Your guide to buying a home (England & Wales only)

No doubt someone, somewhere has probably already reminded you that buying a home ‘it’s one of the biggest financial decisions you’re ever likely to make in your life…’ Well that’s true - for most people a home isn’t an impulse buy. So no matter how exciting it is to think about owning your own home, it’s worth taking some time to think about the pros and cons of buying and what you can really afford. After all, this is a home you’re thinking of buying - it takes shopping into a whole new league!

This guide give you some of the issues to think about and includes a step by step guide at the end as a kind of shopping list you can use, should you decide to go ahead.

Buy or rent?

For many people, owning their own home is the dream. And there are real advantages – the benefits of having made a long-term investment, a sense of permanence, getting to choose your own colour schemes!

On the flip side, though, there can be disadvantages to owning your own home – it costs a lot to maintain a property, and there’s no guarantee that it will rise in value. So sometimes, it’s better to rent. Then again, some landlords charge too much, provide ropey furnishings and décor, and little in the way of service. And of course, when you rent you get no return at all on your rent money.

Whether you’re better off buying or renting depends entirely on your own personal circumstances. Whether you’re a first time buyer, a homeowner looking for somewhere more fabulous to live, or an investor, only you can weigh it up and decide what suits you best.

How much can you afford?

With home buying, as with any kind of shopping, it’s a bad idea to borrow more money than you can afford to pay back. So although most mortgage companies will offer between three and four times your annual salary, it may not be wise to take the maximum amount. Only borrow what you can comfortably afford to repay. To work it out, make a list of all your ongoing expenses, and be really thorough.

Then add up what you’ve got: that’s how much you have saved + the amount you’ll make from selling your current home if you have one + the amount you can afford to borrow. This is your grand total.

Then add up all the one-off costs that will be involved like:

Lender’s arrangement fee
Valuation
Survey
Legal fees
Stamp Duty – the government tax you have to pay when buying property
Land Registry fee
Local Authority and other search fees
Estate Agent’s commission
House-hunting expenses
Removal fees
Mortgage Indemnity Guarantee
Building and/or contents insurance premiums
Removal insurance
Reconnection of services
An ‘unexpected costs’ fund

Sadly, you have to subtract these one-off costs from your grand total… But you should now have a pretty good idea of how much you can afford to spend on a new home.

Location, location, location!

Think about the areas you’d like to live in, and when you’re considering an area, ask lots of questions. Like:

Do you feel like you’d fit in comfortably there? Who would your neighbours be?
Would you feel safe here? (Visit both day and night to get a good feel for the place.)
What local facilities (shops, supermarkets, restaurants, sports centres, public transport, etc) are available for you and your family?
Where are the local schools and are they any good?
Is it easy to get to work? · What Council Tax band applies in the area?
What’s the car parking situation like? (Time one of your visits to see what rush hour is like here.)

*Interesting Fact: A survey asking ‘what adds value to your home?’ found that although rooms can add more than 5% to property values, location is still the biggest factor in adding value. A house in the best neighbourhood can cost up to a third more than the same house in an average neighbourhood.

What kind of property?

This is one purchase we can’t take back to the shop if we decide it’s not right! So have a really good think about what you want from your new home:

What style type of house do you want - A flat, house, or bungalow? Terraced, detached or semi-detached? Purpose built or conversion? Old or new?
How many bedrooms do you need? What about a garden or a garage?
Are you thinking about extending your family? You may want to check whether there are any obstacles to extensions or conversions for the future.
Are you comfortable with the costs – the asking price, any repair or redecorating costs that may be necessary, and ongoing costs like heating?

Leasehold or freehold?

This is an important choice. If you buy a freehold property you are the outright owner and all maintenance and repairs are your responsibility. If you buy a leasehold property, you have ownership for a certain length of time (it’s not a great idea to buy a home with a lease that has less than 50 years left to run). Usually, an agent manages the maintenance and repairs but you and any other owners in the building would have to pay for them, plus a fee to the agent.

*Nationwide survey cited on What Mortgage website May 2006