Guide to home buying

A new home is more than just bricks and mortar: it’s something we invest in emotionally, as well as financially. No wonder the journey from viewing a property to putting the key in the door for the first time can seem stressful.

Yet if you plan ahead and get some help along the way, you could make it a bit less complicated. This guide is designed to act as a starting point to help you take some of the stress out of the home-buying process.

You’ll find tips and information to get you started on everything from budgeting and the buying process, to choosing the property itself, renting it out and paying off your mortgage, so you can buy your new home with confidence. Why not come into your local branch and speak to one of our advisers who can give you more information on our products?

Bear in mind, this guide is not meant to replace legal advice, if there is anything that you’re unsure about, we recommend that you speak to a legal adviser.

Buying a home

Buying a home might seem complicated. Breaking it down into six easy steps makes it simpler to understand.

There are usually six steps involved in buying a home in England and Wales

Before you start looking at properties, it’s a good idea to talk to a mortgage lender to find out how much you might be able to borrow and how much it will cost. The larger your deposit, the more likely it is that you’ll pay a lower rate of interest or maybe less fees.

The amount you can borrow – your mortgage – plus your deposit, gives you a guide to the house you can afford. Your lender should be able to give you an 'agreement in principle' so you can start house hunting.

In the past, how much you could borrow was based on your income. These days, lenders want to know whether you are able to afford the loan, which means they also look at your outgoings and other personal circumstances. It can be possible to get a mortgage that covers 90% of the purchase price. But if you have a larger deposit you can often benefit from better mortgage deals, and remember, the more you borrow the more interest you will have to pay. You’ll also have upfront costs such as survey fees, legal costs and stamp duty to consider.

There are lots of free online mortgage calculators that will give you an idea of what you may be able to borrow and afford, you’ll find all of ours at natwest.com/mortgage

This is also a good time to look forward and think about your plans for the future. Are you thinking of starting a family sometime soon? Will you still be able to afford your mortgage payments if your income was to change? Also, interest rates are low at the moment but will likely start to rise again at some point.

Think about how a rate rise of just 2%, for example, would affect you. Would you still be able to make your repayments? There are different products which could help by fixing your rate and payments for a set period of time to help give you peace of mind.

Buying a house is likely to be one of the biggest purchases you’ll ever make, so it’s important to spend time researching where you want to live and what sort of property you want to buy. Which areas do you like? What type of house are you looking for?

Some people might say that location is everything, but property type is important as well. So think about access to shops, schools and other services, and how easy it will be to travel to work.

Decide whether this is your ‘forever’ home or whether you’ll live there for just a few years before trading up or down. If you’ll be staying put for a while (the average time is 11 years), ask yourself whether it would still be suitable if things changed, for example if you have a baby and need room for a nursery.

Even if you don’t plan on moving in a hurry, it might still be worthwhile considering how easy it will be for you to sell your new home. For example, are there enough bathrooms for the number of bedrooms? Ideally, a three bedroomed house should have two bathrooms.

You might want to draw up a list of essential features like number of bedrooms, and a list of 'preferables' such as a garage or large garden.

How to buy

Once you’ve decided where you want to live and the type of property you want, try signing up with local estate agents and ask them to send details of suitable properties – also start looking online. Be flexible about what properties you’ll view. For example, the agent may know that the seller is prepared to drop the asking price, so it could still be within your budget.

When you've found the right property, make an offer through the estate agent. Remember, the sale price is what the seller hopes to get, not necessarily what they realistically expect - and you may be able to agree a lower price. Your offer should be 'subject to survey and subject to contract'.

Getting the best price

If you’re already a homeowner, you should consider holding off looking at properties until you have agreed on the sale of your current home. If you aren’t selling another property you may be in a strong position to negotiate on the price. This could also apply to having a mortgage that’s ‘agreed in principle’ – what the lender says it will probably give you, based on certain terms and conditions.

Be prepared to walk away. Decide how much you can afford and stick to it. Also, if a survey highlights problems, don’t be afraid to negotiate downwards.

The mortgage that was approved in principle needs to be arranged now. Your lender needs to know what the property is worth, and will arrange for a valuation. You'll have to pay for this. Valuations can be free with some mortgages.

You might want to arrange for a detailed survey, especially if you're buying an older house.

The basic survey, a Home Buyer's Report, only covers the parts of the property that are easily accessible or visible. A full structural survey is more in-depth and can unearth problems that could be costly in the future. If the survey does reveal serious problems, you can withdraw your offer on the property.

And make sure you're protected.Think about life insurance as well as accident, sickness and unemployment insurance to cover your mortgage payments. You'll also need to insure your new home and belongings.

A solicitor or conveyancer will manage the legal transfer of a property from one owner to another and it makes sure that you have proper legal title. They'll also carry out all the necessary land searches to check for past and potential problems.

The three main areas where a solicitor helps are:

When the sale is agreed – carrying out enquiries, preparing the contract, negotiating of the moving date, paying money on account and searches

At exchange of contracts – receipt of your deposit, approval of transfer deeds, contract and deposit to seller's solicitor, preparation of transfer and mortgage deeds, arrangement of final searches and preparation of final accounts

On completion – paying the balance of the purchase price and settlements, managing the handover of deeds, paying Stamp Duty and registration at Land Registry

Make sure you're fully prepared before you move, with your possessions boxed up and clearly labelled. You may want to hire a removal firm to help you.

Don't forget:

• Tell your old gas, electric, water and telephone suppliers that you're moving out
• Tell your new utilities suppliers that you've moved in
• Let the council know about your move so you don't pay Council Tax at your old address
• Think about having your mail redirected from your old address

Once you've moved in there are a couple of extra things that you should take care of. After the first month, check that you're paying the right mortgage repayment amounts at the right time. And make sure your important documents are carefully filed away. They're your main record of your purchase and your mortgage and you may need them in the future.

The steps here are for home buyers in England and Wales. The process is different for buyers in Scotland.

1. Confirm how much you can borrow
2. Decide what you’re looking for
3. Register with estate agents
4. Visit properties you like
5. Make an offer
6. Offer accepted
7. Get a mortgage
8. Instruct your solicitor
9. Survey
10. Survey results
11. Exchange contracts
12. Book a removal van
13. Organise your insurance policies
14. Completion
15. Contact utility companies
16. Move in

Do you have any savings? Will the amount cover a percentage of the deposit plus moving costs, including legal fees?

Do you know how much you can borrow?

Do you know what type of mortgage you want? Can you afford it?

Have you got insurance for your new property and possessions?

How would you make your mortgage payments if you were sick and unable to work?

There are two main types of mortgage:

Repayment– you repay both the capital (the money lent to you) and the interest charged on it each month, until you have repaid the full loan at the end of the term.

Interest only– you only pay the interest on the loan each month, so your debt stays the same size. With this type of mortgage you must have a repayment vehicle in place such as a saving or investment plan, to build up money to repay the loan by the end of your mortgage term. You should regularly track the progress of this repayment vehicle to ensure it will pay off the amount borrowed

Borrowers can also choose special deals on the interest they pay. These then revert back to the lender’s standard variable rate (SVR) – usually between one to five years later. The interest rates available include:

Fixed– where the rate you pay is fixed for a set period. Repayments remain the same during this time, regardless of other interest rate rises or falls.

Tracker– These are variable rate mortgages and therefore the amount you pay each month can vary. Some tracker mortgages track the Bank of England Base Rate, others track their own base rate, for example NatWest trackers track the NatWest Bank Base Rate plus a set percentage. If Base Rate goes up or down, so will your monthly mortgage payments.

Offset– where deposits are kept in separate accounts but linked so that they are all taken into account when calculating interest. If you deposit more money, your balance reduces. Your can also apply to withdraw money – if you do this, then your balance will increase.

Moving house can be expensive. There’s Stamp Duty Land Tax, which ranges from 1% for properties worth £125,000−£250,000 to 5% on those worth more than £1 million.

You also pay legal fees, valuation fees, lender’s fees and charges, surveyors’ fees and Land Registry fees – all of which add thousands to the cost of buying your home.

There are no fixed rules about costs – it depends on what house you are buying, where you live and your mortgage deal. Some lenders offer free valuation and legal fees to borrowers, some have fee-free loans, while others charge. On top of that, there are your moving costs and other expenses such as home insurance and mail redirection that you have to remember to include in your budget.