There are three key financial elements to remember when purchasing a property. These are crucial, to ensure that investors get a property to suit their lifestyle, and something within their budget. The process of purchasing a home varies slightly, depending upon whether the investor lives in England and Wales or Scotland.
Before looking at property for sale at Zoopla.co.uk or similar sites, it’s important to speak with a mortgage advisor. They will calculate the size of the deposit, how much the investor earns and their credit rating. Then work out a maximum loan amount.
Gone are the days of 100% loans. Since the 2007 credit crunch, banks are less likely to take risks. Bear in mind that the smaller the deposit; the more the lender will charge to mitigate against financial risk. Lenders can lend around three to four times the annual income. If investors are buying as a couple, then this can increase further.
These are costs that can possibly occur during the purchase, and therefore need to be factored into the borrowing process. This list covers most, but not all, potential one-off costs:
- Lender’s Valuation
- Building Survey
- Legal/Conveyancing Fees
- Stamp Duty
- Land Registry Fee
- Local Authority Search Fees
- Estate Agency Commission (for the sale of another property)
- Mortgage Indemnity Fees
Calculate How Much Is Affordable
After visiting a lender and also working out the one-off costs, it’s time to work out how much is affordable. Here’s a step by step breakdown which should help you figure out who much is affordable:
1. Work out the income from the sale of the current property, if there is one.
2. Then calculate the amount that can be borrowed.
3. Calculate the savings or investments that can be used for the purchase.
4. Deduct the approximate one-off costs for the property. This will provide a rough estimate of the price range that is affordable.
If you follow these three steps you should have no problem making the huge investment which is a piece of property. Just be sure to take your time and do everything properly, as there are few purchasing decisions as important as this one.