Disclaimer: This Article Does Not Constitute Legal Advice
While this article aims to provide a comprehensive guidance for the first time home purchasers, it’s important to note that this article does not constitute legal advice. Every situation is unique, and detailed, so personalized advice must be obtained from qualified legal professionals to address your specific circumstances. The article is intended for informational purposes only and should not replace competent legal consultation.
Navigating Your First Home Purchase: A Step-by-Step Guide for First Time Homebuyers
Purchasing a home for the first time is an exciting milestone, nevertheless it also comes with a lot of complication surrounding the legal conveyancing process. For those who have never bought a property before, conveyancing can seem challenging.
Fundamentally, conveyancing is the legal transfer of a property’s ownership from the seller to the buyer. There are many administrative and legal steps that make up the conveyancing process Throughout the conveyancing journey, a solicitor will guide the first time buyer and ensure the legal obligations are fulfilled at each stage. However, there are still many important things buyers should understand and keep top of mind so the process goes as smoothly as possible
Having an awareness of the first-time buyer information will help reduce stress and avoid any major issues for first time buyers undertaking conveyancing. The process may seem complicated initially but doing research ahead of time and asking questions along the way can give first time buyers the clarity and confidence needed to tackle this critical step in home ownership.
Understand the conveyancing timeline
Conveyancing can take anywhere from 2-3 months on average. Your solicitor will go through key stages like conducting searches, issuing contract drafts, exchanging contracts, and final completion. Know the estimated timeline
Read documents carefully
You’ll have to review and sign important documents like the contract for sale, mortgage deed and transfer documents. Read the carefully to fully understand your obligations. Ask questions if anything is unclear.
Stay on top of requests
Your solicitor will need various information and funds from you during conveyancing. Respond promptly to source of funds and compliance requests, deposits requests, and search indemnity forms, and any questions that arise. Delays can impact completion
Arrange adequate building insurance
You need appropriate building insurance in place from exchange of contracts. Your solicitor can recommend options. Give yourself time to compare quotes and coverage.
Plan your moving timeline
Conveyancing dictates when you’ll get the keys but you’ll need to line up movers, utility connections, etc. Plan things accordingly so you can access the property on completion.
Stay flexible around delays
Unforeseen issues can sometimes delay transactions. Have a buffer on your moving date and money set aside in case you have to temporarily extend lease at your old rental.
The Perks for First Time Home Buyers in the UK
The good news is that there are also some helpful perks and schemes to make things a little easier for first time buyers. Take advantage of these incentives and savings:
Stamp Duty Relief
Stamp duty is a tax paid when purchasing a property. In England and Northern Ireland, first time buyers get stamp duty relief on homes under £425,000 – meaning they pay no stamp duty.
For first-time buyers who buy a property worth up to £425,000, there is no stamp duty land tax to be paid. Properties worth between £425,000 and £625,000 are taxable at a SDLT rate of 5% on the proportion of the consideration above £425,000. For example, if you are a first-time buyer purchasing a property at a price of £500,000, you would pay a stamp duty of £3,750 (being 5% of £75,000).
However, where a first home is purchased for consideration in excess of £625,000, first-time buyers’ relief is not available and normal SDLT rates apply.
This incentive aims to help first time buyers onto the property ladder. It applies to both houses and flats. To be eligible, you must never have owned a home, either in the UK or abroad. There are some exceptions, e.g. your previous home was repossessed. Additional buyer stamp duty surcharges may still apply. Registering the purchase correctly is essential to receive the relief.
Lifetime ISAs allow people aged 18-39 to save up to £4,000 annually until you are 50 and receive a 25% government bonus on top. This effectively gives you free money towards a first home.
The maximum bonus you can earn per year is £1,000. Over time, this adds up to a nice boost to your deposit savings. The Lifetime ISA needs to be open for 12 months before you can use the funds towards a first home purchase.
When you use the money to buy a first home, it must be under £450,000 to qualify. withdrawals for other reasons have penalties. You can hold cash savings or invest the money. A stocks and shares Lifetime ISA allows tax-free growth. But your capital is at risk if markets fall.
If buying with another first time buyer, you can both use your Lifetime ISAs – meaning up to £2,000 in bonuses.
Overall, Lifetime ISAs offer a 25% boost from the government on your first home deposit savings. Just be sure you can meet the rules and accept any investment risks involved.
Shared ownership allows you to buy a portion or share of a property (usually between 25-75%) and pay rent on the remaining share that you don’t own. This enables buying a home with a smaller deposit and mortgage than purchasing the full 100%.
The share you purchase is normally based on what you can afford, both for the deposit and mortgage payments. Common shares are 25%, 50% or 75%. You pay a mortgage on the share you own, and rent to a housing association on the remaining share. As your finances improve, you can choose to “staircase” and buy a bigger share.
To be eligible, there are often household income thresholds. The property is usually leased from a housing association or local council. Properties are often new builds. Advantages are smaller deposit/mortgage, get on the property ladder sooner. Disadvantages include restrictions on selling, ongoing rent payments, and total costs over time can be higher.
There may be service charges and fees to consider as well. Be sure to fully understand the costs, rules and eligibility before going for shared ownership. Overall it can help get on the ladder if you can’t afford to buy a home outright. But be clear on all aspects before committing.
5% Deposit Mortgages
5% deposit mortgages have opened up homeownership to more buyers by allowing a purchase with just 5% for the downpayment. Many lenders now offer these high loan-to-value mortgages, where the loan is a large percentage of the property’s value. This makes home purchases possible for those without access to large deposits that were traditionally needed, often 20% of the property value.
However, 5% deposit mortgages are considered higher risk for lenders. Borrowers need excellent credit and sufficient income to qualify. Interest rates are typically higher than mortgages for those who can put down larger deposits. Expect to pay 0.5-1% higher. There may also be added fees and mortgage insurance costs to factor in. Shop around for best deals. While riskier in some ways, 5% mortgages allow homeownership dreams to become reality for more buyers.
First Homes Scheme
Sold at 30-50% discount to market price. New scheme aimed at helping buyers in their local area onto the ladder.
These are just some of the key schemes and incentives exclusive to first time buyers looking to get into the property market. Do your research to see which ones you may be eligible for. Taking advantage can make your first purchase more affordable.
Buying your first home is an exciting yet challenging process. I hope the information provided in this article helps you feel empowered and knowledgeable as you embark on this journey. My best advice is to do your research, seek guidance when needed, and don’t feel afraid to ask questions. Homeownership can be highly rewarding, allowing you to customise your space and begin building equity. Wishing the very best of luck to all first time home buyers! I hope you are able to find a home that perfectly suits your needs and reflects your style. With thorough preparation and patience, your hard work will pay off with the keys to your new home.