Welcome to Tips on buying a house – Part 2- after the offer to completion! If you haven’t read Part 1- the early stages… have a look at that first and come back!
Just as a disclaimer, this post is not meant to be professional advice at all, but it just my tips from personal experience of buying houses… Buying a house and moving house are possibly the most stressful things ever! What makes this more difficult, is if you are a first-time buyer, you haven’t done it before! Also disclaimer- picture is not my house!
Your offer has been accepted!
Congratulations! Your offer has been accepted! This is a really exciting part of buying a house, unfortunately the next bit can be a bit tedious, have a look at the tips below to get you on your way!
The quickest a transaction can go through from instructing solicitors is usually about 6 weeks but I would always budget 3 months and it could be longer if there are complications. If you have a date range in mind, state it at the beginning of the sale and keep pushing for this date from your solicitor and the estate agent!
What to do next?
After you’ve had your offer accepted you need to instruct a solicitor. It is probably worth getting a couple of quotes but don’t go mad on this as usually they are in a similar ball park. Most fees are done on a percentage of the price of the house which is why a lot of quotes should come out fairly similar.
You don’t have to instruct a solicitor, you can use a conveyancer and quite often once you instruct a firm of solicitors, a conveyancer will be doing the work anyway. This isn’t a bad thing, in my experience they can be more efficient and cost effective.
Also- read the quote carefully when you get it because it usually includes your Stamp Duty Tax which makes the fee look really high, but it’s not when you get to the crux of it because you should have already budgeted for these costs (refer you back to Part 1).
What is the role of the solicitor?
The solicitor will act on your behalf to ensure that there are no hidden issues with the legalities of the property that you are buying. The solicitor can also act for your mortgage lender as well- this speeds the job up if they can act for you and your lender as it doesn’t give you someone else to wait around on (waiting around for someone else is a very common part of this process). When they act for the lender they are also telling them if there are any legal problems with the property.
Heads of Terms
Once you have instructed your solicitor, the estate agent will send them a ‘Heads of Terms’ document which states the summary of the sale, who you are, who the sellers are, how much you paid, whether there’s a deposit or a specific time frame etc… Check this carefully, but it should be fairly straightforward.
Solicitors are heavily regulated and for security and money laundering legislation they will need copies of ID from you and other information. Don’t delay on getting this info to your solicitor as most of the time they won’t do any work until you have given them this information. Some solicitors will also ask for a deposit for the work upfront as well. In my experience this hasn’t been very much, a few hundred pounds and it is knocked off your bill at the end.
The first thing your solicitor will do is request the searches. Some of these are legal searches done through the Land Registry. The Land Registry is like a library of information about property. It holds information on (most) property in the country and for about £6 anyone can go online and find out who owns what and whether there are any restrictions on the property (i.e. no building a house in the garden). Often you can also see how much they paid for what they have- and this is where Rightmove Sold Prices gets their data from.
So, the solicitors send off the forms to find out lots of information and these are called ‘searches’. These search for any legal issues like Chancel Repair Liability- this is from back in the day where if you lived on certain land you were responsible for paying for repairs for the church. This is actually surprisingly common, but don’t worry about it- if it comes up in the searches you just get an insurance, it’s about £20…
Other searches will be environmental, whether the sewerage pipes are legally connected, whether the property has all the right planning permissions and building regulations sign off if work has been done to the property and lots of other stuff too.
The searches take time, because they take time for all the people to report back to the solicitor. Then the solicitor has to go through all the reports and see if there are any issues. If there are they then need to either ask the seller for more info, or speak to you about what you want to do – i.e. get the insurance policy to cover it or make the seller get an insurance policy to cover the issue.
Usually these are for the sellers but sometimes the buyers have to fill them in to. This is about boundaries and water connection, what’s included in the sale etc… If you get one of these forms, don’t be put off by it. They are usually generic and so a lot of the stuff doesn’t have any relevance to the specific property. Also, don’t be afraid to put’ don’t know / not to my knowledge / as far as I am aware…’ in your answers.
Get a mortgage
As you know from Part 1, you will have needed a Decision in Principle to make your offer. You don’t have to go back to the same place to get your actual mortgage. Once you’ve instructed your solicitor you have a bit of time to have a look what’s out there and get the best deal. Obviously you want to get on with it, but you don’t just have to go with what you found out about before. There may be better deals in the market place today than when you first looked for a mortgage.
We have used a mortgage broker when we have bought houses (we are on our second house). You can find free brokers and these are usually tied to an estate agent. There is nothing wrong with using these but an independent broker usually has a wider span on the market. A private one will probably cost you around £500 ish depending on your circumstances.
For us this was money well spent, we got a really good deal and they did all the paper work and hassle for us. When we bought our first house my partner was self-employed, we had to supply 3 years of his accounts and it can be more difficult to get a mortgage – our broker dealt with all of this for us.
Fixed rate or variable mortgage?
What works for you will completely depend on your circumstances. In brief, a fixed mortgage means that you tie in to an interest rate that is fixed for a period- usually two years or five years. If the interest rates are low at the time you take out your mortgage this could be a good way to go. We have always taken a fixed rate as the amount of money you pay each month is the same and it’s easier to budget your house costs and your money generally. You do run the risk of missing out if interest rates get lower in the fixed period.
In contrast, a variable rate mortgage varies on the level of interest rates. So, if they go up, your payments will go up and if they go down your payment will go down. At the time of writing interest rates are low. You can find a lot of good information about this on the Money Saving Expert website.
Other mortgage stuff
Just to let you know that when you go to get a mortgage they need a LOT of information. You will have your credit checked and they will need things like, ID, proof of address, exact amounts of outstanding loans, finance (i.e. car finance) monthly direct debits, last 3 months pay checks etc… It can be a real pain so get prepared with lots of copies of everything! You usually have to disclose your student loan if you have one but this shouldn’t necessarily go against you. If you have just got a new job then they will want to see the contract to see if you have a probationary period.
Lenders are looking at affordability and what they call ‘stress testing’. Can you afford the repayments now including your other outgoings based on what you’re earning? Plus the stress test which is- if things change and the interest rates (and your payments) go up, can you still afford to pay back the loan?
My advice would be to get all your paperwork and ducks in a row ASAP. Don’t make any changes and apply for any credit in the time leading up to applying for your mortgage. Your credit rating is affected by how much borrowing you have, how good you are at repayment and how much credit you have applied for recently. You don’t want to have applied for credit too soon before your mortgage application if you can help it.
It’s a good idea to have a grasp on your credit- I use ClearScore which I think is really good and it’s completely free. There are lots of different ones out there. Strangely, having some debt and paying it back regularly is good for your credit as it shows you are a good re-payer, but this is the long game, you need to be doing this persistently for a while before you apply for a mortgage for it to have an effect.
There is usually a fee for setting up a mortgage. Some lenders waive this fee for first time buyers. Also there is usually an option just to add the fee on to the top of the mortgage so that you don’t have to pay it upfront, you just pay it off over the term of the loan. Your lender or broker can advise on this. Different lenders and different mortgages have different fees and offers and there are a LOT on the market. You will also usually have to pay a valuation fee as well (see below).
Mortgage surveys and valuations
Once you have applied for your mortgage it will usually take about a week or two for it to be approved. This is a time when the lender will go through all your application documents and they will also have to determine what the property you’re purchasing is worth. They will send out a valuer to value your house in this time too.
If the price you have paid is near enough what they think is the market value then they will put that as the value of the property. You will only really have a problem here if you have over paid for your property and you only have a small deposit as the lender won’t think it’s a good investment. Ultimately if you stop paying your mortgage the lender can repossess your house and sell it. If you’re over paying for your house, they aren’t going to get their money back if they have to repossess so they just won’t lend to you.
Surveys- do you need a survey? Good question, sometimes you do, sometimes you don’t, but ultimately, it’s up to you. The valuation for the mortgage is one thing that you have to have. You don’t have to have a building survey or a homebuyers report (which is between a valuation and a full building survey). A building survey tells you whether the house is structurally sound and whether there are any issues with the property itself. There are two good videos on the RICS website that tells you a bit more about the different types of surveys and valuations which is definitely worth a watch if you don’t know what you want / need.
Also probably worth putting in here- new build properties come with 10 years NHBC building insurance, so find out whether your property has this or the details of it if you’re buying straight from the developer. This means they guarantee its structurally sound for 10 years and if it isn’t you have an insurance policy to claim against to pay for any issues that may arise.
So, your solicitor has been working away on the searches, you’ve got your mortgage approved and it’s all going swimmingly!
The solicitor will prepare the contracts of the sale and the Land Registry documents. You’ll probably be surprised at how simple these are if you’ve never seen them before, just a couple of pages each. Sometimes the solicitor will send these out quite early on for you to sign and return and they will have them on hold until you’re ready to exchange. One is literally a contract of sale. A contract is essentially a promise for a promise. It states, I promise to give you this house if you promise to give me £ X. The second is the form that goes to the Land Registry with all the new details of you and your purchase so that it can be updated for public record. Once registered- available information to anyone for about £6 online.
Exchange is when your signed contract goes to their solicitors and their signed contract goes to your solicitor. Literally an exchange of contracts.
This is only done when everything is completed. At this point a deposit is often transferred as well. You will need to transfer your deposit money in to your solicitors’ clients account, a clients’ account is an account that solicitors have especially for clients’ money, it’s not their bank account, it’s like a holding account for money to sit in but they can’t use legally. So don’t be worried about handing over all your money. They will transfer the deposit over to the purchaser when the time is right. Be aware that bank transfers (BACS) take a few days and you will be charged if you want to do a same day transfer (CHAPS) so be on top of this too.
At the time of exchange a date is usually set for completion. Usually there is a small delay because it can take up to 7 days for your mortgage to be drawn down (get the cash in the bank). You can simultaneously exchange and complete but this requires you / your solicitor to be organised with requesting the funds from the lender.
Once the exchange has happed the sale is legally bound. Up until this point either party can pull out for no reason if they want to for no penalty. From exchange if one party calls off the deal they will lose their deposit.
This is when the money is paid and you own the property. The paperwork is exchanged back plus documents go to the Land Registry for updating! The property is now yours! Hooray!! You don’t need to worry about paying any fees or anything yourself. You will have put your deposit plus the money for the tax and their fees (and mortgage broker if applicable) in your solicitor’s clients’ account, your mortgage money will go there too and on the day of completion your solicitor will pay everyone for you!
Usually completion happens at 12pm on a working day. Also the people selling the house usually move out on the morning of completion if they are going to another house. Be aware of this as they may not leave the property clean or tidy!! Usually you can either pick the keys up from the estate agent or they will meet you at the proeprty with the keys on completion day- it is up to you to organise this.
I would try at the beginning of the sale process to see if the vendor or agent will pay for a professional clean when they leave. I would also try and time your move (which I know isn’t always an option) so that you can have time to clean and / or give the house a lick of paint before you move in. I will say in my experience- there is nothing more depressing than trying to move your life in to a dirty house that you have no time to clean!!!
I you’ve enjoyed Tips on buying a house – Part 2- after the offer to completion…!
I am looking to do a post about what to do when you’ve bought a house- i.e. utilities etc… so look out for that in the future!
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