In this brief blog, we are going to discuss “How to buy a flat in London” and what buying a flat in London entails.
How to buy a flat in London?
Buying a flat in London can be one of the most stressful experiences. There is quite a lot of competition for flats in London as it is a city with a lot of demand. flat prices in London are rising faster and faster and even with this, it is still a seller’s market as there are soo any buyers in comparison to how many properties which are available for sale in London.
If you are considering buying a flat n London then here are a few things you may want to consider:
flats next to the stations will be very competitive.
Gazumping and Gazanging are very common in London
Getting a mortgage in principle will make estate agents and sellers take you more seriously
Having proof of a mortgage deposit will make sellers and estate agents take you seriously
Having a good mortgage broker and a good conveyancer may help reduce how long it takes for you to complete on purchasing the property
You may be able to use a government scheme in order to buy a flat in London
Steps to buying a flat in London
Below are some of the steps on how to buy a flat in London. If you are considering buying a flat in London then you should follow some if not all of the steps mentioned below.
Get a mortgage broker
If you are buying with a mortgage then getting a mortgage broker may be a good choice. A mortgage broker helps you find mortgage products which are suitable for you by scanning the market and let you know what mortgage products on the market may be suitable for you based on your current circumstances.
Mortgage brokers are relevant because they are able to search the whole mortgage market(in some cases) to find mortgage products which may be able to help you buy a flat in London. In comparison, mortgage lenders are usually only able to provide advice on the mortgage products which they provide.
A good mortgage broker will likely be fast and be able to help you get a mortgage faster.
Get a mortgage in principle
A mortgage principle is the next step on how to buy a flat in London. A mortgage principle is an official letter or statement from a mortgage lender which states how much they may be willing to lend to you. A mortgage lender will provide you with a mortgage in principle based on an application which you make. This application will require very little information and most mortgage lenders will perform a soft credit check before deciding if they can lend to you or not.
A mortgage in principle will make sellers and real estate agents take you more seriously as it shows you may be able to buy the flat in London.
Make an offer on a flat in London
Once you have gotten your mortgage in principle and then found a property which you want to buy then you should make an offer on the flat. The seller will let you know if they are accepting your offer and you can then go on to get a mortgage offer.
Get a mortgage offer
To get a mortgage offer you will then need to fill in a mortgage fact find. This is a more detailed document and the mortgage lender will use this to determine your mortgage affordability and will let you know if they will be providing you with a mortgage offer or not.
Having a mortgage in principle does not guarantee that a mortgage lender will provide you with a mortgage offer to buy a flat in London.
Once you have gotten a mortgage offer you should also know that it isn’t a guarantee that you will end up completing on the flat in London.
It is possible for the mortgage lender to still withdraw the mortgage offer up until when you complete on the mortgage.
Get flat insurance
Once you have gotten a mortgage offer, most mortgage lenders will want you to get home insurance before you complete on the property purchase. If the property is a non-standard construction property then you may find that it costs more to insure. You may even need to use a specialist insurance broker to find insurance and even to get a mortgage offer.
Complete on a flat in London
Once you have gotten your flat insurance, the conveyancing process should already have started. At this stage, your conveyancer will carry out legal searches on the property to ensure everything is fine with it and you can buy it.
If everything checks out, you can exchange contracts and then complete on the flat. At this stage, you have just bought a flat in London.
Pay stamp duty if required
You will then need to pay stamp duty when buying a flat in London.
If you are a first-time buyer you may be due for stamp duty relief.
Stamp duty can be very costly so you may want to use a stamp duty calculator to see how much stamp duty may cost you.
The cost of buying a flat in London
Buying in London can be very expensive. The average flat price in London is now around £470,000 which means if you need a mortgage deposit of 5% you will need to have £23,000 saved up. If you need a mortgage deposit of 20% then you will need a mortgage deposit of £94,000 to buy a flat in London.
Aside from the mortgage deposit requirement, you will need to account for fees such as the mortgage application fee: between £250 to £1,000, conveyancing fee £300 to £2,000, home insurance: £300 to £1500 and a home survey: £150 to £500.
These costs are just guidelines and the cost of getting a mortgage can be much higher depending on what service providers you find.
If you are buying a flat in London with cash then you may find that it is easier and much faster as you avoid the whole mortgage process which most sellers hate.
How much deposit do I need to buy a flat in London?
To buy a flat in London you will need an average mortgage deposit of £23,000 but this figure is rising and will differ depending on the region in London you want to buy a flat at.
Most first-time buyers will take over 8 years to save their mortgage deposit before they will be able to buy a flat in London. People looking to buy a flat in London can pay mortgage deposits which go all the way up to £80,000. This is according to research carried out by the Nationwide Building Society.
What mortgage can I get with 20k deposit?
With a 20K deposit you will be able to get a range of mortgages depending on what percentile of the property the 20k deposit is.
A 20k deposit will get you a £100,000 mortgage if it is a 20% mortgage deposit. A 20k deposit will also be able to get you a £400,000 mortgage if it is a 5% mortgage deposit. This may be enough to buy a flat in London.
Government schemes for buying a flat in London
There are lots of government schemes which may be able to help you if you are considering buying a flat in London, they include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy- allows you to buy your home at a discount price.
- Preserved right to buy- same as above.
- Right to acquire- same as above.
Getting a mortgage for your flat purchase
You may want to consider using an independent mortgage broker if you are thinking of buying a flat in London. A mortgage broker will be able to help you get a mortgage at a good rate.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle.
This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application.
Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.
Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.
In this brief blog, we answered the question “How to buy a flat in London” and discussed what buying a flat in London entails. If you have any questions or comments please let us know.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.