Buying your first home is incredibly exciting but it can also be really overwhelming.
To start with, viewing lots of properties can be fun, but once you find your dream home and want to make an offer, things get complicated. How do you negotiate the price, how much of a deposit do you need, what’s the best type of mortgage, and what sort of survey should you have? These are just some of the questions to consider but don’t worry, because we’ve got you covered here at Independent Mortgage Advice Bureau (iMAB).
In this guide, we’re going to be offering some essential advice for first-time buyers so you can navigate the process with confidence. We’ll cover:
- How to negotiate the asking price
- Understanding the different types of property survey
- How to choose the right mortgage for your situation
- The additional costs you need to be aware of
How to negotiate the asking price
Your ability to negotiate the price of the property you’re looking to buy will depend largely on the demand for that property and the state of the market.
In recent years, the property market has been a ‘seller’s market’—that is, an ideal environment for people looking to sell their property. That was because demand outstripped supply, leading to many properties being sold quickly, and often at above asking price.
Analysis conducted by RightMove in January 2021 found that a record 37% of homes that completed were sold for either the final asking price set by the estate agents or higher. However, according to Zoopla, the housing market slowed after the initial post-Covid boom, and by the end of 2023, 50% of homes sold went for 5% or more below asking price.
So, what does this mean for you, and how can you go about negotiating the purchase price?
Know your budget
First of all, you need to know what your maximum budget is. This will be based on the size of your deposit and what you can borrow, and taking into account the fees you’ll have to pay (more on these later).
Each lender has their own “Affordability Calculator” and they determine how much you can borrow based on a wide range of factors, including:
- How much you earn
- The size of your deposit
- Your credit history
- The current interest rates.
The best thing to do is speak to an expert mortgage broker. Here at iMAB we have a team of expert mortgage advisers across Hertfordshire and Essex, boasting decades of experience between them. Your adviser will run affordability calculators with several lenders to give you an estimate of how much you’ll likely be able to borrow. Please bear in mind that at this stage it would be just a guide rather than a confirmed mortgage offer.
How do you feel about the property?
For most people, buying a home is the biggest investment they’ll ever make, but it’s also an emotional decision, and how you feel about a property should be a determining factor.
If a home ticks all of your boxes do you want to risk losing it by ‘lowballing’ (offering well under the asking price), or do you risk paying too much by going straight in at the asking price? Don’t let your feelings get in the way of making the correct financial decision. Going in with a low offer doesn’t necessarily mean that it will be rejected out of hand, but you need to be realistic as going in too low could make the estate agent and seller think you are not a serious buyer. How would you feel if you lost out to someone else? This could be somewhere you live in for many happy years so is it worth paying slightly more?
The most important thing to remember when you’re viewing a property is that the estate agent works for the seller, not for you. They will want to achieve the best sales price for their client and will feed it back to them if you can’t stop talking about how much it’s your dream home. If they know you are very keen they might even suggest the seller holds off accepting your first offer as they know you’ll make another.
Research local house prices
Look at the prices of similar properties in the area, and how quickly they’re being sold. If there are several properties for sale and the asking price for the one you’re looking at is above average, is there a reason for this? Does it have a bigger garden or is it slightly bigger? If not, consider starting with a lower offer. If there is a wide choice of properties for sale it could indicate a slower market in that area which would improve your negotiating position.
How much work do you think the property needs?
You may be looking for an immaculate property. This would usually be reflected in a higher asking price and so you are paying a premium for the luxury of being able to move straight in without needing to do any decorating or updating. You may however prefer a “doer-upper”. The lower price of these properties reflects the fact they need renovations or modernisation and may require significant work to be carried out. You’ll have to use your own judgement to decide how much this work might cost, and whether spending that amount of money would increase the value of the property by enough to make it worthwhile. You may want to take a builder along with you to a second viewing so they can give you a rough idea of the likely costs involved.
In particular, you should look for:
- Signs of subsidence (cracks in the walls)
- Damp (mould within the building or dark patches on exterior walls)
- Rotting timber (for example old windows or doors).
Remember, the amount you offer initially doesn’t have to be your final offer.
Once you’ve had your offer accepted and applied for a mortgage, the lender will arrange for a valuation of the property but you can pay extra for a more detailed survey, and this will provide another opportunity to negotiate the price if it comes back with significant work. In fact, you’ll be in a stronger position than before because the seller probably won’t want to relist the property and start the process again. This survey may be a cost worth paying to identify any potential issues with the property.
Understanding the different types of property survey
Buying a first-time home is exciting, particularly when you get your offer accepted. However, one of the most important tips for first-time home buyers is to invest in an appropriate property survey.
This isn’t the same as a “Mortgage Valuation”, which might be a term you’ve heard of. The mortgage valuation is something your lender typically asks for to make sure the property’s price reflects its actual worth (what you’re paying for it). It’s their way of checking that the amount you’re borrowing is in line with the property’s value.
However, the valuation report doesn’t go into detail about the condition of the home. It might point out any major issues that could affect the property’s value, but it won’t give you a detailed list of any minor defects or highlight any areas requiring attention.
There are three main types of property survey, and the one you choose should depend on the size, type, and age of the property you’re buying.
Mortgage Valuation or Condition report
The most basic type of property survey, a Mortgage Valuation or Condition Report, will only highlight serious or urgent issues that need to be resolved as a condition of a mortgage. They are increasingly becoming “Automated” where the surveyor just refers to local property data and doesn’t even visit the property. You do not usually receive a copy of the report and for that reason they are only recommended for newer properties that are clearly in good condition. These reports are also known as Level 1 surveys.
Homebuyer report
Homebuyer Reports, also known as Level 2 surveys, provide a more in-depth overview of a property, highlighting any issues that could affect the value of the property and that might need ongoing maintenance, such as dampness or subsidence.
As the name implies, they are for your benefit as the homebuyer rather than simply for the lender. You are able to speak directly to the surveyor to discuss the property before their visit and you will also receive a copy of their report.
Building survey
Building surveys, also known as Level 3 surveys, are the most detailed type of survey available to you. They’re also the most expensive.
During a Building Survey, the surveyor will assess the entire structure of the property, including the chimney, attic, cellar, and walls, as well as check underneath floors where possible.
The scope of a Level 3 buildings survey makes them ideal for older properties or buildings that require extensive renovation.
However, there will still be some things the surveyor won’t be able to provide clear guidance on. For example, it’s unlikely they’ll inspect the building’s drainage system, gas, or electrical supply, but instead, they recommend that you have these inspected by experts.
Please note that even the Level 2 and Level 3 reports are limited to what’s visible or accessible to the surveyor. They won’t drill into walls, lift floorboards, or go into any areas of the property that aren’t safe to inspect.
Do we need to have a property survey?
Tempted to skip a more detailed property survey and save a few hundred quid by just having the basic valuation report? Think carefully. The amount you save could end up costing you thousands if the basic report misses an issue with the property that requires significant building work, or that impacts on the long-term value of the property.
What’s more, as we mentioned above, any issues highlighted by the survey could be a great opportunity to renegotiate the price.
It’s common for sellers to split the cost of required work with the buyers, and in these instances your negotiating position is strong. The seller could choose to reject your new price and put the property back on the market, but not only does this delay their own move, but the same issues will probably be found when the next buyer conducts their own survey.
How to choose the right mortgage for your situation
There are a few decisions to make when choosing which mortgage is right for you:
- Do you want a fixed or variable-rate mortgage?
- How long do you want to sign up to this interest rate?
- How long do you want the mortgage term to be?
Fixed rate vs variable rate
You’ll have heard a lot about interest rates in recent months. After decades of record-low interest rates, the Bank of England increased the interest base rate on 14 successive occasions, from 0.1% to 5.25% between December 2021 to August 2023. The base rate stayed static until August 2024 when it was reduced to 5%.
The interest rate you’ll be offered on your mortgage won’t necessarily be linked directly to the base rate, but it does have an impact. If you opt for a fixed-rate mortgage, your interest rate will remain the same for the specified period of time. If you go for a variable rate, it could change as interest rates rise and fall over that time.
How long do you want to sign up to this interest rate?
You’ll have to commit to the fixed or variable interest rate for a set period of time, typically between two and five years. After this period ends, you’ll have the opportunity to change your mortgage rate with that lender or to move to a new lender and “remortgage” to (hopefully) get a lower interest rate.
If you secure a low interest rate initially you might want to lock that in for longer. If your interest rate is higher, either because of your personal circumstances or the current economic landscape, you might want to commit for a shorter time in the hope that it falls in that period.
How long do you want the mortgage term to be?
Traditionally, mortgages were taken out over a period of 25 years. However, due to rising house prices, it’s now common for people to have 30- or even 40-year mortgages.
The shorter the term the less interest you’ll pay and the quicker you’ll be paying off the mortgage balance, but it will increase your monthly repayments.
If you choose a longer term, such as a 30- or 40-year mortgage, your monthly payments will be lower, but you will end up paying more in interest overall. The term of your mortgage should end at or before your expected retirement age. Otherwise, some lenders may refuse to lend, request proof of your pension, or apply additional criteria or restrictions.
You can choose to shorten or extend the term each time you move home or change lenders.
How can you decide which is best for you?
There are hundreds of lenders out there, all offering slightly different mortgage products and interest rates, making it pretty difficult for first-time buyers to navigate the market themselves.
This is why it’s so important to seek expert advice. Experienced first-time buyer mortgage advisers like iMAB have access to over 75 residential lenders and are best placed to provide independent advice on what your options are. We’ll tell you what you can borrow and how each factor discussed above will impact your monthly repayments.
A mortgage adviser will ensure you’re getting the most suitable deal for your circumstances—something that’s particularly important if you’re a first-time buyer.
Need to know more? Read our blog, ‘Which Mortgage is Right for You’ to learn more.
Additional costs you need to be aware of
It’s important to remember that the price of the property isn’t the only cost when it comes to buying a house, and there are various other fees to be aware of when buying your first home.
Arrangement fee
Also known as a Completion fee, the Arrangement fee is charged by a lender to set up a loan. Some may charge a flat fee but others charge a percentage of the loan. This means the exact amount you’ll have to pay will vary depending on the size of the mortgage you are taking. If you are using a mortgage adviser from iMAB they will compare the total cost of the product over the initial period allowing for the respective fees and recommend the most suitable overall deal.
The Arrangement fee can either be paid upfront as a one-off charge or added to the mortgage balance and paid over the term of the loan. If the fee is added you will pay interest on it and the additional cost of this should be made clear in the mortgage illustration. If the fee is paid upfront or before completion, and the mortgage does not proceed, then you may have to wait for it to be refunded or even lose it altogether depending on the terms and conditions of that lender.
Reservation fee
Sometimes called a Booking fee, lenders may charge this fee for reserving a particular fixed-rate deal. This is separate from the Arrangement fee and tends to be non-refundable.
Valuation fee
This covers the cost of inspecting your new home to ensure the price you’re paying is a fair reflection of the property value. The exact cost depends on the size of the property, and different lenders charge different amounts. Some lenders offer a free valuation as part of their products or a reduced fee for an “Automated” valuation.
Legal fees
As first-time buyers, you’ll need to instruct a solicitor to carry out all the legal work required for the property purchase, including conveyancing and searches of local authority data to check for any potential legal issues. The cost of legal services can vary depending on factors like the size of the property and the complexity of the sale. For a tailored estimate, we recommend visiting Your iMAB and using the Solicitor & Survey Quotes Tool to get an accurate idea of what you might expect to pay.
Stamp duty
This is a tax you have to pay when you purchase a property of a certain value. Fortunately, first-time buyers get a bit of a break! Between now and the 31st of March 2025, you don’t have to pay any Stamp Duty on the first £425,000 of a property worth up to £625,000. You’ll pay 5% on the portion between £425,001 and £625,000. If you buy a property worth more than £625,000, there’s no Stamp Duty relief and you’ll pay at the standard rates.
As of 1st April 2025, the rules will change and the tax relief threshold will drop, meaning you don’t have to pay any Stamp Duty on the first £300,000 of a property worth up to £500,000. If your dream home costs more than £500,000, you’ll have to pay the standard Stamp Duty rates, just like any other buyer.
Mortgage broker fee
This is the fee charged by your mortgage broker for their expert advice. As mentioned above, you don’t need to arrange your mortgage through a broker, but doing so gives you access to a friendly and knowledgeable adviser who can make sure you get the most suitable deal. They can also help guide you through the home-buying process and how it all works.
Some brokers charge a fee based on the size of the mortgage, others may charge a flat fee. At iMAB we charge a flat fee of £249, which is payable only at the mortgage application stage. If our clients are not fully satisfied with our service, then we refund their fees.
Ready to buy your first home?
Once you think you’re in a position to buy your first home nothing is stopping you from viewing properties straight away, but we strongly recommend you speak to one of our mortgage advisers first to get an idea of what properties will be within your budget.
You can either email us, give us a call or book an appointment now. Our friendly and experienced team can offer some must-know tips for first-time home buyers, and they will be happy to help you navigate the purchase of your first home, and set you on the path to becoming homeowners.