Getting your funding in place
Whether you are a first time buyer, investor or looking to move up the property ladder it is important that you first get your funding arranged.
Lenders (banks and building societies) will give you a mortgage in principle based on information you provide to them about salaries and expenditure. However, the lenders will only carry out a detailed review of your status once you have offered successfully on a property.
It is usual that you have a mortgage in principle in place at the start of your property search. The mortgage in principle usually gives you an idea of the maximum amount the lender will be willing to give you as a mortgage.
The legals fees and purchase costs
In addition the price you will need to budget for the legal fees, registration dues and any LBTT (Scottish Stamp Duty).
When you ask us to give you a quote of the purchase costs, these will be given and calculated on the budget price you give to us.
However, because some of the costs (the registration dues and the LBTT) are calculated by reference to the actual purchase price, those will need to be recalculated once you have offered successfully for a property. Also, if you own another property then you would also have to pay the Additional Dwelling Supplement (ADS) which is charged at 4% of the purchase price.
The Edinburgh Property Market – how it affects your funding
It is a sellers market at the moment. Properties coming onto the market are generally selling very quickly (coming under offer within a couple of weeks) and selling at prices which are well over the home report value.
Because of this, you are almost certainly going to have to offer for a property at a Closing Date and will need to offer over the home report value to stand a reasonable chance of your offer being successful.
That has an effect on your budget!
It is important to understand that your lender will offer you a mortgage based as a percentage of the home report value of the property not the price you offer and so for every £ you offer above the home report value that is an extra £ you will need to find from your savings.
Just as an example:
- If you offer £110,000 for a property with a home report value of £100,000:
- The mortgage is likely to be 90% of the value = £90,000
- Your contribution to the price will be £20,000
So, you will need to bear this in mind.
Tips if you are working with a tight and limited budget
Although most properties are selling quickly and at prices well above their home report values, there are still some properties which get overlooked and it is those properties, which have been on the market for sale for a couple of months that you should look out for as you stand a better chance of offering successfully at around the home report value, although this cannot of course be guaranteed.
How do you find those properties?
The best way of finding those properties is to request the home report on the ESPC website. The date of the home report is usually the date of or near to the date of the start of marketing.
Also you can look for fixed price properties although these are not common in the current market.