24th February 2010.
Tips for First Time Buyer’s – & explaining the jargon used!
1. Make an appointment
The very first step would be to find out how much you can afford to borrow. Make an appointment to talk to an independent mortgage advisor and they will advise you on your available options. With over 300 different mortgage packages on the market, it is very important to shop around and get good professional advice.
2. Pre-loan Approval
This is mortgage approval subject to finding a property. Having approval in principle (AIP) means that you can shop around for a property knowing exactly how much you can afford to borrow!
3. Find a property
Once you know your price range, it makes it easier to go shopping for your first home. Make sure and search the internet and local property pages in the newspapers and don’t be afraid to talk to your local estate agents, as they can advise you on the types of properties available in your price range.
4. Pay a booking deposit
Once you have found the property you want and agreed the sale with the estate agent, you then pay a booking deposit
5. Appoint a Solicitor
A Solicitor acts on your behalf throughout the property purchase, reviewing important legal documentation, such as the deeds and loan offer and will advise you on issues such as stamp-duty and purchasing with a friend. A point to remember is that Solicitor’s fee’s do vary – so make sure to shop around!
6. Formal loan approval
Lending institutions will issue a formal loan offer once a property has been located. A copy of the loan offer is issued to your Solicitor who makes sure all the details contained within are correct.
7. Signing of Contracts
Formal contracts are signed, usually within three weeks after paying the booking deposit. At this stage, the balance of the deposit will be required from the buyer. The contracts are unconditional contracts so a buyer must progress with the purchase of the property at this stage. Not doing so will usually result in forfeiture of all deposit money.
8. Protection / Insurance
The mortgage company requires you have a life insurance policy in place to pay off the mortgage in the event that you become seriously ill or die. Similarly, you will need to have an insurance policy in place to cover the property and contents. Both policies need to be in place prior to closing the mortgage.
9. Documents to Lender
You now need all final documentation that the lender has requested. This will include home insurance, life cover, legal documents and all of the other supporting documentation.
This is where the keys to your new house are ready. When the big day arrives, your bank will transfer final monies to the lender and the keys are then delivered to the new owner.
1. Annualised Percentage Rate (APR): This is a financial tool to help you identify the true cost of borrowing and to give you a way of comparing the true cost of different types of loan on an annual basis, as it includes the rate, the way the rate is applied and any other fees and charges.
2 Annuity Mortgage: This is another term for a standard capital and interest repayment mortgage.
3. Conveyancing: The practice of arranging the necessary legal work in transferring the ownership of a property. A Solicitor usually undertakes this.
4. Disbursements (conveyancing and outlay): The costs your solicitor has to pay to carry out their work such as searches, Registration fee, photocopying, postage and couriers. They, in turn, will charge you.
5. Gazumping: When the person selling a property cancels their agreement on an offer from one buyer in order to accept the higher price of another offer.
6. HomeBond: This is a service provided by the National Housing Building Guarantee Scheme, through registered builders, to people buying new, privately built houses and apartments. The certificate is called ‘HB47’ and it provides:
Life Assurance – This is compulsory if you are taking out a mortgage.
House Insuance – This is compulsory if you are taking out a mortgage.
Mortgage Payment Protection – This form of insurance is not compulsory. If you cannot work due to an accident, illness or because you were made redundant, this policy will cover the repayments on your mortgage for a period of time, usually up to 12 months.
8. Interest: Simply put this is the cost of borrowing money!
Fixed interest – a loan where the payments are based on a constant interest rate for a set period of time.
Variable or Tracker – This means that the interest rate charged on the mortgage can go up and down over the term of the mortgage.
9. Interim Interest: As soon as you draw down on your loan, interest begins to accure.
10. Land Registry Fee: A fee paid to the Land Registry to update an entry in their records after you buy your home. This fee is included in the legal costs charged by your Solicitor.
11. Loan to Value (LTV): The amount you wish to borrow expressed as a percentage of the value of the property.
12. Mortgage Indemnity Bond: A type of insurance that covers the lender in the event that they make a loss on the sale of a repossessed property. It normally comes into effect when the loan amount exceeds 75% of the purchase price or property value.
13. Searches: Searches are carried out by your Solicitor on all properties to ensure that the person selling the property has a legal right to sell it and that there is no other interest shown on the title.
14. Security/Collateral: The mortgage is secured against your home. A mortgage lender is entitled to sell the house if you do not make the necessary repayments.
15. Stamp duty: A government tax which is charged on all second hand properties and on new houses if the floor area is greater than 125sq.metres.
16. Structural Survey: A full inspection of a property to check that it is structurally sound.
17. Valuation: An inspection, carried out by a qualified valuer, for the benefit of the mortgage lender to see if the property will provide good security for a loan. This is not a structural survey however.
18. Sale by Private Treaty: This term is used with the property is bought other than at auction or by tender. This sale is agreed in principle prior to signing of contracts. The price is negotiated between the buyer and the seller.
19. Closing: This is the date the sale of the house is completed. The purchaser receives the keys to the house!
I hope this information as shed some light on key areas/phrases used when you’re a first time buyer!
Caterina at Kehoe Auctioneers.