Planning to invest in Edinburgh real estate? This manual will walk you through the entire process, from applying for a mortgage to meeting with a solicitor and conducting any necessary house inspections and final paperwork.
First, get a “in principle” mortgage approval
First, you need confirmation from a mortgage lender that it is willing to give you money before you can submit a bid on a property. This type of debt is known as a “in principle” mortgage. Your offer won’t be considered seriously unless you provide this.
Make sure the sum of your down payment and mortgage will be enough to cover the price of the home you want to purchase.
After getting mortgage approval “in principle,” you may have to pay a booking fee or some other cost to secure the mortgage. Typically, prices range from £99 to $250.
Stay within your limits to avoid burnout
Land and Buildings Transaction Tax applies to properties priced at more than £145,000 (or £175,000 for first-time buyers), in addition to mortgage and legal costs.
Finding a lawyer is the next step
Putting in a bid on a home requires the services of a lawyer who is also a conveyancer.
They have to make the offer, negotiate and check the contract, and arrange for the transition of the title and the funds.
A “Point of Interest”
If you find a home you like, you can have your lawyer or certified conveyancer put in a “note of interest” with the seller’s agent.
This demonstrates your seriousness about submitting an offer and your desire to be kept abreast of any relevant updates, such as the establishment of a deadline for doing so.
The duties of an attorney
The duties of an attorney
- make sure there is nothing stopping the seller from selling the property by conducting inquiries in the property and personal registers.
- See if any roads adjacent to the property have been adopted by the local government and if there are any planning issues that could impact the value of your home by contacting the relevant authorities.
Most lawyers will ask for money once the job is done, but some will require deposits or search fees up front.
It’s important to think this through beforehand because if the transaction falls through and you already paid for the search, you’ll be out that cash.
Once your offer has been approved, you can have your solicitor conduct the search, but doing so is contingent upon mutual agreement between you and the seller.
Because the results could offer you grounds to negotiate a lower price with the seller or even back out of the sale entirely, the seller may be hesitant to agree to this. Average prices range from $250 to $300.
Third Phase: Survey and Property Report
Sellers should prepare a Home Report to demonstrate prospective buyers before listing their home for sale.
All three of the following must be present in a Home Report.
- EPC, or Energy Performance Certificate, details a building’s energy efficiency and identifies potential upgrade areas.
- A survey is an evaluation of a property performed by a licensed member of the Royal Institution of Chartered Surveyors (RICS) that identifies any necessary fixes and provides an estimate of the property’s market value. In some cases, a credit appraisal is also provided. The poll is on par with the Homebuyers report discussed below in terms of depth of information.
- Sellers are obligated to disclose all material facts about the property on the Property Questionnaire, such as the property’s Council Tax band, the existence of any Local Authority notices, the existence of any alterations, the availability of parking, the occurrence of any flooding, and the existence of any plans for the future repair or upkeep of the property.
If you want to purchase a certain house, when you get the Home Report for it, read it thoroughly before making any decisions.
It will help you plan for the future by estimating the expenses associated with maintaining your new house. Inquire about the seller’s payment history for utilities using this form.
Analysis of your home loan’s value
When you’ve been approved for a mortgage, the next step is for the lender to schedule an appraisal of the property to ensure it’s worth the loan amount.
In cases where a mortgage appraisal is included in or is required by the Home Report, your mortgage lender may rely on it.
Depending on the market worth of your home, you can expect to pay between £250 and £1,500. Depending on the mortgage agreement, you may be eligible for a free appraisal.
The Home Report includes a poll, but you can opt to get your own if you prefer.
The surveyor who conducted the research for your Home Report has a legal obligation of care to both the seller who directed the survey and you, the buyer.
Surveys
You can choose from three different varieties of surveys if you opt to have your own done.
- The most fundamental and affordable type of home survey is the home condition survey. You won’t learn anything about the home’s condition, but it’s fine for brand-new construction or standard houses. A normal price tag is around $250.
- Homebuyer’s report, or an intensive inspection of the premises inside and out. In addition, a price estimate is provided. Determine if it is possible to combine the homebuyer’s report with the appraisal to save money. Typically, you can expect to spend £400 or more.
- The most thorough type of survey for a non-standard or historic structure (like one made of wood or with a thatched roof) is called a building or structural survey. Normal pricing is £600+.
Making a bid is the fourth step
Once you have the poll results and have verified that they accurately reflect the market, you can set your offer.
Your offer’s final price tag will be determined by:
- real estate costs in the neighborhood
- to what extent you are able to pay
- any other parties who have a stake in the property; and
- any additional items, like furniture, that you’d like to have included in the sale price.
On the closing date, if there are multiple offers, the seller’s solicitor will open them simultaneously and call yours to let you know if you’ve won.
Making your offer contingent to survey allows you to delay having your own survey done until after it has been accepted.
Provided that your offer is approved
If the seller’s attorney decides to approve your offer, they will issue a “qualified acceptance,” which means the property will be yours as long as certain conditions are met.
Documents pertaining to the land, such as title deeds and building permits, will also be provided by the solicitor.
Consult with your lawyer about all the papers you’ve received; they may have additional inquiries for the seller. You and the vendor have made no binding commitments at this time.
Phase 5: Contract Acceptance
After all of the nitty-gritty specifics of the contract have been ironed out, the two attorneys will write each other letters to formalize the agreement.
The term “conclusion of missives” is used to describe the final paragraph of such messages. The sale is now binding on both sides.
A holding deposit, usually between £500 and £1,000, may be required after the conclusion of letters to secure the transaction.
Holding deposits are unusual because most contracts include cancellation costs in the event that one party cancels after the other has already paid for services. After signing the agreement, it’s time to start looking for building insurance.
Think about getting life insurance and home contents insurance to safeguard your new investment.
The Burdens of Title
Your lawyer will examine the property’s title deeds and inform you of any ‘title burdens’, or limits on the property’s ownership, from where trash cans can be placed to more severe limitations on the property’s use or alteration.
The final step involves the seller signing the disposition, also known as the transfer of title documents.
Make that call to your financial institution
The next step is for you or your attorney to get in touch with your mortgage lender and confirm the purchase and suggested entry date.
Your lender can then provide their chosen solicitor with loan and security directions.
In addition, the lender will have time to get ready to release the loan funds necessary for the transaction to close on the entry date.
Cost of the setup
An setup fee is what’s typically charged to get a mortgage started.
This is often something that can be tacked onto the end of a mortgage, but doing so will result in interest charges accruing over the life of the loan.
Therefore, you will spend more than if you had settled all the associated costs at once.
Sixth and concluding stage: completion and wrap-up
If the seller accepts your bid, the transaction will close on the agreed upon entry date.
In order to get ready for the date of entry, the seller’s solicitor will contact your lender to collect the leftover balance (typically 90% if you had to pay a holding fee).
Any remaining balance must be paid through your lawyer’s services if you’re a cash customer.
Payment of any additional costs that may now arise
There is a chance that your provider will request the following:
- a money transfer charge, usually between £40 and £50
- Costs ranging from £150 to $300 to open, manage, and close your bank account.
The land transaction return will be prepared by the seller’s lawyer as well.
Now is the time to settle up with your lawyer by paying their fee in full (less any deposits made). Pricing typically ranges from £400 to £900 + 20% VAT.
The bill will include the cost of searches, as well as any other fees that have been paid on your account, even if you have not yet paid for them.
They will also take care of getting the signed title documents recorded at the Land Registry.
The price ranges from £60 to £600, with the exact amount needing to be determined by the amount you spent for the home.
A printed LBTT form and instructions for filing by hand are also provided for those who prefer to do so. This option, however, limits you to paying LBTT via check if you choose to go that way.
Only the portion of the total value that lies within each band and is subject to the new rates will be taxed.
Prices in Scotland are going to be:
- 1 percent for properties priced between £145,000 and £250,000
- price range of £250,001–£325,000: 5%
- Homes priced between £325,001 and £750,000 receive a 10% discount.
- Homes priced at over £750,000 carry a 12% premium.
The applicable consideration on each band increases by 4% for residential properties in Scotland (including buy-to-let properties and second homes) with a value of £40,000 or more.
It’s possible to get tax breaks for first-time homeowners if they meet specific requirements.