So you are looking to take your first steps onto the property ladder as a contractor. We understand that this can be a daunting process, but don’t worry, we’re here to guide you every step of the way.
In this article we have outlined the main steps involved:
Saving up a deposit
The first thing you need to do is save up for a deposit. Consider using a lifetime ISA, where you can save up to £4,000 a year and receive a bonus top-up of 25% annually from the government (up to £1,000 a year). These savings can be put towards your deposit, and the larger your deposit, the better contractor mortgage rates you may be eligible for.
Finding a contractor mortgage
To ensure you find the most suitable and affordable mortgage, working with a contractor specialist mortgage broker is recommended. As a contractor it’s important to ensure your broker understands you and how you work. A specialist contractor broker like My Contractor Broker will have access to the entire market and can help you find the best mortgage options. Using a specialist contractor mortgage broker greatly increases your chances of having your application accepted the first time and can also save you a significant amount of money in the long term.
Exploring different types of mortgages
Before making a decision, it’s important to educate yourself about the different types of mortgages available. This will help you determine which mortgage is right for you. Whether you’re considering guarantor mortgages, shared ownership, or the government’s First Homes scheme, understanding your options will empower you to make an informed choice.
Choosing a property
Once you have a clear understanding of your budget and mortgage options, you can start searching for homes within your price range. Aim for the best property you can afford, but also give yourself a safety margin. Your mortgage broker can help you understand how interest rate rises may affect your mortgage repayments, allowing you to make an informed decision.
Be prepared to view multiple properties before finding the one that suits your needs. If you’re feeling adventurous, you could even consider building your own home, but only if you’re confident in managing a major project.
Conveyancing – hiring a solicitor
When your offer is accepted, the conveyancing process begins. This involves legal procedures to ensure a smooth transfer of ownership. To navigate this process, you’ll need a solicitor. It’s advisable to choose a local solicitor who can easily communicate with you and handle any necessary paperwork. Your solicitor’s role is to ensure that your purchase is legally sound and free from any unexpected issues.
Getting a survey
Before exchanging contracts, it’s recommended to hire a chartered surveyor to assess the condition of the property. For newer properties, a RICS HomeBuyer’s report should suffice if you don’t have immediate plans for major renovations. However, for older or unique properties, it’s wise to opt for a more detailed RICS building survey. This survey will provide a comprehensive analysis of the property’s condition and any potential issues. The cost of a building survey can vary depending on the size of the home. Your lender will offer some basis valuation options as part of the mortgage application. It is worth considering the more detailed options but your contractor specialist mortgage broker can guide you in this area.
Negotiating on price
Sometimes, a survey may uncover problems that require additional expenses. In such cases, it may be worth negotiating with the sellers to lower the price accordingly. Be reasonable and realistic in your negotiations, keeping in mind that the sellers are not obligated to agree to your requests.
Calculating stamp duty
Stamp duty is a tax that you may need to pay when purchasing a property. The amount you owe depends on the property’s value. In England, you don’t pay any stamp duty on the first £250,000. After that, stamp duty is charged in bands. Use a stamp duty calculator to determine how much you might owe. Keep in mind that stamp duty rules differ in Wales and Scotland, where it is known as the land transaction tax (LTT) and the land and buildings transaction tax (LBTT), respectively.
Exchange and completion
The final stages of buying your home involve exchanging contracts and completing the purchase. Your solicitor will handle the exchange of contracts, which legally binds you to proceed with the purchase. At this stage, you’ll typically need to pay an initial deposit, usually 10% of the property’s value. The completion day, usually a week after the exchange, is when the remaining funds are transferred, and you receive the keys to your new home.
Insurance
It’s important to secure appropriate insurance for your new home. Buildings insurance protects your property in case of damage or destruction, while life insurance ensures that your mortgage will be paid off in the event of your death. As a contractor you do not have an employer to fall back on should you be unable to work due to illness or injury and therefore income protection and critical illness cover should to be considered. .
Moving home
Moving can involve additional expenses, such as removal costs and fees for money transfers. It’s also common for homes to require some refurbishment and redecoration after moving in, so it’s wise to keep some cash in reserve for these costs. Don’t forget to update your address with relevant organizations, including your bank, the DVLA (if you drive), and any pension schemes you hold.
Now that you’re armed with this comprehensive guide, you can confidently navigate the process of buying your first home as a contractor. Remember, we’re here to support you every step of the way. You can start the process by calculating how much you could borrow below or contacting us on 02394 211122
Happy house hunting!