Buying Property: Three Key Points to Remember

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. 

Borrowing Estimate 

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. 

One-Off Costs

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.

Photo by: james.thompson
About Christopher

Comments

  1. Glad to see your back! Thanks for the info.
    SavvyFinancialLatina recently posted..9 Tips for Paying for CollegeMy Profile

  2. Just don’t rely on the banks to only lend you an amount which is truly affordable. I know when I got a mortgage pre-approval they offered me far more money than I should realistically be borrowing. Taking on a mortgage that high could have been disastrous. It would have eaten up far too much of my monthly income.
    Modest Money recently posted..Why You Shouldn’t Buy Cheap Pet FoodMy Profile

  3. Thanks for coming out of hiatus Christopher! I really missed you.
    Shilpan recently posted..How to Crucify Your BlogMy Profile

  4. Good to see you back in action!

    I’m with Jeremy though: don’t rely on the bank to truly let you know what you could afford. We were recently approved for $40,000 more than what we were looking at buying. After really crunching the budget and taking all of our misc monthly savings into account, there is no way we could afford what they bank is saying we could.
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  5. Really informative post – thank you for sharing. It’s so good to see someone else writing about tips on buying property, as it can be quite hard to find authoritative, real advice out there.
    Todd Garth recently posted..Top 10 Gold Traders of All TimeMy Profile

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