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When do you need a survey on your house?

Sometimes the decision to actually buy a home can seem like the easiest decision you will make in the whole house-buying experience. From that point onwards it’s one difficult decision after another. Should I go for a standard mortgage or a Shared Ownership Mortgage? What type of insurance do I need? Shall I use the mortgage lender’s offer of insurance or go through a broker? The list seems never ending. In and among this exhaustive list you will eventually happen upon the question of a survey. So, do you really need one?

Recent studies suggest that a high percentage of first-time buyers just rely on the valuation report of their new property which is conducted by the mortgage lender and do not bother conducting a more detailed survey.

However, it should be noted, that the mortgage lender’s valuation report is not a comprehensive survey and its purpose is to verify that the property provides adequate security for the lender’s loan. It may satisfy the lender’s needs but will not necessarily satisfy the borrower’s needs. At this point you must consider if you need a more detailed survey of the property.

A detailed survey will evaluate if the property has any structural problems. The results may allow you to re-negotiate the price of the house if any faults are found and will also provide you with the more information in order to make a decision as to whether or not to continue with the purchase.

There are two basic types of survey:

A Homebuyer’s Report -This may typically cost you between �300 and �400. It will alert you to any basic defects in the property but it is not an extensive survey. This means that the surveyor will not lift carpets, test the drains or check the wiring. It is a basic survey which details the parts of the property which are visible and evident and is designed to put you in a relatively informed position when considering whether to proceed or not.

A full structural survey �This may typically cost you between �600 and �800. It will be more comprehensive than the above report and will cover all minor and major defects. Recommendations will then be made based on the results of this type of survey and it should highlight all information necessary to form a more thorough judgement on the condition of the property.

Importance of the FSA

Why is the FSA important to you, as a customer?

There has been much talk of late about the new mortgage regulations which were introduced by the Financial Service Authority (FSA) last year, but what does this mean to you as a consumer? Will these regulations affect you as a first-time buyer looking at your first standard mortgage or Shared Ownership Mortgage?

The FSA (Financial Services Authority) introduced the regulation of mortgage lending and advice on the 31st of October 2004. This means that every mortgage lender and adviser you deal with today should be FSA registered and should comply with the FSA Mortgage Conduct of Business regulations. Fundamentally, the purpose of the regulation is to protect consumers against the consequences of incompetence and fraud by requiring firms and advisers to demonstrate sufficient levels of competence and experience for the advice they are providing. As a result, they should observe certain standards of skill, care and diligence and ensure any advice provided is professional in standard and suitable for your needs and personal circumstances. They should also act with integrity and treat you fairly when providing mortgage advice and information.

In order to promote confidence in the financial system, secure the appropriate level of consumer protection and promote transparency and public understanding of the risks and merits of different mortgage products, amongst other requirements, the regulations necessitate the following information to be provided:

•  You must be provided with an Initial Disclosure Document (IDD) which outlines the type of service which the adviser provides and also with a Key Facts Illustration (KFI) which explains the different suggested mortgages in terms of charges and risk factors.
• The KFI should follow the standardised format in order to make it easier for you to compare different mortgage.
• The mortgage contract - in particular the pricing information - must be outlined in a clear manner so that you can understand it and there should be no hidden charges, tie-ins or penalties.

Wills

Why do I need a will?

If you are a first-time buyer and are thinking about taking out a standard or a shared ownership mortgage, read on for the reasons why you might also want to consider drawing up a will.

You are embarking on an exciting stage of your life. You are either moving into a new home or you are possibly buying your first house. Either way, it’s the start of something new. It’s a beginning. So why on earth would you be thinking about what happens when you die?

Well, something that many people do not realise is that mortgages and wills go hand in hand. In fact, the word ‘mortgage’ comes from Old French: mort meaning dead and gage meaning pledge. So if you are going to take out a ‘dead pledge’ then you might as well think about what happens when you are no longer there to fulfil the pledge. There are lots of good reasons for getting a will and buying something of value is one of the main ones.

Benefits of a will

• You can say what happens to the property and your personal belongingsYou have control over who receives your money.
• You ensure your children will be cared for.
• If you are an unmarried couple a will is the only way to ensure that you inherit the property from one another.
•  You can say what happens to the property and your personal belongings.
• You have control over who receives your money.
• You ensure your children will be cared for.
• If you are an unmarried couple a will is the only way to ensure that you inherit the property from one another.

Cost of a will

The cost of drawing up a will varies from solicitor to solicitor and so it is worthwhile either using a family (or recommended) solicitor or finding out the fees of a few solicitors in your general area.

What is in a will?

In general a will contains:

• Your name and address.
• List of your assets.
• List of beneficiaries.
• A designated guardian for children.
• A designated executor (someone you trust to ensure your wishes are followed).
• Your signature.
• Witnesses’ signatures.

The First Time Buyer mortgage glossary

The mortgage glossary

Do you often find the world of mortgages a bit confusing? Not really sure what all the official-sounding terms, like ‘Shared Ownership Mortgage’ really mean? If so, you will definitely benefit from our glossary of terms associated with mortgages found below.

Arrears - An unpaid or overdue debt. In relation to a mortgage this would mean that the mortgage repayments are outstanding.

- An unpaid or overdue debt. In relation to a mortgage this would mean that the mortgage repayments are outstanding.

Base rate - An interest rate set by the Bank of England for lending to other banks.

- An interest rate set by the Bank of England for lending to other banks.

Buy to let - The purchase of any property which is bought with the intention of making a profit through letting. Special buy-to-let mortgages also exist.

- The purchase of any property which is bought with the intention of making a profit through letting. Special buy-to-let mortgages also exist.

Capped interest rates - Over a fixed period of time, these provide a maximum amount of interest that you will pay.

- Over a fixed period of time, these provide a maximum amount of interest that you will pay.

Credit check - A way of checking whether the borrower has a poor credit rating.

- A way of checking whether the borrower has a poor credit rating.

Early Repayment Charge - This is a fixed or stepped fee for repaying your mortgage before the agreed time.

- This is a fixed or stepped fee for repaying your mortgage before the agreed time.

Endowment - A life assurance policy that pays out a cash lump sum after an agreed specific period of time or on the death of the policy holder. The actual cash lump sum is not guaranteed although the amount payable on death is, providing the premiums are maintained.

- A life assurance policy that pays out a cash lump sum after an agreed specific period of time or on the death of the policy holder. The actual cash lump sum is not guaranteed although the amount payable on death is, providing the premiums are maintained.

Fixed interest rates - These fix the interest rate you pay each month for a set number of years (usually from two to five). Whether interest rates fall or increase you will be paying the same amount.

- These fix the interest rate you pay each month for a set number of years (usually from two to five). Whether interest rates fall or increase you will be paying the same amount.

Interest-only mortgage - The monthly repayments made to the lender only cover the interest owing on the loan. At the end of the fixed period of time the actual money borrowed remains the same and this is then payable.

- The monthly repayments made to the lender only cover the interest owing on the loan. At the end of the fixed period of time the actual money borrowed remains the same and this is then payable.

Interest rate - The lender will agree to lend you money on the understanding that you will pay a percentage of the sum on top of the money borrowed.

- The lender will agree to lend you money on the understanding that you will pay a percentage of the sum on top of the money borrowed.

Mortgage - You borrow money from a lender in order to buy your house and the lender uses the house itself as security for the money it has lent you.

- You borrow money from a lender in order to buy your house and the lender uses the house itself as security for the money it has lent you.

Repayment mortgage - The monthly repayments to the lender will consist of the actual money you borrowed (the capital) plus a share of the interest on the money you borrowed. At the end of the agreed period of time you will have then totally paid off the mortgage.

- The monthly repayments to the lender will consist of the actual money you borrowed (the capital) plus a share of the interest on the money you borrowed. At the end of the agreed period of time you will have then totally paid off the mortgage.

Shared Ownership Mortgage - This mortgage enables you to buy a share in a property and pay rent to a housing association on the remaining share.

- This mortgage enables you to buy a share in a property and pay rent to a housing association on the remaining share.

Shared ownership and you - more information on shared ownership mortgages

Shared ownership is gaining in popularity as a way of buying a first home. Because you only buy a share of the property, and pay rent on the rest, the property becomes affordable. Joint ownership (buying with a friend) and shared ownership can sometimes be combined.

SHARED OWNERSHIP: What’s good about shared ownership?

•  It offers an opportunity for those on a low income to step onto the property ladder.
• If you are on a low income, housing associations will usually give you priority. They will consider what money you have coming in, as well as your housing need - for example, if you have children.
• Your monthly mortgage payments and rent may be less than if you had bought your home outright.
• There is little or no deposit.
• If you are a taxpayer, you will get tax relief on your mortgage.
• If you decide to sell your home, you will get a share of the increase in the value of the property.
• The exemption from stamp duty reduces the cost of buying.
• You can build up the share of the property you own until you own it outright, thus investing in your own home rather than just paying rent.
• By proving that you can make regular mortgage repayments, you may find it easier to obtain a mortgage in the future.
• The landlord is responsible for maintaining the structure of the property.
• It is a useful scheme for people who expect their income to increase in the future.
• Shared ownership properties are usually new-build or refurbished.
• You can combine shared ownership with joint ownership.
• It offers an opportunity for those on a low income to step onto the property ladder
• If you are on a low income, housing associations will usually give you priority. They will consider what money you have coming in, as well as your housing need - for example, if you have children.
• Your monthly mortgage payments and rent may be less than if you had bought your home outright.
• There is little or no deposit.
• If you are a taxpayer, you will get tax relief on your mortgage.
• If you decide to sell your home, you will get a share of the increase in the value of the property.
• The exemption from stamp duty reduces the cost of buying.
• You can build up the share of the property you own until you own it outright, thus investing in your own home rather than just paying rent.
• By proving that you can make regular mortgage repayments, you may find it easier to obtain a mortgage in the future.
• The landlord is responsible for maintaining the structure of the property.
• It is a useful scheme for people who expect their income to increase in the future.
• Shared ownership properties are usually new-build or refurbished.
• You can combine shared ownership with joint ownership.

SHARED OWNERSHIP: What are the downsides of shared ownership?

• There are fewer properties available under shared ownership schemes than in the general market.
• There may be no properties in the area in which you wish to live.
• You have to fulfil the criteria specified by Registered Social Landlords (RSLs).
• You still have the responsibilities of a homeowner but the home does not belong only to you.
• You have to ask permission to make improvements.
• If you want to increase your share of the property, you will have to pay a valuer’s fee.
• In rural areas, RSLs may restrict your ability to buy further shares or may retain the right to buy back the property when you sell.
• Even if you own your home outright, you may still have to pay some service costs to the RSL.
• If you purchase the local authority share, this could leave you with high repayments at the end of the loan period. You should carefully consider the length of the repayment period for both your first share and then the local authority share of the property
• There are fewer properties available under shared ownership schemes than in the general market.
• There may be no properties in the area in which you wish to live.
• You have to fulfil the criteria specified by Registered Social Landlords (RSLs).
• You still have the responsibilities of a homeowner but the home does not belong only to you.
• You have to ask permission to make improvements.
• If you want to increase your share of the property, you will have to pay a valuer’s fee.
• In rural areas, RSLs may restrict your ability to buy further shares or may retain the right to buy back the property when you sell.
• Even if you own your home outright, you may still have to pay some service costs to the RSL.
• If you purchase the local authority share, this could leave you with high repayments at the end of the loan period. You should carefully consider the length of the repayment period for both your first share and then the local authority share of the property.

Useful websites

www.housingcorp.gov.uk
www.housing.org.uk
www.odpm.gov.uk
www.keyworkerliving.co.uk
www.homesonthenet.co.uk
www.sfha.co.uk

By Helen Adams

www.FirstRungNow.com