How to Buy a Flat in London
Buying property anywhere can be complicated and stressful, and probably even more so in London, where the average price for a 385-square-foot one-bedroom flat just outside the city centre is £473,073—100 per cent higher than the UK national average price of £234,794. For a first time buyer, making the leap from renter to homeowner in London can be a terrifying prospect. But if you get your finances in order, stick to your budget and approach the process with determination and patience, you can get your foot onto the property ladder.
Save for a Deposit
How to save to buy a flat in London depends on your income and outgoings, but the more you can save, the quicker you'll be able to start flat-hunting. The bigger deposit you have for a flat, the lower your mortgage will be (and you’re likely to get a better deal). While some lenders offer a loan for 100 per cent of the property’s value, those deals come with a higher interest rate than lower percentage loans. If you can put down a deposit of 10 per cent or more, you’ll benefit from much lower interest rates. As of December 2017, the average deposit put down by a first time buyer was £40,406, compared to £14,120 from an existing homeowner.
Sort a Mortgage
When you have your deposit saved, start shopping around for a good mortgage deal. Think about whether you want a fixed or variable rate. A fixed rate guarantees the same interest rate for two, three, five or more years, which lets you figure out your long term budget without worrying about interest rates going up. However, think carefully about how long you want to be locked into a mortgage, because most lenders charge an early repayment penalty if you move out of the deal before the fixed term is up.
A mortgage broker can talk you through the different types of mortgages, compare multiple deals from different lenders and help you with the application process. This shouldn't cost you anything, as they earn their commission from the bank.
Know What You Can Afford
Before you even look in an estate agent’s window, know what you can afford. Don't forget to take stamp duty, solicitor's fees and surveys into account. First time buyers don't pay stamp duty in London (or anywhere else in England and Wales) on properties less than £300,000. Additionally, further stamp duty relief is available for purchases up to £500,000 for first time buyers, which makes a difference in expensive areas like London.
Consider Government Schemes
Government schemes like Help to Buy and shared ownership can help you buy a flat in London. If you want to buy a new build flat under £600,000, the Help to Buy scheme lets you borrow up to 40 per cent of the purchase price interest-free for the first five years, provided you have at least a 5 per cent deposit.
If you live in London and your income is less than £90,000, you can buy a home through shared ownership. You buy a share of the property from the landlord (typically the council or a housing association) and pay a reduced rent on the remaining share. At a later stage, you can choose to increase your share in the property up to 100 per cent of its value.
The London property market moves quickly, so if you think you've spotted a flat with potential, don't waste time. Make a viewing appointment as soon as possible. Email is convenient, but a phone call to the agent (or going into his office in person) is more likely to get things moving.
At the viewing, take notes and ask the agent as many questions as you need to in order to work out if it's worth pursuing. Take plenty of pictures on your phone too, as you may be viewing several flats in one day and it's important to keep track of what you've seen. (On that note, be prepared to view several flats before you find your dream home.) If the owner or tenant is at the viewing, ask her the reason for selling or moving out.
While it may seem as if there are lots of cheap houses for sale in London, many may not live up to your expectations. Inspect walls for damp, check the water pressure in the shower, and if it's so far, so good, take some time after the viewing to check out the local area, paying particular attention to shops, restaurants and public transport links. Different people have different priorities, so think carefully about what to look for when buying a flat, depending on your circumstances.
Decent flats in London get snapped up quickly, so don't miss out. If a flat ticks all your boxes, get on the phone to the agent straight away and make an offer. Check out property website Zoopla for a rough idea of what the flat is worth, then make an offer below or at asking price and see how the agent responds. Some hard bargaining may follow if the seller wants more money. Remember what you can afford, and don't go over your limit. If you're a first time buyer, use this to your advantage. Sellers often take a lower offer from a first time buyer because there is no chain involved (i.e., you don't have to sell a current home before buying), leading to a quicker sale.