Buying Property

This section gives you advice on buying a property, the purchasing process and mortgages.

Purchasing New Builds

Some advantages of new builds:

  • Clean and new furnishings.  Home buyers may even design some elements, such as flooring, carpet, lighting, built-in wardrobe, etc

  • Higher energy efficiency, which saves energy costs 

Besides, in some Government schemes designed to help home buyers, only new builds are eligible.  For example, England’s “Help to Buy: Equity Loan” Scheme (which will close for new applications on 31 October 2022) only applies to first time buyers buying new builds.

Major Developers

Since 2010, more than 1.8 million new homes have been built.  This is however still not meeting demand. The government’s target is 300,000 new homes every year, and may need 340,000 to be built each year to catch up.

HomeViews is UK’s review site dedicated to residential property.  Home buyers interested in new builds can download their 2022 New Build Buyer’s Guide in full from:  https://www.homeviews.com/buying-a-new-build/

The Buyer’s Guide draws on reviews from over 7,000 verified UK property buyers. As well as the Top 10 developers for first time buyers, the guide also includes a list of the 10 things owners wish they’d known before buying and a list of Top 5 housing associations for Shared Owners. 

Purchasing Second-Hand Properties

Before buying a second-hand property, you should find out the conditions regarding the property, for example, whether it is a listed building, or a council house. 

Property “chain” is a common condition, which means a group of home buyers and sellers are connected.  If your target property is in a chain, you have to wait until the seller buys his/her next home before you can complete the transaction, even if the seller accepts your offer. 

Some properties are in the market with no onward (upward) chain condition, meaning the vendor is not looking to buy another property, and the transaction can proceed once an offer is accepted. 

Normal Steps and Key Issues when Buying a Second-Hand Property

1. Look for a property from websites or property agents. 

Common sourcing websites are:

• Rightmove (www.rightmove.co.uk)

• OnTheMarket (www.onthemarket.co.uk)

• Zoopla (www.zoopla.co.uk)

2. Ask the agent to arrange viewing. Take a look at the neighbourhood, and check out the environment.

3. Ask for the Energy Performance Certificate (EPC). In the UK, Properties which had been sold before would have an EPC.  Each EPC is valid for 10 years. The energy performance is graded from A to G. A the most efficient and G least efficient. The lower the grade, the more expensive the utility expenses are. 

4. Make an offer. The agent has a responsibility to disclose all offers received to the seller. However, the seller doesn't have any obligation to accept any.  When the seller accepts your offer, the seller or his agent should remove all advertisements regarding the property. If they choose to retain some ads, they should inform your legal representative.

5. If the seller accepts your offset, you should appoint a legal representative. A qualified legal representative plays a key role in the transaction handling all legal documents and procedures, some even help to secure the keys of the property when the deal is done. You can have a solicitor, licensed conveyancer, chartered legal executive, or CILEx practitioner to be your legal representative.  The website Legal Choices enables one to check whether someone is qualified.

6. Find a surveyor and get a Homebuyer report.

7. Exchange contract and pay the agreed amount.

8. The property will be handed over through the legal representatives on completion.

Mortgage for Home Purchase

A mortgage is a loan used to purchase a property.

Unless it is a cash buy, a cash deposit of at least 5% is normally required to purchase a property.  The remainder can be financed by a mortgage from a bank or building society.

The mortgage is then paid back in monthly instalments over a specified number of years.

In the UK, 25 years is usually the maximum length of a mortgage term.  There are now many lenders who offer mortgages longer than 25 years, with the longest readily available being 40 years.

Types of Mortgages

There are 2 categories of mortgage:

  1. Interest only. Where homebuyers pay back interests only every month, then repay the loan in one lump sum at the end of the mortgage term.

  2. Repayment mortgage. Where homebuyers pay interest and part of the loan every month.

Mortgage Arrangements

Within these categories, there are different types of mortgage arrangements.  The most common are fixed-rate, tracker, and discount mortgages.

Fixed-rate Mortgages

The same interest rate will apply for a period of time, regardless of interest rate fluctuations.  Majority of mortgage deals are fixed for 2 years and 5 years.  Borrowers can then switch to variable rate (usually at the lender’s SVR, i.e. Standard variable rate) or other arrangements, depending on their prevailing financial position.  Generally, longer fixed rate periods attract higher interest rates.

Tracker Mortgage

The interest rate is calculated by using an external rate, usually the Bank of England base rate, plus a fixed percentage. That means the interest rate will rise and fall with the base rate.  But some tracker mortgages have a pre-set ‘collar’ (a minimum rate). 

Quite often, the tracker is for 2 or 5 years, after which the lender’s SVR will apply. However, it is possible to have lifetime trackers for paying base rate plus for the entire mortgage term.

Discount Mortgage

This is another variable rate arrangement where the interest rate is set at a fixed percentage below the lender’s SVR for 2 to 5 years, after which the lender’s SVR will apply.  Longer discount period would mean a smaller discount.  Again, there may be a pre-set ‘collar’.

Discounted arrangements can be 'stepped,' which means the discount level is fixed for an initial period, say for one year, then reduced for the remaining period, say for 2 more years.

How to get a Mortgage in the UK

When assessing a mortgage application, the lender’s aim is to ensure the borrower can pay the loan back.  The key considerations are the borrower’s income, job history, credit score, assets and the debt-to-income ratio. 

It would not be easy for those who don't have a steady income to secure a mortgage. 

Preparing to Apply for a Mortgage

1. Check whether you have the qualifications, such as good credit score, proof of income etc. required by mortgage providers.

2. Check how much you can borrow.  There are a number of online sites providing simple mortgage calculators to help get a rough idea of the level of loan available.

3. Check and research what is on offer.  There are many types of mortgages in the market.  Many websites provide various mortgage information, including pros and cons of different mortgage deals.  Using a mortgage broker can be a good way to get individualised mortgage advice.

4. Get the usual documents ready.  Required documents may include:

  • Proof of ID

  • Proof of income

  • Details of your employment history

  • Proof of assets (eg. bank statements)

  • Credit documentation

Only certain documents will be accepted, and you'll usually need originals rather than scanned or printed versions (the exception to this is bank statements - printouts or PDFs of online statements are generally accepted). 

Normal Steps to Apply for a Mortgage

1. Find the right mortgage provider and mortgage deal

2. Get an agreement in principle(AIP), also called DIP (decision in principle) from the lender to indicate that the lender agrees to give you a mortgage, subject to final checks and approval of the property you intend to buy. 

3. After your offer on a home has been accepted, you should apply for a mortgage in writing. If you use a mortgage broker, they will take care of this.  The lender will assess your application, and if rejected, you should find out why.  Wait a while before applying to another lender.

4. If your application is approved, the lender will send you a formal mortgage offer. Mortgage offers are usually valid for six months. 

5. On the strength of the formal offer, your conveyancer will arrange for the mortgage funds to be transferred from your mortgage lender to the person you are buying the property from on the day of completion. 

Getting mortgage in Hong Kong

There are three Hong Kong-based banks with branches in the UK that provide mortgage services for UK properties: HSBC, Bank of East Asia and Bank of China.  Buyers can submit their documents and process the mortgage application in Hong Kong.

The requirements are higher for UK property buyers who apply for a mortgage in Hong Kong. The Bank of East Asia, for example, requires a minimum annual income of £72,000, and accepts only Buy To Let Mortgage applications. HSBC requires a minimum annual income of £75,000.

Useful websites: 

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