If you’ve been thinking about starting the search for your first home, this year could be a prime opportunity to get on the property ladder. First-time buyers currently have a growing number of low-deposit mortgages to choose from, alongside schemes to support them in taking the next step.
Purchasing your first property is exciting, but it can also feel daunting. There are significant, hard-saved sums of money involved, and lots of jargon when it comes to the paperwork, meaning many first-time buyers are unclear on the process and can skip over important considerations when purchasing their first home.
Here, our trainee solicitor Charles Barrand outlines three factors for first-time buyers to consider and breaks down some terms that can often cause confusion.
Leasehold or freehold – what’s the difference?
When searching for a property, it’s important to be clear on the difference between leasehold and freehold. A freehold means you own the property and land outright and indefinitely. With a leasehold, you own it for a fixed period of time and a freeholder owns the land. Many flats are leasehold, with annual service charges and ground rent payable to the owner of the building the apartment is in. A lot of houses are freehold, but this isn’t always the case.
Before purchasing a leasehold property, make sure that you’ve accounted for any additional charges, any future increases, and considered how many years are left on the lease. Often, a leasehold will be anywhere from 90 to 999 years, so it’s unlikely to end during the time you live in the property, but it’s always important to make sure, as it can impact your mortgage and the resale value. If you’re planning to make any significant changes to the property, you’ll usually need the landlord’s permission.
Legal ownership: joint tenants vs tenants in common
Another key consideration for any buyer is how the property will be owned. As joint tenants, you own the whole property together, which means that if it’s sold, both owners receive an equal share. Under a joint tenancy, if the co-owner passes away, their interest in the property automatically transfers to the surviving co-owner. As a result, this form of ownership is common with spouses and long-term partners, as well as those contributing equally to the property purchase.
Alternatively, tenants in common own individual, unequal shares of the property. This is often preferred by siblings, business partners or friends purchasing a property together, or by those who want to protect their individual financial contribution. If you and your co-purchaser are contributing unequally to the deposit, this should be recorded in a legal deed called a Declaration of Trust, which your solicitor can prepare at the time of purchase.
As tenants in common, each owner’s share of the property forms part of their estate and passes in accordance with their Will; it doesn’t automatically transfer to the co-owner.
The decision you make can have a lasting impact, so if you’re not sure which ownership option is best suited to your circumstances, our expert team can help you to decide.
Financing your purchase: ensuring you can cover the costs
Many first-time buyers use Help to Buy or Lifetime ISAs to boost their deposits and benefit from the additional government contributions. However, they do make the process more complex and time-consuming, which is reflected in a small increase in the legal fees.
Other circumstances, such as buying a leasehold property or requiring a Declaration of Trust, can also increase legal costs, so ensure that you have budgeted for these before making the decision to move forward with your house purchase. Additionally, the conveyancing process for a new build property can differ significantly, due to additional checks, developer involvement and tighter timelines, which can incur higher costs.
Whilst reaching your deposit goal is a major milestone, it’s also important to account for costs associated with surveys, mortgage fees (if applicable), moving and insurance, alongside conveyancing costs, to ensure you have enough left over to cover these expenses. First-time buyers in England don’t pay Stamp Duty on homes up to £300,000, but if the property you’re purchasing is over this amount (up to £500,000), you’ll need to pay a reduced rate of 5%. If the property is over £500,000, you won’t qualify for first-time buyers’ relief.
Expert guidance to get you on the property ladder
At Hill and Company, we know that buying your first property is no small feat. We take the time to explain the process at the outset, outlining what happens when, so you know what to expect from us and the timescales involved in getting you the keys to your new home.
If you’re ready to step onto the property ladder, get in touch to find out how we can help you.
