Deciding on a property

How much can you afford?

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The first thing you need to do is decide how much you can afford. You will need to look at how much money you have available yourself and how much you can borrow. There are a number of different financial institutions which offer loans to people buying a property, for example, building societies and banks. You should find out if you are able to borrow money and if so, how much (for information on mortgages, see under heading Mortgages).

Some building societies now provide buyers with a certificate that states that a loan will be available provided the property is satisfactory. You may be able to get this certificate before you start looking for a property. Building societies state that this certificate may help you to have your offer accepted by the seller.

Additional costs of purchasing a house

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Before finally deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional costs. These include:-

• survey fees
• valuation fees
• Stamp Duty Land Tax. From 3 September 2008, this is payable on properties costing more than £175,000 and is at least 1% of the purchase price
• land registry fee
• local authority search
• fees, if any, charged by the mortgage lender or someone who arranges the mortgage, for example, a
• mortgage broker
• the buyer’s solicitor’s costs
• VAT
• removal expenses
• any final bills, for example, gas and electricity, from your present home which will have to be paid when you move.

For more information about Stamp Duty Land Tax, go to the HM Revenue and Customs (HMRC) website at www.hmrc.gov.uk/so, or ring the HMRC Stamp Office enquiry line on: 0845 603 0135.

On some properties, where the seller has to provide a Home Information Pack (HIP), the seller will pay for local authority searches.

You should be aware that if you start the process of buying a property and then the sale falls through you may have already paid for a valuation and/or a survey. If the solicitor has started any legal work you may also have to pay for the work done.

Property running expenses

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You should also take into account the running expenses of the property you wish to buy. These may include:-

• council tax
• water rates
• ground rent, if the property is leasehold
• service charges, if the property is a leasehold flat
• insurance costs, including life insurance, buildings and contents insurance
• heating bills. An energy performance certificate can help you work out how energy efficient your property is.

You will have to pay a deposit on exchange of contracts a few weeks before the purchase is completed and the money is received from the mortgage lender. The deposit is often 10% of the purchase price of the home but it can vary.

Warranties for newly-built properties

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If the property is a newly-built property, check whether it has a Buildmark warranty. Buildmark warranties are organised by the National House-Building Council (NHBC) which is an independent organisation with over 20,000 builders of new houses on its register. Before being accepted onto the NHBC register, builders must be able to show that they are technically and financially competent and they must also agree to keep to NHBC Standards.

The Buildmark scheme covers homes built by NHBC registered builders once the NHBC has certified them as finished. The scheme will, for example, protect your money if the builder goes bankrupt after contracts have been exchanged but before completion. It also covers defects which arise because the builder has not kept to NHBC Standards. For more information, go to the NHBC website at: www.nhbc.co.uk.

Freehold property

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If the property is freehold, this means that the land on which the property is built is part of the sale and no ground rent or service charge is payable.

Leasehold property

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A property may be leasehold, which means that the land on which the property is built is not part of the sale. You have to pay ground rent to the owner of the land - who is called the freeholder.

The length of a lease can vary and you should check that the length of the lease on the property you are interested in buying is acceptable to the mortgage lender. You should consult an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

In addition to ground rent on a leasehold property, you may have to pay an annual service charge. This usually happens with a flat. The service charge covers such items as maintenance and repairs to the buildings, cleaning of common parts and looking after the grounds.

For further information around leasehold property can be found from The Leasehold Advisory Service and contacted on 020 7374 5380.

Commonhold property

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If the property is commonhold, this means that you can buy the freehold of a flat and own common parts of the building jointly with the owners of other flats in the building (known as a commonhold association).

In commonhold a ground rent or service charge is not payable. However, a share of the commonhold association's expenditure on maintenance, insurance and administration will be payable for the common parts of the building. Further information is available from LEASE .