. This
is a problem if you want to move when you
would have to find the outstanding amount
to repay the lender or if you wish to take a
further advance against the property.
Valuation - a valuer’s report undertaken for
the lender to ensure that the property is good
security for the mortgage.
Vendor - another name for the person
selling the property.

Portability - whether the mortgage deal can

be taken with you when you move house.

Remortgage - repaying your mortgage by

taking out a new loan from a different lender.

Self-certification - if you are self-employed or

make a lot of money through bonuses you may
be able to self-certify your income. The lender
will base its mortgage offer on your statement,
rather than asking for pay slips or copies of
company accounts.

27
 Checklist for first-time buyers
Before you can apply for a mortgage,
make sure you have the following paperwork:
✔ Recent pay slips and/or P60
✔ Recent bank statements
✔ Details of any personal loans
✔ Recent credit card statement
✔ ID - passport and driving licence
✔ Details of employer and landlord

When visiting a property, pay attention to the following:

Ask for a copy of the Home Information Pack
? Is there central heating?
? Is it double-glazed?
? Can you hear the neighbours?
? Is it handy for public transport/major roads?
? Is there a garden?
? Will the seller be leaving any appliances or carpets?
? If it’s a flat, is it a leasehold property?
? And is there a service charge?

Before you move notify the following:

✔ Landlord
✔ Bank
✔ Credit card & loan companies
✔ Insurance companies
✔ Utility companies
✔ Television licencing authority
✔ Council Tax office
✔ HM Revenue & Customs

Notes:

28
Budget Planner
When working out your overall budget, don’t forget to allow for:
■ Decorating costs such as paint, wallpaper, decorating equipment and so on.
■ Furnishings and fittings, including carpets, curtains, tables and any other essentials for your
new home.
Items Estimated Actual
Cost Cost
Application fee
Broker's fee (if applicable)
Lenders valuation
Higher Lending Charge
Homebuyer's report
Local Authority search
Water Utility search
Stamp Duty land tax
Land Registry fee
Buildings insurance
Moving costs
Bank Transfer fee
Extra expenses such as
• Decorating
• Furnishing

Total Costs

Notes:

29
 Applications subject to standard lending criteria and all loans subject to status.
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