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What to consider when calculating the total costs of your purchase:
Once you have found your ideal property, you must make sure that you have sufficient funds to buy it. If you are a first time buyer or seller you may be unaware of the additional costs that are involved and times at which they will need to be paid.
There are four main areas of costs that you must consider in your calculations. These include the purchase price; deposit; stamp duty and disbursements.
Purchase Price
The purchase price is usually payable in two stages, a deposit and the balance. If you are relying on a mortgage it is advisable to have a thorough look at what is available as there are always a number of different mortgages on the market at any given time.
Deposit
You will need to pay a deposit to your sellers. This is usually 10 per cent of the purchase price and will have to be paid AT Exchange of Contracts. Note that if you are getting a 95% mortgage or higher you may be able to negotiate a 5% deposit. You should further note that your mortgage loan will not be released until AFTER Exchange of Contracts so your deposit will need to be arranged out of other funds.
Stamp Duty
Duty is payable on the value of the purchase.
The rates of stamp duty are as follows:-
£ 0 - 125, 000 = None
£125,001 - 250,000 = 1% of purchase price
£250,001 - 500,000 = 3% of purchase price
£500,001 + = 4% of purchase price
Disbursements
There are unavoidable additional costs to any transaction called 'disbursements'. These are payable in addition to our fees. For a Seller they are usually all included in the Home Information Pack, and for a Buyer they may simply be a full Local Search or any reports required by a Lender.
Time Frame
We would expect a typical transaction to take up to about 6 weeks but if there are complications this may be delayed. You might find yourself in a 'chain'. If you are relying on the proceeds from the sale of your property to buy another one you will become 'linked' to the person you are buying from because their sale becomes reliant on yours. These related transactions could involve both the parties who are buying from and selling to you and if each has similar links the chain that forms makes it possible to proceed only at the speed of the slowest.
Outline of a simple transaction:Pre-contract stage
This covers everything UP TO Exchange of Contracts. Both you and the seller are able to withdraw from the transaction at any point BEFORE Exchange of Contracts so you will want to know as much as you can by that point. We will report to you in detail before exchange explaining exactly what you are purchasing.
We will conduct all the necessary enquiries on your behalf. These are:-
" Investigating the seller's title to the property. Investigation is important for two reasons. Firstly you want to be certain that you are buying good title. Good title means that there are no problems with the seller's ownership. Secondly, if you are relying on a mortgage, your legal title is the security against which the lender agreed to loan you the money. If the lender is not satisfied that you have good title then you may lose your mortgage offer.
" Depending on the quality of the Home Information Pack, obtaining Local Searches from local authorities to access information about the changes that have been made to the property and whether consents were given. Sometimes extra searches will be carried out where needed for example if the property you want to buy is in a flood zone or there are large open areas or perhaps gas or hazardous substances.
Exchange of Contracts:
Once these enquiries have been conducted, we will thoroughly check through them to ensure that there are no areas of concern. Once we have discussed the result with you and you are happy to proceed we will amend and approve the terms of the draft contract prepared by the sellers solicitor to ensure that your interests are met. The contracts will then be signed and exchanged by both parties.
After Exchange of Contracts you will be committed to continue with your purchase and your deposit will paid to the sellers as security of your intention.
Immediately following exchange we will prepare a transfer deed. This in essence confirms the terms agreed in the contract and after completion it will be evidence that the title in the property has passed from the seller to you.
At the same time we will send the lender evidence that you have good title in a Report on Title. We will prepare the mortgage deed, and will carry out a bankruptcy search against your name and the names of anyone else you are buying with. This is to satisfy the lender who wants to be sure you have the money to repay them under the mortgage. Once the lender is satisfied with these documents the funds will be released to us just before completion.
Completion
On the day of completion, we will send the balance of the purchase price (less the deposit which was paid on Exchange) to the sellers solicitors, by bank transfer. Once they have received the funds, they will tell their client or the estate agent who will arrange for you to take possession of the property.
Post-completion
We will prepare an SDLT form for your signature and will send this, with a cheque to the Inland Revenue. They will reply with a certificate to say that they have received the tax.
Once this is received we will be able to complete the transaction by formally registering the property with HM Land Registry. Once we receive the new Title Deeds these shall be forwarded to your lender to retain until the mortgage is repaid at which stage they will be sent to you.
Disbursements
Disbursements can vary depending on the type of sale or purchase and whether or not the property is a leasehold or freehold property.
Some of the main disbursements are shown below:
Disbursements on a typical SALE:
H.M. Land Registry office copy entries
Home Information Pack £350.00
Disbursements on a typical PURCHASE:
Stamp Duty (see section in the text for rates)
H.M Land Registry registration fee Purchase Price Fee
0-50,000 £ 40.00
50,001-80,000 £ 60.00
80,001-100,000 £100.00
100,001-200,000 £150.00
200,001-500,000 £220.00
500,001-1,000,000 £420.00
1,000,001 & over £700.00
Local Authority Search fee £Variable (approx. £300 depending on the local authority) - if required
H.M Land Registry search fee £6.00
Bankruptcy search fee £2.00 per person
Notification to Landlord of
change of ownership and mortgage £Variable (approx. 50+vat)
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