Check prices before you buy a house in the UK
Buying a house in the UK may seem complicated, the more that most Poles in the UK aren’t tuned in to complexities of English law. That's why today I decided to introduce the topic of buying a house in the UK.
We have known for a long time that the real estate market is changing in the UK very dynamically.
There is a situation of the lack of an appropriate number of houses for sale in a proportional relation to demand, which causes that real estate prices are growing fast.
Also, historically low rates make money cheap and this means that real estate is expensive. Also, the strong weakening of the pound contributed to the fact that many investors from around the world decided to invest in real estate – mainly in London.
This in turn fuels even more the entire “machine”. Many of us wanting to buy a house before prices rise to a level that exceeds our capabilities, must know that the UK government is trying to give us solid support.
The point is that the state is trying to help as much as it can, offering a lot of help programs, so we can afford it. Therefore, if we are among people who want to buy their first home, we should think about a few things. After all, buying your dream house is one of the most serious financial decisions.
Therefore, I will try today, look not only on the financial side of the purchase of real estate, but also on the formal side, discussing the topic – a loan for a house in the UK. I will try to give you all the information you need.
Where and how to check property prices in the UK?
Many of us, the dream home is looking on the Internet, it is the most convenient and the fastest way to find something. I will only briefly write where you can check the real estate prices.
If we have trouble in finding out how much the houses in our area cost, just visit rightmove.co.uk, enter the desired property and get acquainted with its prices.
Another way is to buy a local newspaper with the so-called add-on “Properties“. As a last resort, we can visit High Street, where the largest real estate offices usually have their headquarters.
Own payment – means how to buy a house in the UK?
Going smoothly to the most important part of the material, i.e. how to buy a house in the UK, we must bear in mind that if we are trying to get a loan for a property, we must have, so-called – own payment.
Most often it’s 10%. That's all it takes to get a fairly acceptable interest rate on the flat loan. Of course it is better to have 15% or even 20%, but not everyone is able to save such cash.
There is the possibility to deposit only 5% percent, but the interest rate is not attractive and you have to use the programme: help to buy home.
Read the article, where you will learn how to check your creditworthiness in the UK
Our funds, which will be used for own payment, are called a deposit. What if, for such a deposit, we need to save half a life and we want to buy a dream house earlier?
There’s a solution for this! Namely – we can make money on deposited money. It's not just about traditional savings accounts or deposits. The British government has launched a savings account called Help To Buy ISA – it is intended for people saving money as a deposit.
It works by paying £1,200 a month to our account, and when saving about 200 pounds every month we receive 25% of the collected amount at the moment of withdrawing saved funds. In total, we can gain a maximum of 3,000 pounds!
I strongly encourage you to read the analysis of real estate prices in the UK, where you will find out whether real estate in England is expensive or cheap.
Before we decide to buy a home in the UK, we should know how much we can afford. Thanks to this, we won’t waste time browsing ads that we can’t afford.
Here it should be emphasized that the bank sets to what extent we can afford, granting a loan for an apartment. Usually, its amount doesn’t exceed 4 or 5 times of annual revenues.
So it’s easy to count that if you earn £20,000, the bank will give you a home loan in the range of £80,000 – £100,000.
Other government aids when buying a house or flat
Earlier mentioned – Help to Buy ISA isn;tthe only form of help. In fact, there’re several similar programs in the UK that will make it easier for us to buy our first home – Here is some of them.
- Right to Buy: This program is available to people who currently live in social housing – it provides discounts on the purchase of a rented flat.
- Shared Ownership: This is a program designed for people who, due to lack of finances, can’t buy a whole house and acquire part of the property, and rent the remaining part
Additional and unavoidable costs
Buying a house has always been associated with a complicated transaction that generates a lot of additional costs. It’s difficult to disagree with this statement, because we have to pay for the appraiser, lawyer, pay insurance and tax – Stamp Duty Land Tax.
To know all the costs associated with buying a house in the UK, read the article “How much does it really cost a house in the UK?”
We make a purchase offer
By going, step by step in this material, I’d like to focus now on the purchase of our future home. So, in England, the purchase offer is usually sent to the agent informally.
Then, we can negotiate the price – we give an amount that we’re willing to pay for a given property. After accepting the offer by the seller, we can start the formalities.
It’s very important to remember that at this stage, each party can still withdraw its offer. Why? For the simple reason, as in Poland, the oral contract isn’t formally binding.
The offer can be negotiated until the exchange of contracts, which is exactly what the conclusion of the contract for the purchase and sale of a given property expresses. If we get along with the seller, we can proceed to finalizing the loan.
Finalization of the contract
If we’re sure of buying a home, we set the day of the move. Mostly, the conclusion of the contract and the same move is a few days (otherwise, the entire purchase process, from the moment of submitting an offer, which can last even from 2 to 3 months).
We will get the keys from our house only when the previous owner receives confirmation that the money has been received by the account. Our lawyer in this case registers the change of ownership in Land Registers – Land Registry.
Very important! The real estate tax is from 0 to 5 percent.
- from 0 to £125,000 – 0 percent. property values
- over £125,000 to £250,000 – 2 percent property values
- over £250,000 to £985.000 – 5 percent property values
NOTE: if you purchase your first property, Stamp Duty up to a value of £500,000 is £0. This is a recently introduced discount by the government in the UK, which aims to help you purchase the first property in the UK.
The purchase of real estate can be our investment
Many Poles in the UK very often assume that someday they can come back to Poland at an unspecified time. Therefore, it’s worth thinking about it earlier and have a plan B if you return to Poland.
Therefore, it can be assumed that there will be two variants. So you can rent a property or sell it.
That's why you can make improvements at home. Each investment affects the increase in the value of the property. But if you plan to rent it, you may find that investments made in an apartment will never be returned.
This happens if the district you live in isn’t one of the best, so nobody will pay more for rent than the current top range.
Securing our income
At the end of this material, I’d like to mention the insurance of a home or flat. Building Insurance – it can be in two types.
- insurance of walls, ie. the building itself,
- insurance of property that is, everything inside our home.
It is important to remember that both types are insured against theft, fire and other hazards. In the case of a loan for a house in the UK, basic insurance is mandatory, but it is normal that the bank wants to protect itself in the event of, for example, a fire.
If you don’t know how to buy a home in the UK, you can always ask a question on a Facebook group, ask a person who has already bought a house in the UK or just talk to a credit counselor.
I strongly encourage you to familiarize yourself with previous articles about the purchase of a home in the UK as well as related to investing in real estate in the UK.
If you have any questions then write in the comments.
All information comes from gov.uk. To find out the details, I recommend talking to an adviser.
NOTE: I present private opinions and I’m. not responsible for the readers' decisions. I always try to present current information but may no longer be up to date. Therefore, before making a decision, please verify it and consult a licensed financial adviser.
Hey! My name is Radek and I work hard in England everyday and the thought that I will be able to retire after 68 years is not in my favor. That is why I will prove that it is possible at the age of 55 or maybe earlier. See on this blog how I want to achieve this.