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Making an informed decision

Buying your home is one of the biggest decisions you will make and you should obtain as much advice as possible.
 
Important notice

Discount given for the Right to Buy is attached to the tenants who purchased the property. If it is repossessed and you move to another property, the Council has the right to ask for any discount which remains unpaid. The Housing Act 2004 emphasises that the Council has a discretion whether or not to demand repayment of the full amount of the discount. However, not to recover the full amount due has implications for public funds. Therefore, it is anticipated that the Council will only exercise its discretion in exceptional circumstances where there is clear and objective evidence for the reasons why the discount should not be repaid in full. Further information on the discretionary powers on repayment of discount is available is available from the Council's Right to Buy Officer

Talk with your family, friends, your local Citizens Advice Bureau. A building society, bank or financial advisor may also be a useful source of advice and information. Think carefully before you buy. Consider all the costs of buying the property and whether it is suitable for your circumstances. Some of the issues you may need to consider are:

  • can you afford the costs of running your home? Remember, your rent includes the building insurance and a free repairs service. Once you have bought your home you will have to arrange and pay for these yourself.
  • can you afford the mortgage costs? Not just now but what would happen if interest rates rose or you lost your job? Normally Income Support is not available for the first nine months after you become unemployed. The Income Support you would be entitled to claim would only be for the mortgage interest, it will not cover the full amount of the mortgage payments.
  • Do you receive or are you eligible for Housing Benefit? As an owner -occupier you will not receive any housing benefit to assist with your mortgage costs.
  • If you are elderly and own your own home, can you arrange or undertake your own repairs? You also need to be aware that the value of any home you own may be taken into account in assessing whether you are eligible for financial help in meeting the costs of residential care.
  • If you are buying a flat or maisonette you will be responsible under the provisions of the lease for service charges. You will need to take into account service charges when looking at the cost implications of buying a flat or maisonette.
  • If you cannot keep up your repayments on your mortgage, the lender may repossess your home. The Council does not have to give you another tenancy if you lose your home in this way.
  • Please note that the discount on the property remains connected to the tenants who bought the house. If your house is repossessed, you are still liable to repay the discount, even if you move elsewhere.

Home ownership costs

When considering buying your home it needs to be borne in mind that there are a number of on-going costs associated with owning your home, these may include the following:

Mortgage repayments - if you have taken out a mortgage to purchase the property you will need to meet the regular payments. There are a number of different types of mortgage but basically you will have to pay a regular sum in relation to the repayment of the sum borrowed together with interest. If you fail to meet the repayments you risk losing your home as the lender can repossess the property. Further advice regarding mortgages is available from the Financial Services Authority's Moneymadeclear service (telephone: 0300 500 5000).

Mortgage protection insurance - if you lost your job or fell ill could you keep up your mortgage repayments? If not, you should consider insuring against these possibilities.

Building insurance - buying a home is probably the biggest financial investment you will make. Consequently, it is important for you to protect that investment by insuring your house. You should make sure your house is fully insured against risks such as fire, explosion, flood, and storm damage. You should insure against the cost of rebuilding (this is likely to be different from the market value). The insurance premium will depend on how much it would cost to rebuild your home.

Contents insurance - It is not a legal requirement to have contents insurance but it is surprising how much it can cost to replace household items. Therefore, you are advised to insure your furniture, carpets, electrical equipment and other possessions against damage by fire, flood or other risks. The costs will depend upon the terms of the policy but ideally you should insure at the replacement cost of your possessions.

Life assurance - What would happen to the mortgage if you were to die? A life assurance policy may enable your family to pay off the mortgage in these circumstances.

Repairs to the building - all properties need to be properly maintained and kept in good repair. Once you have bought your home you will be responsible for all repairs to the interior and exterior of the building and possibly for the boundary fences as well. Periodically, this is likely to include substantial expenditure. For example, the roof may have reached the end of its life and require replacing, or the windows may need replacing. In considering whether to purchase your home you will need to take account of anticipated future repairs as a cost of home ownership and whether you will be able to meet those costs.

Repairs to services - you will be responsible for repairs to the water, drains, electricity and gas services to the building. On safety grounds, gas appliances will need to be serviced at least once a year and electric wiring on a regular basis. A number of the service providers provide care plans for gas and water / drains repairs. The monthly fee of care plans may help in giving an indicative cost in relation to these repairs.

Council Tax - Council tax will be payable on the property.

Utility charges - You will be responsible for the cost of all the utility services supplied to your home. These may include:

  • electricity, gas and water supplied to your home for heating, power and water,
  • sewerage / surface water removed from your home through the drains and sewers.

Service charges (flats and maisonettes)

For a flat or maisonette the costs of occupying a property will vary slightly as the building insurance and repairs to the exterior and common areas is likely to be undertaken by the landlord. However, these will be reflected in service charges payable to the landlord. That is a payment made by a leaseholder, in addition to rent, towards the day-to-day communal expenses of the block of flats. As the holder of a long lease in a flat it is likely that you will be responsible for contributing towards:

  • day-to-day maintenance and repairs to the exterior of the flats,
  • services in the common parts for example, lighting of the entrance halls and maintenance of door entry system,
  • insurance of the block of flats,
  • major repairs such as the replacement of the roof or the replacement of sewers and drains to the block of flats.

On purchasing a flat or maisonette you will sign a long lease. The lease will specify the responsibilities of the landlord and tenant for carrying out the works and what service charges the tenant will contribute towards.

For further information visit Ashfield Homes

Costs related to the buying of your own home

There are a number of initial costs incurred in buying your home which include:

Legal fees - you are likely to require a solicitor or a licensed conveyancer to look after the legal side of buying your home. The legal costs will include the solicitor's fees to carry out the legal work and disbursements. Disbursements include:

Searches - undertaken to establish who owns the property, whether anybody else has any rights over the property, and to ensure that the property is not subject to any future developments.

Land Registry fees - the recording of your ownership of the property at the Land Registry. The solicitor's or licensed conveyancer's fees can vary, therefore you should shop around and ask for an estimate of their fees and costs. However, you should bear in mind that the cheapest is not necessary the best to act on your behalf. A good source of information may be friends or relatives who have recently bought their house. The Law Society (tel: 020 7242 1222) will be able to provide a list of local solicitors, or if you wish to use a licensed conveyancer you can contact the Council for Licensed Conveyancers (telephone: 01245 349 599).

Mortgage

A mortgage is a loan which is secured on the property you occupy. If you take out a mortgage to buy the property you will have to pay for the costs of arranging the mortgage. The lender may also require you to pay the cost of a mortgage valuation fee. For a general idea of the cost you should speak to a number of lenders. Local banks and building societies are a useful starting point or alternatively speak to a financial adviser.

Further advice regarding mortgages is available from the Financial Services Authority's Moneymadeclear service (telephone: 0300 500 5000).

Stamp duty

Stamp duty is a Government tax on the purchase price of a property. However, it is not payable unless the price of the (residential) property is more than £125,000. From £125,001 to £250,000 stamp duty is 1% of the purchase price.

Further information on stamp duty is available from HM Revenue and Customs.

Survey

You should consider protecting your investment in your home by having your own survey carried out. A surveyor acting on behalf of a mortgage lender will undertake a valuation. However, the valuer is simply seeking to ensure that the value of the property is sufficient to meet the sum borrowed against that property. It is not a survey and it may not identify any structural problems. A structural problem will have cost implications and once you have bought your home you will have to meet any costs arising from such problems.

Chartered Surveyors, structural engineers or architects can undertake surveys. Fees may vary and an indicative cost can be obtained by speaking to local Chartered Surveyors. A RICS Homer Buyer Survey may cost from £250 to £500 while a Building Survey may cost £600 or more. The Royal Institution of Chartered Surveyors (telephone: 0870 333 1600) will be able to provide a list of local members.

Warning

If you are considering buying your home you should always bear in mind the following:

Mortgages - If you fail to meet the repayments on your mortgage you risk losing your home as the lender can repossess the property.

Service charges and ground rents - if you breach the terms of your lease the landlord may have a right to forfeit the lease and recover possession of the property. However, where the property is lawfully occupied as a dwelling, the landlord cannot re-enter the property without a court order.

Companies - you should be aware that some companies may ask you to pay for services that the Council will provide free of charge - for example help in completing application forms. Some companies will include the cost of arranging the mortgage and the legal fees in the mortgage rather that these sums being paid when the property is purchased. You should bear in mind that if these sums are included in the mortgage you will be borrowing a larger sum on which interest will be paid for the period of the mortgage.

Important notice

Discount given for the Right to Buy is attached to the tenants who purchased the property. If it is repossessed and you move to another property, the Council has the right to ask for any discount which remains unpaid. The Housing Act 2004 emphasises that the Council has a discretion whether or not to demand repayment of the full amount of the discount. However, not to recover the full amount due has implications for public funds. Therefore, it is anticipated that the Council will only exercise its discretion in exceptional circumstances where there is clear and objective evidence for the reasons why the discount should not be repaid in full. Further information on the discretionary powers on repayment of discount is available is available from the Council's Right to Buy Officer.

Further information on costs is set out in the Communities and Local Government booklet "Your Right to Buy your Home".