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Getting started with your home purchase
It’s commonly said that buying a home is one of the most stressful things you can do, but we believe it doesn’t have to be. Having a good idea of the process and an understanding of what mortgage lenders will be looking for on your application can help to speed things up and allow for a seamless process.
Step one: Speak to our experts
Getting in touch with one of our expert mortgage brokers at the very start of your home purchase process can save you plenty of time. In this initial conversation, your broker can advise you on how much you can borrow. You’ll also get a good idea of the types of rates that you may be able to access, which will help you financially prepare for your monthly repayments.
Your broker will also be able to advise you on the full process and discuss getting a decision in principle (DIP) secured before you’ve even started looking at properties. A DIP is an indication from the lender that they would lend a specified amount, based on details you’ve provided about your income, spending, and debts and is subject to you meeting their criteria. Having a DIP before you’ve found your new home may help with your negotiations, as many vendors like to know that prospective buyers are financially prepared, and it gives you a realistic budget for your property search.
Step two: Preparing for your application
Once you’ve secured your DIP and have a better understanding of how much you can borrow, you can then start to review your finances. You may decide to continue saving longer to build up a greater deposit to access more competitive interest rates, for example. Or you may be ready to start the purchase process.
Once you’ve found the right home for you and had an offer accepted, it’s then time to apply for a mortgage.
Step three: The mortgage application process
With thousands of mortgage products to choose from, your broker will guide you in the right direction and find the best rate for your individual needs. Once your application is submitted to the lender, the underwriting process can take a few weeks. This is because your lender will be assessing your affordability, and will need to conduct a valuation on the property you’re looking to buy. Once your application is approved, your lender will send you a mortgage offer, which your broker will review with you.
As you proceed with your mortgage application, both your dedicated broker and client relationship manager will be working alongside you to progress the case and answer any questions you may have. They will be your direct points of contact throughout the process and will chase both your lender and solicitor to help speed up your application.
What type of rate should I be looking for?
There are thousands of different mortgage products available on the market, and many different types of rates to consider. With such a variety to choose from, it’s difficult to know what type of rate is right for you. That’s why it’s essential to speak to one of our experienced residential brokers, who can go through your options and recommend the best rate for your individual needs.
In terms of the different types of rates you can choose from, there are two categories to consider: fixed and variable products.
A fixed rate mortgage means your monthly repayments are set in stone for the length of the initial rate period. No matter what happens in the UK money markets or to interest rates as a whole, the amount you repay each month will not change during this initial fixed rate period.
As such, these are the most popular option with homeowners. These products offer financial security to borrowers, as you know what your monthly repayments will be for a set period of time. To find our what your monthly repayments will be with your next mortgage rate, use our repayment calculator here.
Typically, borrowers will choose to fix for 2 or 5 years. There may be the option to fix in for 10 years if you’re looking for financial security for a longer period, but these rates may be more expensive. Your broker will cost up the options available to you to ensure you secure the most competitive deal.
There are a number of drawbacks to fixed rates to consider. Mortgage rate pricing, for example, can be more expensive on fixed rates than on variable products. Similarly, lenders will normally have hefty Early Repayment Charges (ERCs) if you want to repay, remortgage, or sell the property before the initial rate period ends. So, if you on a fixed product and rates reduce, you may have to pay the ERC to move to a cheaper deal. Once again, our brokers can help you decide if this is the right option for you.
Variable rates, mean your mortgage repayments can vary from month to month. Your repayments may change depending on how your lender passes on any increases or decreases in the Bank of England Base Rate to their mortgage pricing, and UK money markets activity. There are a number of different variable rate options to choose from:
Tracker rates, as the name suggest, track a prescribed rate (BBR OR LIBOR) at a margin above the monthly rate. For example, your tracker rate may be priced at Base Rate + 1.50%. so if Base Rate was at 5.25%, this would mean your mortgage interest rate would be 6.75%.
As these are variable rates, if BBR increases or falls, so will your monthly mortgage repayments. Tracker rates can be for a fixed period or set for the life of the loan.
One of the main benefits to a tracker rate is, in a period of reducing rates, your mortgage product should reflect those reductions, and therefore your monthly repayments will come down. However, there is of course the downside that when rates increase, your payments will too. You’re also tied into a deal with a lender during an initial period and may be liable to pay ERCs if you look to switch to a fixed rate or remortgage onto a new product. Your broker will review whether this is the right option for you when discussing your mortgage needs.
A discounted rate means a lender is offering you a mortgage product at a discounted price against either their own Standard Variable Rate (SVR) or a financial indicator such as the Base Rate. These rates are typically set for a short initial period of time, such as 2 or 3 years.
One of the primary benefits of a discounted rate is the pricing is generally more competitive than other fixed and variable rate deals. However, as with tracker rates, there is a level of financial uncertainty that comes with discounted rates. Additionally, if your product is discounted against your lender’s SVR, money market changes won’t necessarily see your monthly mortgage payments reduce. You will be reliant on the lender’s decision to reduce their SVR before you see the benefit of your mortgage payments falling.
Speak to one of our expert residential brokers to discuss which rate is best for you.
What fees will I pay with on my home purchase?
There are a number of fees and charges to be aware of when you come to your home purchase. You may choose to add these fees to your loan, but remember you will then need to pay interest on this for the length of the mortgage.
A lender’s arrangement fee is the amount charged by a lender to set up the mortgage for you. Depending on the rate, the lender will either set the arrangement fee as a percentage or as a fixed charge.
For example, your lender may charge an arrangement fee of 2% of the loan. On a £200,000 mortgage, that’s a cost of £4,000 that will either be due on completion or added to your loan. Remember, adding this fee will increase your loan amount and you will pay interest on this for the length of the mortgage.
As arrangement fees can be significant, especially as you will be juggling numerous other fees and costs, it’s important to view these as part of the cost of a mortgage. Many lenders will look at innovative ways of supporting clients to make the mortgage process as affordable as possible. For example, it may be that a lender offers a higher interest rate product with no arrangement fee, or alternatively, a lower interest rate with a higher arrangement fee. Your expert broker can cost up the different options available to you to compare and guide you in the right direction.
A valuation fee covers the cost of a lender’s survey of your home. This survey reassures the lender that the property is worth the price you paid for it and that the lender has suitable security for the loan in the unfortunate event that they need to repossess it.
In general, valuation fees will depend on the property’s value and your lender, but typically cost around £250. Many lenders will offer free valuations as an incentive on their mortgage products.
There are other more detailed, and more expensive, valuations (surveys) available to you as a purchaser, such as a Homebuyers report or a full structural report. Our brokers will discuss these with you, as depending on the age, condition, location or type of property you are purchasing, one of these extra surveys could prove invaluable.
The legal fees refer to the solicitor/conveyancing costs incurred as part of the mortgage process. Again, our expert brokers can provide a quotation for you from an extensive panel of conveyancers, all of whom meet your lender’s criteria and have the capacity and service requirements to meet both our and your needs.
Can I overpay my mortgage?
Many homeowners will look for a mortgage product that gives them the ability to overpay, whether that’s on a monthly basis or a lump sum from time to time. The benefit of overpaying your mortgage is that you clear the debt much quicker and pay less interest overall. There are many helpful tools online to help you calculate the impact of overpaying on your mortgage. The moneysavingexpert overpayment calculator linked here provides a breakdown of your potential savings year on year.
Most mortgages allow you to make some form of overpayment, but it’s typically capped at 10% of the outstanding loan amount per year, or a fixed amount per month. If you pay more than the lender’s limit, you may be charged penalties. If you want a mortgage with no overpayment limit, it’s unlikely you will be able to get a fixed rate.
Stamp Duty Land Tax (SDLT)
You pay SDLT when purchasing a property over a certain price. Currently, the thresholds for when SDLT starts to apply are:
£250,000 for residential properties
£425,000 for first-time buyers buying a property worth £625,000 or less
£150,000 for non-residential land and properties
If you buy a property for less than the threshold, then there’s no SDLT to pay. There are also different rates of SDLT when buying a property that you need to be aware of. For example, if:
You’re a first-time buyer
You’re buying an additional property
You’re not a UK resident
Please speak to a professional tax advisor before making any property investment decisions.
Frequently asked home purchase questions…
How long does buying a home take?
There’s no one size-fits-all timescale for purchasing your home. On average, it can take between six to twelve weeks from having your offer accepted to getting the keys to your new home, however it can also take up to six months. The conveyancing is typically the longest part of the purchase process.
What will slow down my home purchase?
It’s important to be aware of the common factors that may slow down your purchase process.
Conveyancing issues are the most frequent cause of mortgage purchase delays. These may come down to paperwork issues, complications with the property, environmental search results, or even a disagreement between a buyer and seller. To reduce the risk of this impacting your purchase, have all your documents completed and ensure your solicitor is not waiting on you for any forms.
Survey results may also cause delays to your purchase process, particularly if structural issues are found in the property. It’s important to consider the costs of these issues and whether you’re happy to fix them yourself. You may decide to ask the seller for a discounted sale price depending on the scale of the issues. These negotiations, though necessary, can delay the process by days or potentially a couple of weeks. If you do require any additional specialist property reports such as subsidence or timber and damp, we can help you find the best companies to undertake these reports.
Finally, delays in the chain may slow down your process. Chains can be complex and long, and coordinating everyone to complete on the same day can be extremely difficult. Your dedicated relationship manager will stay in touch with your estate agent and solicitor and chase along the chain to progress things as fast as possible.
How long will my mortgage offer last?
All mortgage offers have an expiration date. Typically, your offer will last anywhere between three to six months. If you’re unsure, then speak to one of our expert mortgage brokers. In the unusual event that your offer expires, it is possible to get an extension granted in exceptional circumstances. However, your valuation will also need to be in date for this to have a chance of being agreed by the lender.
Do I need insurance for my property?
Before you can exchange and complete on your home purchase, your will need to have a buildings insurance policy in place as a minimum requirement. We highly recommend you take out comprehensive home insurance as well to cover both the property and the contents. Speak to a member of our expert team to find a suitable home insurance policy for you.
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Talk to an expert
Have all the facts and figures you need to purchase or remortgage your home? Our experts will make the whole process easier for you! Give us a call or choose a convenient time for us to call you. Drop us an email or chat with a human on our live chat.