Buying a home
This information applies to Scotland only
Table of contents
What is on this information page
There are many issues to consider when buying a property. The processes and how they relate to each other are explained stage by stage.
If you have problems in the course of buying a home, see Problems with buying and selling a home.
How much can you afford
Working out a budget
The first thing you need to do is work out how much you can afford to spend. You should work out a budget from your current income and expenditure then work out how much you can afford to pay for a mortgage as a monthly outgoing. If you are buying with someone else you need to work out the budget from your joint income and expenditure.
The Money Advice Service has an online budget planner that you might find helpful to use.
How much can you borrow
You will need to find out how much money you can borrow. There is a range of organisations that lend money.
Once you know how much you can borrow it is helpful to work out a new budget, particularly to check how much you will have to live on after all the new outgoings have been paid each month. This forward planning can be invaluable to protect you from getting into debt later.
Some building societies now provide buyers with a certificate that states that a loan will be available provided the property is satisfactory. You may be able to get this certificate before you start looking for a property. Building societies state that this certificate may help you to have your offer accepted by the seller because it provides a certainty that the funds are available.
Additional immediate costs when buying a home
Before finally deciding how much to spend on a property, you need to be sure you will have enough money to pay for all the additional one-off costs of the purchase. These include:-
- survey fees - if you or your mortgage lender require a survey in addition to the survey provided by the seller in the Home Report
- valuation fees - if you or your mortgage lender require a valuation in addition to the survey provided by the seller in the Home Report
- Land and Buildings Transaction Tax. For more information about Land and Buildings Transaction Tax, see the Revenue Scotland website at www.revenue.scot
- fees, if any, charged by the mortgage lender or someone who arranges the mortgage, for example, a mortgage broker
- solicitor’s fees
- VAT
- removal expenses
- any final bills, for example, gas and electricity, from your present home which will have to be paid when you move.
You should be aware that even if your bid for a property is not accepted you may still have some one-off costs. For example, you may have to pay for a valuation and/or survey. If the solicitor has started any legal work you may also have to pay for that work unless you have a special deal with the solicitor. A special deal may be possible if you are continuing to instruct the same solicitor until you have secured a purchase of a property.
On-going costs in a new property
In working out your new budget remember to take into account the running expenses of the property you wish to buy. For example, you are maybe moving to a bigger property which might be more expensive. The costs may include:-
- higher heating bills
- council tax
- insurance costs - including life insurance, buildings and content insurance.
The Home Report for the property that you are buying will include some information which might help you to assess the running costs.
Summary of steps in buying a property
These steps are not rigid. For example, you may know exactly what property you want to buy before you have chosen a solicitor. However most of the steps will be part of the process you go through to buy a home. You have to use a solicitor or qualified conveyancer to buy the home legally. Once you have chosen the solicitor or conveyancer they will help you through the whole process.
Step 1: Choosing a solicitor or conveyancer
Step 2: Investigate getting a mortgage or loan
Step 3: Look for a property
Step 4: Deciding on a property
Step 5: Get the Home Report
Step 6: Get a survey – if needed
Step 8: Closing date is set (unless no-one else is interested)
Step 10: Completion – part of the completion is the setting of an entry date which is usually negotiated. Other terms can be discussed at this stage.
First-time buyers
Buying a home for the first time can often be a daunting experience but there is lots of information to help you through the process.
The Money Advice Service website covers information on costs such as how to work out what you can afford as well as providing other money tips. See www.moneyadviceservice.org.uk.
Which? magazine has produced a step-by-step guide which is on their website at www.which.co.uk.
Deals on new build homes
Some builders of new build homes may offer a deal with extra costs covered, for example, Land and Buildings Transaction Tax and solicitor's fees or new furniture, as well as arranging the mortgage. You should get independent advice to check if the deal is financially worthwhile. A local conveyancing solicitor should be able to provide this advice. Although you are likely to have to pay for this extra advice it may protect you from a financial problem with the value of your home in the future.
Help to buy (Scotland) Affordable New Build scheme
The Help to Buy scheme is for first-time buyers and existing homeowners who want to buy a new build home but cannot afford the total cost. The Scottish Government has a budget for each financial year (up until 6 April each year), and once it has been fully allocated no new applications are considered for that year. If you wish to apply to the scheme you should seek independent advice as soon as possible.
If your application is accepted, you will receive up to 15% of the purchase price of a new home in the form of a loan. The loan can be repaid at any time or when the property is sold. There is a maximum value for a property that can be bought under the scheme. The current maximum value is available on the mygov.scot website at www.mygov.scot.
There is more information about the scheme, how to apply and a list of participating home builders on the mygov.scot website at www.gov.scot.
Choosing a solicitor or conveyancer
When someone wishes to buy a property, in almost all situations, it is necessary to use a solicitor for the legal work that needs to be done. You should approach local firms of solicitors and/or ask friends and relatives to recommend a suitable firm. Before making a choice of solicitor, you should ask for estimates of their charges for buying a property.
- check whether the figure quoted is a fixed fee or is determined by how much work is involved
- check that the figure includes Land and Buildings Transaction Tax, search fees, land registration fees, expenses and VAT and get a breakdown of these costs
- find out what charges, if any, will be made if a sale falls through.
You cannot use the same solicitor as the seller because the solicitor cannot act for both buyer and seller.
It is an advantage to use a solicitor who has a good knowledge of the local housing market.
If you already have a mortgage lender you may need to check if the solicitor you choose is on your lender's panel of solicitors. Some lenders may not have a special panel but, if yours does, you may have difficulty in getting the transaction completed.
What the solicitor or conveyancer does
The main tasks of the solicitor or conveyancer over the time period of purchasing a property may include:-
- discussing your needs and explaining the procedure for buying a property if required
- explaining the Home Report, the different types of survey and arranging a survey for the property
- discussing a mortgage and advising on the different methods of loan repayment available
- informing the seller’s solicitor that you are interested in making an offer on the property
- drawing up and submitting a formal offer for the property after consulting with you
- preparing mortgage documents
- checking the legal ownership of the property and preparing a deed confirming the buyer’s ownership. A deed is a document which proves who owns the property. If you are buying with someone else both your names will have to be on the deeds
- checking the property certificate to find out if the local authority are planning any repairs or developments affecting the property
- checking that alterations to the property have had planning permission from the local authority and completion certificates have been issued if required
- checking the search of the official records carried out by the seller’s solicitor to see if there are any problems with the seller’s right to sell the property
- receiving the money to pay for the purchase and pay it to the seller’s solicitor
- checking what insurance covers the property
- negotiating with the seller’s solicitor in the event of any dispute.
You can arrange some of these things, for example a mortgage, or insurance, yourself but will still have to use a solicitor or conveyancer for the legal side of the purchase.
Lists of independent qualified conveyancers and solicitors can be obtained from:-
The Law Society of Scotland
26 Drumsheugh Gardens
Tel: 0131 476 8179
For information about problems with solicitors and conveyancers, see Problems with buying and selling a home.
Flood risk
When buying any property it is important to ask your solicitor to investigate whether the property is in a high flood risk area and/or has been flooded in the past. A history of flooding can significantly increase the cost of insurance premiums, or make it difficult to find insurance for a property.
The Scottish Environmental Protection Agency (SEPA) has published flood maps that provide a community-level view of flood risk in Scotland. These cannot be relied upon to establish the flood risk for an individual property, however. Flood maps are available on the SEPA website at www.sepa.org.uk. You will also benefit from local knowledge of flood risk by speaking to neighbours and contacting the local authority.
If you wish to buy a home you may be able to borrow money to do this. This is called a mortgage. The loan is for a fixed period called a term and you have to pay interest on the loan. If you do not keep up the agreed repayments, the lender can take possession of the property.
Types of mortgages
There are two basic types of mortgage available - repayment mortgages and interest-only mortgages.
Repayment mortgage
This is a mortgage in which the capital borrowed is repaid gradually over the period of the loan. The capital is paid in monthly instalments together with an amount of interest. The amount of capital which is repaid gradually increases over the years while the amount of interest goes down.
Interest-only mortgage
With this type of mortgage you pay interest on the loan in monthly instalments to the lender. Instead of repaying the loan each month, you pay into a long-term investment or savings plan which should grow enough to clear the loan at the end of the mortgage term. However, if it doesn't grow as planned you will have a shortfall and you will need to think of ways of making this up.
You can find further information about interest-only mortgages, repayment plans and shortfalls on the Money Advice Service website at www.moneyadviceservice.org.uk.
Islamic mortgage
With an Islamic mortgage none of the monthly payments includes interest. Instead, the lender makes a charge for lending you the capital to buy your property which can be recovered in one of a number of different ways, for example, by charging you rent.
You can find further information on this type of mortgage from the Money Advice Service website at www.moneyadviceservice.org.uk.
Can you afford a mortgage
Lenders must make sure you only take out a mortgage you can afford. This means that they'll ask you for lots of information and proof on your income, outgoings and spending habits.
Lenders will check to see if you can meet the initial mortgage repayments and other propertyhold costs. They also consider how you would cope financially if interest rates were to go up in the future, or if there was a change in your income because, for example, you wanted to start a family or retire.
More information on what a lender will do to check if you can afford a mortgage is available from the Financial Conduct Authority's website at www.fca.org.uk.
Where to get a mortgage from
A mortgage could be available from a number of different sources. Some of the available options are:-
- building societies
- banks
- financial institutions
- specialised mortgage companies.
For more information about government-backed schemes to help you buy your own home, see Finding accommodation.
If you’re thinking about taking out a mortgage you should make sure you look into all the different options available and that you only borrow what you can afford to pay back. If you do not keep up the agreed repayments, the lender can take possession of your property.
For more information about mortgages go to the Money Advice Service website at www.moneyadviceservice.org.uk.
If in doubt, you may want to consult an independent financial adviser. For help with finding a financial adviser, visit www.moneyadviceservice.org.uk.
Specialised mortgages
As well as standard mortgage deals, lenders might also offer deals which are designed for people who don’t qualify for a standard mortgage. This type of deal is known as a 'sub prime' or 'adverse credit' mortgage. These mortgages are aimed at people who have had financial difficulties or credit problems in the past. For example, you might have had a previous home repossessed or have been declared bankrupt. You might also have difficulty proving that you have a regular or reliable income.
Sub prime and adverse credit mortgages usually charge a higher rate of interest than standard mortgages. Lenders may also limit the amount of money they are prepared to lend you.
Before taking out a sub prime or adverse credit mortgage, you should get some independent financial advice.
Using a broker to get a mortgage
Instead of going directly to a lender such as a building society for a mortgage you could use a broker such as an estate agent or a mortgage or insurance broker. They will act as the agent to introduce you to the source of mortgage loan.
If you use a broker it may save you time shopping around. However, some lenders only offer products directly to customers. A broker may not be in a position to offer such deals to you.
A broker must tell you if there are limits on the range of mortgages that they can recommend. For example, they must tell you if they restrict recommendations of mortgages to only what is available from particular lenders rather than the whole mortgage market.
A broker may be used when it could be difficult obtaining a mortgage directly from a lender, for example:-
- the mortgage required is particularly large
- the property is unusual in some way
- more than two people wish to jointly purchase the property
- the applicant is self-employed and their income fluctuates.
There are rules about how much a broker can charge for their services. Brokers must not discriminate against you because of your age, race, sex, disability, religion or belief, gender reassignment, pregnancy and maternity or sexual orientation when they are offering you their services.
For more information about mortgage brokers, go to the Money Advice Service website at www.moneyadviceservice.org.uk.
There is also information on getting mortgage advice on the Financial Conduct Authority's website at www.fca.org.uk.
Making a complaint about a mortgage lender
If you want to complain about a mortgage lender or broker, you have to firstly discuss the problem with them. After this initial attempt to solve the problem, if you are still dissatisfied, you can consider making a formal complaint. If you think the mortgage lender or broker has discriminated against you, you can complain about this as well. Each lender or broker should have its own internal complaints procedure. If you have followed this procedure and are still not satisfied, you can take your complaint to the Financial Ombudsman Service.
For more information about making a complaint to the Financial Ombudsman Service see How to use an ombudsman or commissioner in Scotland.
How to find a property
There is a number of ways in which someone could find a property to buy:-
- using estate agents or solicitors’ property departments
- visiting the local solicitors’ property centre
- looking at property pages in local newspapers
- contacting property building companies for details of new properties being built in the area.
Deciding on a property
When you find a property you are interested in you should arrange to look round it to make sure it meets your requirements. You will need to get some idea of whether or not you will have to spend any additional money on the property, for example, on repairs or decoration. It is common for a potential buyer to visit a property two or three times before deciding to make an offer.
Warranties for newly-built properties
If the property is a newly-built property, check whether it has a Buildmark warranty. Buildmark warranties are organised by the National House-Building Council (NHBC) which is an independent organisation with over 20,000 builders of new properties on its register. Before being accepted onto the NHBC register, builders must be able to show that they are technically and financially competent and they must also agree to keep to NHBC Standards.
The Buildmark scheme covers homes built by NHBC registered builders once the NHBC has certified them as finished. The scheme will, for example, protect your money if the builder goes bankrupt after contracts have been exchanged but before completion. It also covers defects which arise because the builder has not kept to NHBC Standards. For more information, go to the NHBC website at www.nhbc.co.uk .
If you buy a new or newly converted home, you may be able to use the Consumer Code for Home Builders if you have a problem. This is a voluntary code and applies to builders under the insurance protection of one of the participating home warranty bodies. You can get more information about the code, which includes a dispute resolution scheme, on the Consumer Code for Home Builders website at www.consumercodeforhomebuilders.com.
Energy Performance Certificates
When you buy a property you will get an Energy Performance Certificate (EPC) free of charge. An advert to sell a property must include EPC information. The EPC will give you information about the energy efficiency rating of the property and suggestions for cost effective energy saving improvements. The Energy Performance Certificate must include details of any Green Deal plan as you will have to take over repayments of any Green Deal loan. If the seller fails to provide an Energy Performance Certificate the local authority can charge a penalty of £500. More information about EPCs can be found on the Energy Saving Trust Scotland website at www.energysavingtrust.org.uk.
There is information about the Green Deal scheme on the GOV.UK website at www.gov.uk.
The Home Report
Most properties which are marketed for sale will require to have a Home Report and to make it available to potential buyers. There are three parts to the report; a single survey of the property, an energy report and a property questionnaire. More information about the Home Report can be found on the Scottish Government website at www.scotland.gov.uk.
Getting a survey
If you are buying a property which has a Home Report you will get the single survey as part of the Home Report. The surveyor who produces the single survey has a legal responsibility to provide accurate information to both the seller and the buyer. The single survey is broadly the same as a scheme 2 survey.
You should consider getting your own survey as well as the seller's single survey especially if you have any concerns about the condition of the property. If you are buying the property with a mortgage, the lender may insist on having a survey for mortgage assessment carried out, to be paid for by the buyer. There are three main types of survey, or inspection which you can get:-
- mortgage valuation report (scheme 1 survey). A mortgage valuation is the least expensive type of inspection and provides a valuation of the property for the purposes of getting a mortgage
- home buyers report (scheme 2 survey). The home buyers report will consider not only the value of the property but will also examine the structure of the property and should identify any existing or potential problems
- full structural survey (or buildings survey). A full structural survey is expensive but provides a thorough and detailed inspection of the property.
The buyer’s solicitor should ensure that the surveyor is a member of:-
- the Royal Institute of Chartered Surveyors; or
- the Incorporated Society of Valuers and Auctioneers; or
- the Incorporated Association of Architects and Surveyors.
If the surveyor reports that there are some problems with the property, you will have to consider whether you still want to go ahead with the purchase. In some cases it may be necessary to ask a builder or other workman to estimate the cost of carrying out necessary repairs.
Alterations
You should try to see whether the property has been modernised or altered in any way. If it has, your solicitor or qualified conveyancer should check with the local authority to see whether the work is legal. You should be aware, though, that although the council may have granted a 'completion certificate', showing that work has been carried out in accordance with building warrants, this is no guarantee of structural quality or standard of workmanship.
You or your agent should ask the seller for details of any major repairs that have been carried out on the property. If it is a flat you should ask about how repairs are shared between owners and whether there are any outstanding statutory repair notices.
For information about when a solicitor or qualified conveyancer fails to provide information that might affect your decision to buy the property, see Problems with buying and selling a home.
What kind of offer to make
Unconditional offer
It is normal practice for the buyer to arrange a mortgage and find out as much as possible about the property before making an offer. The offer specifies the price to be paid. Although this is called an ‘unconditional’ offer, it contains a number of standard conditions. You should make sure that the property is sound so get a second survey done if your solicitor or conveyancer thinks this is necessary.
Conditional offer
The conditional offer specifies the price to be paid but makes this subject to the buyer receiving a satisfactory survey or some other condition.
Making an offer
When you make an offer for a property it may be accepted.
If the property is advertised at a Fixed Price this means that the seller is willing to accept the first firm offer at the price specified.
If the property is advertised at an Upset or ‘offers over’ price this means the figure specified is the minimum the seller would be willing to accept. The seller will normally wait until a number of people have expressed an interest in making an offer and then announce a closing date. Sealed offers are submitted on that date and the seller chooses the best one, which is often the highest amount.
Acceptance of offer
If you have made an unconditional offer for the property this will normally be accepted or rejected by the seller straight away. Usually, however, the acceptance will contain a number of conditions and there will be no binding contract until all of those conditions have been accepted by your solicitor.
Completion
A binding contract has been agreed when all the conditions of the offer have been accepted. This is called ‘concluding the missives'. Your solicitor will complete the conveyancing procedures and prepare a number of documents, particularly a ‘disposition’ which will transfer ownership of the property to you. The contract or Missives will specify the date of entry to the property. This is the date on which you will have to pay the seller the purchase price of the property in return for the Disposition and the keys to the property. Your solicitor will make all the arrangements for settling the transaction on the date of entry. This is called ‘completion’ of the purchase.
Buyer wants to withdraw from the purchase
You might want to withdraw from the sale before the contract has been completed. This is usually a matter for negotiation between your solicitor and the selling solicitor. This is because; although the contract hasn’t been completed, some costs may have been incurred for example, the seller may have extended warranties to accommodate you with a late entry date.
If you are wanting to withdraw from the purchase after the sale has been concluded you are unlikely to do so without incurring costs. The costs you incur may be damages from breaking the contract of sale. However a recent landmark ruling in court (July 2013) has ordered the purchasers to pay the full asking price for dropping out of the contract. You must discuss the possible consequences of wanting to withdraw from the contract with your solicitor or qualified conveyancer.
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