How To Buy a Home in London 101: A Guide for Friends

A detailed guide for first time buyers looking for a home in London

How To Buy a Home in London 101: A Guide for Friends
Photo by Landon Martin / Unsplash

We bought our flat about 5 years ago and I had to do so much Googling at every stage of the process because I knew nothing about buying properties. I wrote a doc with all my learnings to share with friends who might be going through the same process of buying a home for the first time in the future. One tip saved us literal thousands of dollars!

Why Buy a Home in London Instead of Renting?

I was in my thirties already when I came to London and had been renting and living with housemates my entire adult life. I saw no problem with renting as it afforded me flexibility. I liked the appartments and locations and until I moved in with my partner at that time I also didn’t mind the housemates. In fact I always enjoyed housemates, making sure I lived with people I’d consider friends and thus felt like a bit of surrogate family when you’re a foreigner in a new city.

I had a vague concept of the “Housing Ladder” and you needing to get on it, but never gave it much thought. Like why was it called a ladder, because if all property prices went up, you could sell for more but anything else you wanted to buy had also gone up? So what’s the rush? (Also I was still saving, I couldn’t have bought a home earlier even if I wanted to)

The times I lived with only 1 other housemate I rented flats for about £1300 – £1700 a month in the West London (mind you this was about 5-10 years ago, no idea what the current rental prices are like). I had moved flats about 3 times in 5 years, and that suited me because my circumstances had changed every time.

I figured whether you pay mortgage or rent, what’s the difference?

You might think I’m super ignorant but honestly it wasn’t until I got a mortgage that I realised the benefit of a mortgage – and the “ladder” part of the housing ladder. See I didn’t realise that yes you might be paying the same amount monthly on a repayment mortgage – but the difference is that only £500 of that entire amount (depending on the interest rate you got, more on that later) is interest and thus money you’ll never get back. But the rest goes towards paying off the loan on the home. So when you sell the home, that’s money in your pocket (or money towards the deposit for a bigger home)! When you’re renting, you’re not getting any of that money back.

And yes you’ll have to spend more money on maintaining your home as well. Not talking about decorating, but the boring stuff like “repointing a chimney” or “replacing a roof” that will cost a couple of grand nevertheless (you need to save up for these costs, also more on that later). But hopefully the price of your home will also increase over time so it’s as if you’re saving with interest, and if the housing market is in your favour you might get a better return on your “investment” compared to just saving money on a bank account and watch the value evaporate due to inflation.

When Is The Best Time To Buy A Home In London?

I’m no financial adviser or housing expert, if it wasn’t obvious already. I can’t advice you on when would be the best time to buy or how to save up for the deposit. But hopefully I can give you an idea of how much you’d need to save up and all the steps involved so you can plan for the future and home ownership becomes less of an abstract pipe dream and more of a concrete goal you could work towards.

Really the timing depends on your personal financial situation. I had been setting aside a good chunk of money monthly for 5 years so I was able to pay for my half of the deposit on our 2 bedroom flat in East London. If you’re serious about buying your first home in the future, keep reading!

Step 1 – How To Start Looking for Homes in London

Go to Zoopla and start looking NOW! It will take a while to get a feel for the housing market and your personal preferences. It took us 50 viewings to tweak our criteria and find our place. heard from other people they also viewed around 40 places. If you have very clear criteria you’ll spend more time searching the ads but you could find your house in just a few viewings.

Some practical tips:

Keep note of your favourites and their stats in a google sheet for easy reference. It makes it a lot easier to compare your viewing history against your latest criteria as you update them.

What if you had set 80 sqm as a minimum criteria, how many of the places you viewed/were interested in initially would have still made the cut? It might seem a lot of work to write all this stuff down, but the effort will pay off in the end in our experience, as it will force you to look critically and objectively at all the stats of a house.

Especially in the beginning it’s easy to get swayed by pretty pictures! But at some point you will find out the criteria that really matter to you most and viewing anything below would just be a waste of time and opportunity.

Suggested things to keep track of per entry:

  • Viewing dates
  • Zoopla link
  • Postcode
  • Address
  • Agent
This will be very helpful when you start getting callbacks and you’re doing multiple viewings at the same time with different agents! Also because the first time doing a viewing with an agent you will usually have to register your details with them so it’s good to know whether you’re already registered with them or not – saves some time
  • Price
  • Price Note (Offer over, Guide Price, etc)
  • Freehold / Leasehold
  • Beds
  • Size (sqm or sft whatever metric you prefer)
  • Nearest Tube (in miles)
  • Nearest Tube Name
  • First listed
  • Last sale
  • Distance and Ofsted rating of nearest primary school
This is relevant if you’re planning to have kids in the future, but even for people that aren’t interested in starting a family, being in a good catchment area will boost the value of a house and make it easier to sell later!
  • I’ve linked a example template here (feel free to copy to start your own)
  • Also think of other factors that are important to you and make sure to add them to the list so you judge and compare all potential houses equally.

Once you have a shortlist of houses you are interested in, you are ready to start contacting the agents for a viewing. Make sure to review them once more to sort them by priority!

You definitely want to make sure you prioritise your favourites first, as the housing market can move fast and delaying a viewing by a few days can sometimes mean it’s already under offer before you get a chance to have a look.

Step 2 – Prepare for making an offer

You want to make sure that when you do find your dream house, everything on your side is ready so you can make an offer and move forward asap in case it gets accepted. Here is a list of things you can prepare before having your offer accepted on a house:

2.1 Getting a Mortgage in Principle (and shop around for a Mortgage)

Mortgage in Principle (or also known as “Mortgage Agreement”). This is a document from a bank that has assessed your situation and sort of promises it could provide you the mortgage of said amount. When you make an offer on a house the housing agent sometimes asks for this proof. Having it will definitely increase your chances of winning an offer as your offer will be taken more seriously by the buyer as you have this bank doc backing you up. We applied for one online via Lloyds to get an idea of the mortgage we could get (to help our house search), you get the results in a few minutes!

I would recommend to shop for an actual mortgage in the meanwhile (via mortgage broker / financial adviser) and once you’ve decided on one apply for the mortgage in principle with them asap. This will make it easier once you’re ready to apply for the actual mortgage (once your offer on a house has been accepted).

Note: fees of mortgage brokers vary. Some work for banks and thus offer you “free” advice (they will get paid by the bank for the referral). Others are independent and can therefore ask for a fee of like £400 once your mortgage has been approved (that means before that you are still free to just ask them for any advice and if you don’t decide to take out a mortgage via them it will cost you nothing).

We went with a mortgage adviser from Dehavilland as he was recommended via a friend of the family. Their fee was £395, but it was worth it imo. He helped inform us a lot with any questions we had.

2.2 Plan your finances

The mortgage in principle will give you an idea of the house value you could afford. Talking to the mortgage adviser will give you an idea of the actual monthly costs of that house (you can use online calculators for that as well).

Factors that determine the monthly mortgage cost

Assuming you’re picking a repayment mortgage – which is the most common one)

  • House value (obviously) & deposit %. They usually refer to this as LTV
LTV stands for "Loan to Value". This means if you pay 10% deposit, your LTV is 90% (as in you’re borrowing 90% of the value of your house).
  • Interest rate. The lower the LTV (so the higher your deposit) the better interest rate you will get.
Usually this changes per 5%. So for example whether you’re putting down 10%, 11%, or 14% deposit, it won’t make a difference, but at 15% you will get a better (lower) interest rate.
  • Repayment term. Usually 25 years, but you can push this up to 30 years for example
A longer repayment term will give you slightly better interest rates and lower monthly payments, but obviously you will be taking an additional 5 years to pay off your mortgage. Which means another 5 years of interest so this works out to be more expensive for you in the long run.
We chose a repayment term of 30 years, because we would rather have a bit more breathing space on a monthly basis even if this means paying more in total at the end of the term
  • Fixed term. This is like the duration of the contract you sign up for to stick with this mortgage provider - think of it as phone plans! During this term your interest will be locked at a certain interest rate, after this period it will switch to variable rate (which will most probably be higher).
Just like with phone plans, (and broadband deals etc), people usually shop for a new mortgage deal before the fixed term ends to lock in to another low interest rate again for x amount of years. The longer you fix your term, the higher the interest rate will be (but still not as high as the variable one of course).
  • Another thing to keep in mind is that if you pay off your mortgage within this fixed period (because you sell the house for example), you MIGHT have to pay a penalty fee (varies depending on the bank/mortgage offered). This could be anywhere between 1-5% of the value of the early repayment. So another reason why people might not want to lock in for too long (We went for 2 years fixed term).
When talking to your mortgage adviser, play with these stats and ask him to give you the interest rates and monthly repayment cost for the different scenarios so you can make an informed decision.

There is also a one-off cost

While you get a mortgage for the value of the house, there are some additional costs you should budget for that are not included in your mortgage and you will need to pay up front / from your account once you buy the house.

You need to budget for about £ 6,500 – £ 11,000 on top of your deposit to pay for additional fees, but you won’t need them until you exchange contracts, which is about 4-6 months or longer after your offer gets accepted.

A detailed breakdown of the required lump-sum savings:

  • The deposit. 10% of the house value minimum, but some lenders might require 15% minimum depending on the value of your house. As mentioned before, usually per 5% increase you will get better interest rates, so definitely worth saving up for bigger deposit if you can.
  • Stamp duty. Depending on the value of the house if you’re first time buyers you will get a discount
Up to £ 300,000 – 0% stamp duty = £0 yay
£ 300,001 – £ 500,000 – discounted stamp duty. Depends on value of the house, check here (“After budget” tab) for calculation of the price. I’d say roughly budget about £4000 – £8000 for this if you’re buying a house between 350k – 450k.
Above £ 500,000 you don’t get any discount. Even if you go over by a penny, just stay under 500k I’d say as a first time buyer as the increase is quite significant!
  • Building survey costs about £ 500 – £ 700, price varies depending on the quality of the rapport.
  • Solicitor total fees about £ 2,000 (this includes admin fee, fund for searches, solicitor’s fee etc)
  • Mortgage fees about £ 700 – £ 1,100
  • Valuation fee £ 200 (sometimes you can get deals with free valuation)
  • Lender Arrangement fee £ 1,500 for setting up the mortgage (you might find a better deal)
In our case we got a £1000 cashback as part of the deal, so that knocked a bit off the total fees
  • Mortgage Broker (optional): £395 admin fee
REMINDER: All these extra fees (before you even start budgetting for decorating your house) might seem super daunting, but don’t fret too much as you won’t need to pay all of this as soon as your house offer is accepted! It can still take about 4-6 months (sometimes even longer) before you actually exchange contracts and have to pay all these fees, so in the meanwhile you can save up some extra money.

The deposit is the biggest one that you want to have ready first, as you will need to have this ready when you do the mortgage application (after your offer gets accepted)

2.3 Get your paperwork in order

When you start the mortgage application, they will require a lot of information and documents. It’s good to start tracking them down and knowing what to expect!

With certain docs like proof of address and bank statements they need to be very recent, less than 3 months old, so it’s not necessarily efficient to immediately start putting together these docs right now.

Disclaimer – I don’t know if there are any additional or different requirements if you’re self employed!
  • ID
  • Proof of address
  • Experian Credit Report I don’t think every mortgage provide requires this, but I found it helpful to check your credit score on this website anyway and see how you might improve it
  • Bank statements of the last 3 months
  • Proof of deposit which is the last 3 months bank statements from the account where you have the deposit saved. They need to see where the money came from and that is has been on your account at least 3 months.
If part of the deposit is coming directly from your parent’s account (or whatever benefactor you may have), they will need to provide a letter as proof they’re gifting the money to you and also need to provide the bank statements of the last 3 months of the account the deposit was on
  • Last P60
  • Payslips of the last 3 months

As an example of the potential additional details they ask during the application here is the form we had to fill in. It included:

  • Address history of the last 3 years Which can be a bit of work if you've moved a lot during that period.
  • Break down of your monthly finances. Definitely worth doing a detailed monthly budget planning anyway! See screenshot from the relevant part of the form to see what kind of costs to include:
  • Lastly since the doc asked about insurance, we decided to take out an income protection insurance and a life insurance, but you start that once the contracts are exchanged. I don’t know if this affects your chances of getting a mortgage or not. It’s nice for peace of mind anyway!

2.4 Pick a solicitor (or “conveyancer”)

You will need a solicitor once your offer gets accepted on a house (and you start the actual mortgage application etc)

Litterally copy pasting this from a website for some more general info (sorry I lost the original source as I had not included it in the doc):

“Conveyancing is the legal term for transferring ownership of property, whether you are buying or selling.

A solicitor or conveyancer will:

  • handle contracts
  • give legal advice
  • carry out local council searches
  • deal with the Land Registry, and
  • transfer the funds to pay for your property.

It’s an important role, so choose carefully.

Solicitors are usually more expensive than conveyancers and are qualified lawyers, so they can offer a full range of legal services.

Licenced conveyancers are specialised in property but can’t deal with complex legal issues.”

We went for Rotherham Solicitors who were recommended via a friend of a friend, and were very happy with their services. Once your offer gets accepted it’s another lengthy process and it was very reassuring to have a trusted solicitor on our side.

Step 3 – Making an offer

Once you’re ready to make an offer, some tips:

  • Look at how long the property has been on the market (whether you can undercut the asking price or not)
  • Don’t be disappointed if the first few times your offer doesn’t get accepted! It will probably happen, and I think it’s probably a more valuable experience to lowball and loose a few times and then adjust accordingly, then overbid in your excitement the first time and pay too much. You might fall in love with a house, but you should really try and keep a healthy subjective view! Whether you can underbid / or should offer more really depends on the current state of the market. You need to get a feeling for it (so just go out there and get your feet wet!)
  • If you’re a first time buyer – and therefore “Chain Free”, that is very appealing for sellers. The highest bid on our house was actually 5k more, but the seller preferred us as first time buyers.
Chain free means that you're not trying to sell a house the same time you are buying a house. This means you're either a first time buyer or a cash buyer. As you can imagine a chain can get quite long with multiple parties involved and at any point can the chain collapse and the deal fall through!
  • GOLDEN TIP (this was a winner for us!) – Don’t round of your offer on 1000s! Add some weird random number, because chances are someone might be bidding the exact same price, and those few pounds and pennies you added randomly extra might make all the difference! Our bid won by a £100 😀

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