Buying a Residential Property

Buying a residential property is a huge step for many people. Find out everything you need to know about purchasing a property and some common FAQs, here:

What is the Minimum Deposit I Need to Buy a Property?

Purchasing a home has had a stigma for a number of years that it is impossible to achieve unless you have a large amount of money to put down as a deposit. This is not the case, the minimum deposit that you will need to put towards the purchase is 5.00% of the property value/purchase price; the remaining 95.00% would be provided by a Bank or Building Society in the form of a mortgage. The loan amount is dictated by a number of factors; the main points are the income you earn and the maximum income multiple which a lender will allow. However, the Bank or Building Society take in to account any debt you have; which can impact the loan amount you can achieve.

Can My Family Help Me Buy a Property?

When you are exploring the world of purchasing your own home, I can almost guarantee you will hear someone mention “Bank of Mum & Dad”. What this refers to is family members helping their Sons, Daughters, Grandchildren, Nieces & Nephews get on the property ladder. Some people are fortunate enough to have family members willing to “Gift” a deposit to their relations in order for them to get on the property ladder and purchase a property which would not be obtainable based on their income and original deposit. For example, John is looking to buy a property on his own; he is 28, debt free, employed full time earning £30,000.00 per annum and has a £20,000.00 Deposit (Legal Fees and Any Stamp Duty are separately). Based on Johns income and situation, it is likely his maximum loan would be £142,500.00 and when adding his deposit on; the maximum value of a property he could purchase is £162,500.00. John is looking to by near to his work in Wimbledon and there are no properties in his price range. His parents have decided they would like to help and gift John £50,000.00 towards his deposit. John now can look at properties up to £212,500.00 and can now purchase a property in that area. Mortgage providers constitute a true gift as a sum of money which is non-refundable, non-interest bearing and the giftee does not have any financial interest in the property.

How Much Can I Borrow?

The most common question I will be asked when speaking to someone will be, “How much can I borrow” as this will be the driving force behind everything. All Banks & Building Societies have a maximum income multiple which in turn dictates the loan amount you can achieve. Income multiples vary from 4.5 times annual salary up to 5.5 times your annual salary, dependant on your circumstances. The reason I specified “annual salary” above as different lenders take in to account different percentages of additional income on top of your annual salary like commission, overtime, bonuses etc. Depending on the lender some can look at using 100% of your additional income, but others will cap this additional income and only take 65% of this. If you receive a large amount of additional monthly income like overtime or commission, a majority of lenders will look at taking a 3-month average of the additional income and annualising this; which can increase your maximum achievable loan amount substantially.

What Costs Can I Expect When Buying a Residential Property?

When purchasing a property, it is key you set out an accurate budget as you never want to be caught short when you are in the middle of the process. The main costs you need to think of during a purchase transaction are:

Stamp Duty Land Tax

This is dependant on the property value & property ownership status

Conveyancing Costs

This will depend on the type of purchase and tenure of the property (freehold or leasehold)

Removal Fees

Survey Fees

The cost will depend on the type of survey carried out. These include:

Basic Mortgage Valuation

Home Buyers Report

Full Structural Survey

Estate Agents Fees (if you are selling your property via an estate agent)

The overall cost will either be based on a percentage of the sale price or a flat fee upon instruction.
When you have taken all of the above costs in to account, I would always recommend having an amount of savings remaining for after you move in; this is because you never want to move in to a property without having funds for a rainy day.

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If you want to buy a residential property, our expert team can help! Get in touch today to find out more.

Will Help to Buy Help YOU? – It’s All in the Detail

Here at Hawke Financial, the beginning of the year has seen an influx of enquiries from young and old alike as the ‘B’ word has not stopped the sun from rising in the morning…the dream to purchase a property very much remains in the current financial climate.

We have supported many clients in establishing how to best purchase a property via a variety of approaches including shared ownership and Help to Buy.

One of the reasons the Help to Buy scheme is mentioned in a lot of these enquiries is the sheer number of opportunities to buy via this method, as a result of the number of new build properties being erected. The Help to Buy Equity Scheme aids clients that are looking to purchase a new build property where they are the first persons to reside in this dwelling. This gives the true blank canvas to be able to make your house a home.

How Do Help To Buy Mortgages Work?

HTB should allow you to buy more of each brick of your home per month. Here is how…

Example One

Buying outright: your house purchase price is £300,000. With a deposit of £30,000 and a loan to value of 90%, your monthly payments are £1,044.50. The capital part of your mortgage payment is £523.58, whereas the interest part is £520.92. Your balance after 5-years is £237,062.

Example Two

Help to buy: your house purchase price is £300,000. With a deposit of £15,000 and an equity loan, and a loan to value of 75%, your monthly payments are £833.90. The capital part of your mortgage payment is £459.42, whereas the interest part is £374.50. Your balance after 5-years is £196,289.

…as HTB enables you to have a lower loan to value – and subsequently have a lower interest rate – the capital element of your mortgage payment is greater than the level of interest you are repaying to the lender. 55% of your mortgage payment towards owning more of your home rather than 50% (based on the first years mortgage payments).
If you have a house hold income of circa £60,000 and a deposit of circa £15,000- £30,000 the above scenarios are achievable. Deciding which method of purchase is best is for your consideration and based on the detail:

Will your salary increase at a rate for you to look to repay your equity loan from a potential remortgage?
Do you want to have cash funds available when you move into the property to furnish your new home?
Are your aspirations to build a portfolio before you have repaid your HTB equity loan?

The above examples go onto show is that the level of equity you have created is fairly similar in comparison as with HTB the loan amount decreases by 12.76% and with buying outright a 12.20% decrease. So although you are buying more of each brick for the first five years and managing cash flow once you factor in repaying the equity loan via sale of your home, savings or remortgaging and raising funds your HTB experience has provided value only in getting a foot on the ladder at a reasonable cost per month.

Secure Your Help To Buy Mortgage Today

At Hawke we would take the time through your initial enquiry to break down options in this level of detail to establish which method of purchase is BEST for YOU. Speak to our consultants today to find out more.