What You Need to Know About Property Purchases: Tips and Insights

Our Head of Purchase, Solicitor, Tom Keene provides a helpful overview of the legal and financial considerations when planning to purchase a property:

Property Ownership

 

Knowing whether the property is freehold or leasehold is crucial because it can significantly impact your ownership rights and responsibilities. A freehold property gives you ownership of both the building and the land that it sits on. As the owner, you are in full control of what you can do with the land. You are free to renovate, rebuild or modify the property without any restrictions.

 

On the other hand, a leasehold property means that you own the property only for a stipulated period, usually for 99 years. 

You will have to pay an annual maintenance fee to the landlord or the management company for the building's maintenance and repair. This fee is for the upkeep of the common areas such as gardens, halls, roofs, and staircases.

 

When buying a leasehold property, make sure that you review the length of the lease, the maintenance charges, and the ground rent. Ground rent is usually a small annual fee payable to the freeholder. However, it can sometimes increase significantly over time or at certain intervals per the lease agreement. It is also important to check whether there are any restrictions on what you can do with the building both inside and outside.

 

Mortgage

 

When you plan to purchase a property with a mortgage, it is best to consult a mortgage broker or advisor to help you select the best product based on your specific needs. A mortgage is a long-term financial commitment, and it is crucial that you choose a product that is affordable and manageable. Your lender will consider various factors, including your income, expenses, and credit score, when considering your mortgage application.

 

The process to get through the application stage can take some time, so it is advisable to start this process as early as possible, even before you start searching for a property. Getting pre-approved for a mortgage can give you an accurate idea of how much you can borrow before you start your property search. This will enable you to avoid disappointment by only viewing properties you can afford.

 

Exchange of Contracts

 

Exchange of contracts is a crucial point in the purchasing process; it legally binds both parties to complete the transaction. Typically, exchange of contracts occurs on a case-by-case basis and usually involves a phone call between solicitors to confirm the key points of the contract.

 

At this stage, you will need to pay a deposit of 10% of the purchase price to the seller. However, the seller may accept a reduced deposit if you are obtaining a mortgage loan in excess of 90% of the purchase price. Keep in mind that mortgage funds or Help to Buy ISA bonus funds cannot be used towards the exchange deposit.

 

Once the contracts have been exchanged, the completion date is set. You will have a legal obligation to complete the purchase on the agreed date.

 

Property Insurance

 

Building insurance is a requirement for those obtaining a mortgage. It is essential to arrange it before the exchange of contracts takes place. We always recommend finding a suitable quote for building insurance as early as possible to ensure there are no unexpected cost implications later.

 

Buildings insurance should cover at least the re-build cost of the property or your lender's recommended figure. If you're purchasing with cash, buildings insurance is not mandatory, but it's still advisable to arrange this on exchange.

Completion

 

Completion day is a critical day in your property purchase. Once the legal work is complete, your solicitor will receive the balance of the purchase price, and the keys will be available for collection from your estate agent.

On the completion day, you could be waiting for most of the day to hear that completion has occurred. Once you get the confirmation, you can begin unpacking and settling into your new home.

 

Stamp Duty

 

Stamp Duty is a tax imposed on property purchases in England, while "Land Transaction Tax" applies to Wales. It is essential to calculate how much Stamp Duty or Land Transaction Tax you will be liable to pay, which varies depending on the purchase price of the property.

 

At MJP Conveyancing, we use your details to calculate your estimated Stamp Duty or Land Transaction Tax at the outset. We'll also go through any factors that may alter the amounts payable during the transaction to ensure that you're paying the correct amount.

 

In conclusion, purchasing a property can be a complex process, and there are several legal and financial considerations you should be aware of to make the process smoother. At MJP Conveyancing, we provide specialist conveyancing services with expert knowledge aimed at ensuring your purchasing journey is straightforward and stress-free. Contact us on 01603877067 today to take advantage of our expertise.