We have seen a recent surge in enquiries from first time buyers, perhaps due to the recent cut in interest rates, the first drop in rates since March 2020 when the UK first entered lockdown.    So, we thought some top tips for first time buyers would be useful. Samantha Bellamy, Chartered Legal Executive at Penderlaw outlines some key areas first time buyers often forget to consider.  

First time buyers are often understandably unfamiliar with the conveyancing process associated with this exciting milestone and because of this, can feel quite anxious about their purchase. We work hard to explain the process and guide them through whilst giving reassurance in the form of regular updates on the progress of the transaction.

However, it sometimes becomes apparent that first time buyers are worrying about the wrong things, and it is for us as lawyers to manage their expectations in this respect!

How are you buying your property?

In our experience, in the longer term, considering carefully ‘how’ you are buying your house is as important as ‘what’ you are buying. Whilst ‘what’ you are buying is the typical conveyancing issues which people commonly think of when purchasing a home, the ‘how’ also needs to be considered from the outset as a first time buyer.  ‘How’ you are raising the money, who is involved, and on what basis the money is being given or lent should be carefully documented to avoid confusion and conflict in the future. You also need to factor into your initial budget any additional legal fees involved in these documents, so that further costs later down the line do not put you off recording these matters for the long term.  

Buying with a partner

If you are buying with a partner and you are not married, it is crucial that you consider what happens should you split up.  Perhaps not something you want to think about right now in the midst of all the excitement, but absolutely crucial nonetheless. Cohabiting couples often do not realise that the law simply does not recognise this type of informal relationship, and people often come to grief because they have not considered the possibility that their relationship may not last. A cohabitation agreement would ensure financial security should this happen. A cohabitation agreement can also help document how you intend to organise your property finances for example, who pays for what in terms of outgoings and living costs.

Buying with the help of the bank of Mum and Dad

If you are being helped onto the property ladder with some financial support from your parents or your partner’s parents or grandparents for example, or you are being gifted or loaned monies from a family member to help make up your deposit, it again makes sense to get this contribution legally documented in a document known as a Declaration of Trust. This will ensure that should you break up at some point in the future, there is clarity on what is expected to happen to the sum of money they have contributed. For example, do they expect to be repaid by a certain date (a loan) or, what happens to the sum if it was gifted to you and you split up with your partner in the future?  Again, not being clear about this from the outset can create untold problems further down the line.

Shared ownership

With the disparity between property prices and average earnings, it is no wonder that many people find their only hope of getting onto the property ladder is to buy through a shared ownership scheme. These schemes have pros and cons and have their complexities regarding the legal work required as part of the conveyancing process.

The pros and cons of shared ownership

Shared ownership is a government scheme whereby buyers can purchase a share of a property whilst paying a market rent on the other share to a housing association.  It means that a smaller deposit is required, and you only need a mortgage on the share you own via a specialist shared ownership mortgage.

However, there some drawbacks in that you will pay additional maintenance charges as all shared ownership properties are leasehold, you may find these properties have high service charges, and you may be restricted if you want to make alterations to the property.

Can I make a profit on a shared ownership property?

In terms of whether you can make a profit from buying a property via the shared scheme: this depends on the housing market as with any other property sale. If the property value increases, the value of your share also increases. Correspondingly, if the property value decreases, the value of your share will also be affected.

There are also additional administration costs that need to be taken in account at a later date should you decide to purchase an additional share in the property. 

Key stages in buying and selling a property

If you’d like to know more about the main stages of buying and selling a property, you can read more in our blogs on this topic:

Key stages of buying a property
Key stages of selling a property

Get in touch

If you’re a first time buyer and would like to speak to our friendly and experienced property team about your purchase you can reach them by calling 01872 241408 or email us at info@penderlaw.co.uk