Welcome to Michelle’s Property Q&A, my new weekly segment aimed at addressing the public’s top questions and concerns about property investment and ownership in the UK.
Whether you are a seasoned investor or a first-time homebuyer, there will inevitably be times in which you just don’t know what your best options are.
Looking to purchase your first home and don’t know where to start? Considering expanding your portfolio and don’t know which type of property to buy? Want to know if you have enough equity to retire on?
Send your questions to hear my top property tips and strategies gained over my 20 years in the property industry, including hundreds of homes under management and thousands of property purchases for my satisfied clients.
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Questions from the Public
Our fifth question comes from @LeonThomas, who asks:
My wife and I want to sell off a piece of our garden which contains an out building. Would I need my mortgage lender to agree to the sale and if so, are they likely to object?
Very good question Leon. A mortgage is not only for your house, as the property title that you are purchasing includes both the house and the land it sits on. If you want to sell a portion of your property, such as a garden, garage, or pool house, you will need the mortgagee’s consent to release part of the land from your ownership. There would typically be specific forms you have to complete, and usually an administration charge.
Whether the lender will consent is likely to depend on the amount left on your mortgage and the value of the land. The lender may refer this to an independent valuer who must make sure that releasing the land will not jeopardise their interest in the land.
Our fourth question comes from @Damien87, who asks:
I want to buy my first home but want to save money by going through an auction house. Is this a good idea?
Very good question Damien. As with anything in life, there are pros and cons to buying a house at auction.
- Lower property prices
- Speed of completing the purchase process
- Visibility on pricing negotiations and rival bidders
- Relative ease of purchase process compared to traditional home purchase
- Limited time for property inspections, making investments riskier
- Title issues, for distress properties in particular.
For a first home, I would suggest purchasing from the property market, with the use of a mortgage broker and surveyor. The last thing you want with a first home is surprise costs that can overwhelm your finances.
Our third question comes from @BritneyFlood, who asks:
I’m currently saving to purchase my first home. Can you give me a breakdown of all the additional costs I should expect to pay?
Thanks for the question Britney. The absolute first cost of buying a home is your deposit. If you’re a first-time buyer you will normally have to pay at least 5% of the purchase price, so £15,000 for a £300,000 property.
Additional costs include:
Stamp duty – A government tax paid on homes costing £125,001 or more. Though, first-time-buyers will pay no Stamp Duty on the first £300,000 for properties worth up to £500,000.
Valuation fee – Where your lender assesses the value of the property to establish how much they are prepared to lend you. The cost can be £150-£1,500 based on the property’s value.
Surveyor’s Fee – Ranging from a basic home condition survey costing around £250 to a full structural survey from £600 or more. Paying for a good survey could save you money on repairs in the long run.
Legal fees – where a solicitor or licensed conveyancer carries out all the legal work when you buy or sell your home. Legal fees are typically £850-£1,500 including VAT at 20%.
Our second question comes from @Cody112, who asks:
I want to transfer my parent’s mortgage into my name and take over their home. How can I do this?
Very good question Cody. Banks will generally not allow you to simply assume a mortgage title entirely, so you’ll need to apply for a new home loan and the old loan will need to be paid out.
The reason is that a bank can’t simply approve a home loan with no property or security.
Your best option would be to have your parents sell you the property at or below market value, otherwise known as a “favourable purchase arrangement”.
Your parents could even sell it to you at a price equal to the mortgage balance, bearing in mind, there will be stamp duty and conveyancing costs for transferring ownership, just like a normal sale.
Our first question comes from @JonasJamie, who asks:
I want to buy my first home. How do I know how much I can borrow?
Very good question Jonas. When you apply for a mortgage, most UK lenders will cap your loan-to-income ratio at four-and-a-half times your income.
They will also assess what level of monthly payments you can afford, after taking into account your various personal and living expenses as well as your income.
This is called an affordability assessment. Lenders may also look at giving your income a ‘stress test’, to gauge your ability to repay the mortgage if/when unforeseen complications arise. This may include changes such as; redundancy, having a baby, or taking a career break.
If the lender thinks you won’t be able to afford your mortgage payments in these circumstances, they might limit how much you can borrow. The amount you can borrow also differs depending on the lender you choose. Your best bet is to have a free consultation with a reputable mortgage advisor in your area, as they would be the ones to search the mortgage market for you in order to ensure you get your best rates possible.