Here is an overview of how the process works:
- Find out what your buying power is by finding out how much you will be able to spend on a house.
- This can be done by going to a bank.
- They will discuss the mortgage options available to you. They may have stipulations on you being able to prove you will be staying in the country for at least two years. Also as the immigration laws have been changing over the years, you are not longer able to stay here if you are retired even if you have money coming in and having property here does not give you the right to stay here after you retire either.
- This maybe 3-5 times your income.
- If you are a couple with incomes coming from two different currencies, they may only give you an offer based on one of your incomes.
- The deposits work differently here too. In the US, if you $50,000 and the bank is willing to lend you $300,000, you have $350,000 to play with. In the UK, if you have £50,000 deposit, and the bank is willing to lend you £300,000, you have £300,000 to play with.
- You cannot use your VA loan for properties overseas.
- You need to have a mortgage in principle because this will be something that they will ask for once your offer has been accepted best to have this before you go shopping around. It does not mean you have to commit to getting your mortgage with this bank so you can still shop around.
- Find a house.
- You can look on websites like Rightmove.com and Zoopla.co.uk to see houses that are on sale and get an idea of what you can get for your budget. Houses further away from the city centre are generally cheaper. I think you need to be realistic on the things that you want and what you are willing to compromise on. Remember UK houses are different than US ones!
- In the US, you might have a realtor that works on your behalf to whom you pay a commission but in the UK, you are on your own. The estate agent is tied to the property and not people so they will be working for the sellers. Saying this, the estate agent for the house we bought was very helpful and understanding as we were first time buyers.
- If you are looking for a house to move kind of quickly in, you need one that is not in a chain. This means that the sale of this house is not dependent on the owner having to find somewhere else to live.
- This is what took our process so long. We were at the bottom of the chain with 4 houses in the chain. So our offer was accepted at the end of October. The people we were buying from were waiting for the people that they were buying from to find a house. The last people found one but the house was in probate so was at the end of the chain but the first house they waited 2 months and never got anywhere so they had to find another house. Their offer was accepted in March.
- This does not affect you as you are exempt from council tax but we had to consider how much we could afford to pay for council tax on top of our mortgage payment. This is dependent on the value of the house.
- Agree on a price.
- Depending on the area you are buying your house, you can suggest a price below the asking price. That works for areas up north and not in areas within commuting areas to London. This does not work in areas like Cambridge where houses are selling within 3 weeks of being on the market. My house was on the market for £275,000. By the time we saw it, it had been on the market for three days already and the owners had an offer for the asking price. We went into a bidding war and in the end we won the house in last and final sealed bids with less than £1,000 difference between our offers. Places around the bases may not have the same kind of market. Where we are located, we are competing with commuters from London, people tied with the universities and the other professionals in the area.
- In England, once you agree on the price you are not out of the deep end. Up until you exchange contracts (I will discuss later), both the buyer and the seller can walk away as it is not a binding contract. That can mean someone can gazump you (they can come in and offer a higher bid than you did and the owner can accept it). You can try to gazunder them (that means you can offer a lower price than you previously gave them based on the survey results). Both of these are frowned upon but they happen sometimes. Or like my friend who was buying a house and the owner decided that he did not want to sell his house and she had started the proceedings and she had to eat the money that she owed the solicitor for his work he had done. Or a buyer may not like the results of the survey and pull out of the process as well. In Scotland, once a price is accepted, it is a binding contract which provides more protection for you both. This is one of the reasons why this is so stressful.
- Once your offer is accepted, they will want to see your mortgage in principle because it will show that you are able to meet the amount you have agreed to.
- Get a solicitor/conveyancer.
- This guy is going to be working for you on your side. You should probably looking for this person the same time you are looking for a house.
- See if you can negotiate no sale no deal because this may save you money if the sale falls through. I would suggest putting aside £1,000-£2,000 aside just for his work and surveys being completed.
- Once your offer is accepted and the whole chain is ready to move forward to closing on the deal, it can take from 8-12 weeks to completion even when there is no chain. It can be frustrating sometimes because of the amount of solicitors involved but they are working to make sure that you do not loss any money and that this deal is worth it.
- They will be researching all the issues tied to your property such as:
- Environmental search- the flood risk, radon levels and other issues in the local area.
- Property tithes- these are payments that have to be made to the local churches if your property is effected.
- Arranging for the title to be put in your name and ensuring that the seller is legally able to sell this property.
- What the boundaries are for your property and any issues that might arise from it.
- If there were any planning permissions allowed or denied and all the building regulation certifications done on the house.
- You can help this along by being prompt in answering his questions and having all your paperwork together.
- Get a mortgage.
- While the solicitor is doing his bit, you will need to settle on who you are going to get the mortgage with. Your mortgage company will have its own requirements. Check this out first because if your solicitor has to sign up to work on their behalf and won't, you will either need to pay for a second solicitor to work on behalf of the bank and keep your other one. Or you will have to pay for the work that your solicitor had done and just work with one solicitor who can work for you and the bank.
- You may have to pay for the mortgage to be arranged which can cost up to £1,400.
- You will need to buy insurance for the house and arrange for a valuation (around £300) of the house. This will highlight issues with the house. In our case, we were paying so much for the house, that I got the owners to correct the findings for us. It also helped that he was a builder.
- You will also need to figure in the Stamp Duty for your house. You are not exempt from this even though you are stationed here. It is based on the price that you pay for your house. You can either pay this when you purchase the house or tack it onto your mortgage but it is best to pay it up front. The current rates for 2014 are:
Purchase price of property Rate of SDLT (percentage of portion of purchase price) £0 - £125,000 0% £125,001 - £250,000 2% £250,001 - £925,000 5% £925,001 - £1.5 million 10% Over £1.5 million 12%
- Exchange contracts.
- This date is arranged when everyone has done all their searches and is satisfied with the answers. The contracts are signed ahead of time but not dated until this date.
- This is also the date that everything becomes binding and you cannot pullout without losing your deposit and have to pay legal costs up to this point.
- You will have to pay your deposit of the house to your solicitor which can range from 5-10% of the value of the house. This money will then be released on the date of completion to the owner's solicitor.
- Completion date is also arranged at this time, usually two weeks later. This is the date that everyone gets the keys. So literally everyone moves house on this date unless other arrangements are made.
- Move in!
Another resource about buying a house is the Housing office.
If you are thinking about buying a house while you are here for a four year tour, I would say you can expect it to take 6-9 months to move into your house and you should put your house up for sale at least a year before you leave to allow time for everything to go through. Honestly I think that the market is not stable enough, the exchange rater is poor, property is expensive here and it is more hassle than it is worth so I do not advise people to buy just for a tour here. The interest rates are going up and they are requiring people to have at least 5% or more for a deposit following the housing market crash which some experts think might happen again. It is best to save your money up and buy a house in the United States. I had a friend (dual military) that bought a house here and when they went back they tried to sell it but the housing bubble burst. They tried to rent it for a while but they had tenants that got out of their lease after six months due to the military clause which is a headache when you are over the pond. Not an ideal situation at all.
I have my Indefinite Leave to Remain visa, thinking about getting British citizenship and here for the long haul. I thought I would just tell you my knowledge of the housing market here.
All the Best!
American to Britain