1. How much deposit will I need to buy a house/apartment?
Typically you would need between 5% and 10% of the full value of the property in a standard new build purchase. So, if you needed 5% and you wanted to buy a house costing £400,000, then you would require £20,000.
However, there are properties available called Shared Ownership properties, where the other party involved is a housing association. In this case, you would only need to have 5% of the percentage you are buying, say 30%. So a 5% share of 30% of the same property above, at £400,000, would be just £6,000 needed as a deposit. Shared Owner ship is the option that has the lowest deposit required to begin a home purchase. In most cases you would be able to buy more and more percentage of a property until you own it outright, this is called ‘staircasing’.
Note : During covid (2020-2022), the banks were wary to lend and were requiring 15%, 20% or even 25% in some cases. Thankfully that situation has passed and things are close to ‘normal’ again.
In 2023 the Skipton Building Society announced a 100% mortgage package for renters called the ‘Track Record Mortgage’. Meaning that renters who have a provable good history of rent payments and can evidence the ability to afford a mortgage will not need a deposit. This mortgage is not just for the new build market, but for 2nd hand properties as well.
2. I’ve got an AIP – Can I reserve a property?
Yes, you can. You can even reserve a property without an AIP. Your sales agent on site would be able to provide you with a list of recommended brokers (independent financial advisors). See also, item 3 below. The broker would then run through your personal financial details and give you options on the best mortgage products available at the time. Ultimately the final decision is yours. Note : If you have a property to sell, the sales agent is very unlikely to allow you to reserve unless you have a formal offer on your property.
3. Where do I get a mortgage from?
You could just walk into any high street bank and apply for a mortgage. Of course, you should be aware that in this situation, that bank would only be able to offer your their mortgage products, which may not be the best mortgage deals available on the market at that time. The banks show very little, or no, loyalty to their customers in giving you preferential rates.
So, personally I would recommend that you find an independent financial advisor (a mortgage broker). A broker would be able to give you options on the best mortgage products available at the time across all of the high street lenders, as well as other lending institutions. Do ensure though, that the broker you use is independent from the developer and independent from all lenders and banks.
4. Do I need to use a mortgage broker?
No, you do not. However, see point 3 above. The broker will give you independent advise on the best mortgage options available at the time. The broker will charge a small fee (typically around £400), but it is well worth that to get access to all the available rates and their expertise in the market.
5. Can I use my own solicitor?
Yes, you can. However, I cannot suggest strongly enough that you use one of the developer’s recommended solicitors. I advise this because those solicitors are already familiar with that developer’s contracts and would spend less time querying details, because they’ve already seen those contracts before. When I say less time, I mean that it will save you 2 to 3 weeks worth of time. This is very important when the developer’s representative is working through the mortgage process with you.
6. How long does the buying process take?
The buying process should take 4 to 6 weeks. This would be best-case scenario. This would be possible if you had all your ID ready, your deposit in place, and an AIP (Agreement in Principal) from a bank. You would also benefit hugely in time savings by using one of the sales agent’s recommended solicitors from their panel list. This is because those solicitors are already familiar with that developer’s contracts and would spend less time querying details, because they’ve already seen those contracts before. The solicitors should be able to fulfil their role in 4 weeks, and often the banks would get you a mortgage offer back in around 3 weeks. If you do not use one of the recommended solicitors, the process could take 8 weeks or more. Even though these solicitors are recommended by the developer the solicitor works on your behalf, to your best interests.