First-Time Home Buyers in Scotland: Top Tips and Essential Legal Considerations

Buying a house is Scotland can be challenging for the uninitiated. In fact, it can be daunting for even the most hardened home mover. There are essential elements of any house purchase that must be borne in mind. This is especially true for those who have never been through the experience before. This First Time Home Buyers in Scotland: Top Tips and Essential Legal Considerations article seeks to address the most important aspects of the house buying process.

An Introduction to Home Buying

When you decide to buy your first home, it is important to understand the different stages in the house buying process. The whole process starts before you have even found your dream home! If you do not do the preparatory work, your house buying endeavours might just fail.

Challenges for first-time home buyers

Perhaps the biggest challenge is dealing with the overwhelming volume of information. Buying a house is stressful at the best of times. When you do it for the first time, it can be hugely stressful. Buying a house involves the process of matching money to property, bundled with a legal process that few house buyers truly understand. A good solicitor will explain the entire process to you in a language you can understand.

Importance of preparation

Perhaps it is best to make sure you have everything you need in place before you embark on your house buying journey. Much of that is to do with money. Have you saved enough money for your deposit? Have you spoken to a lender about your mortgage? Have you chosen a solicitor to represent you and look after your interests? What should you look out for in a Home Report? How best to deal with estate agents and closing dates? These are some of the questions we will look to answer.

The Mortgage Process

For those first-time buyers requiring a mortgage, this is a critical stage. Few first-time buyers have funds available to buy their first home outright. That means the earlier a prospective first-time buyer engages with a lender, the better. You can do this directly with the lender or through a mortgage broker. The advantage of using a mortgage broker is that they can view the entire market for the best deal for you. When you approach a lender direct, you are only given the selection of mortgages that they provide.

Pre-approval Process

Having confidence that your mortgage will be available when you offer for your first home is essential. To do that, you need to consider a pre-approval process. This process involves you and your spouse or partner or anyone you are buying the house with. You need to set up your mortgage arrangements with your lender, discover how much of a mortgage you can obtain and get a decision “in principle” that you meet the criteria for the mortgage. Doing this will make the mortgage process much more straight forward.
It is also important to make sure you have savings, not only for the deposit, but also the costs of buying a house.

Mortgage Types and Options

There are several different types of mortgages available on the market. These range from high loan to value mortgages (90% - 100%) where you will pay a higher interest rate because the risk to the lender is higher. There are also different types of mortgages. The two most common types of mortgages are capital repayment and interest only. Of these, capital repayment means you will pay back the amount you borrow plus interest whilst interest only means you only pay interest throughout for the term of the mortgage with the amount you borrow being repayable at the end. Interest only types of mortgages usually rely on an investment of some description to pay off the capital at the end of the mortgage term.
It is important to understand the financial requirements of any mortgage you take on. There may be penalties for early redemption, fixed rate terms and what happens when the fixed rate expires and your options for re-mortgaging in the future.

Your lender or mortgage adviser will take you through all the options available to you. This will enable you to decide which type of mortgage is right for you and if a 100% mortgage is needed, you might be interested in our article on “100% mortgages – the benefits and pitfalls.”

Finding the Right Property

Finding the right property can be challenging. You must consider the practical requirements as well as the aesthetics of the property. You should, firstly, think about where you want to live. Are you a country dweller or city slicker? Then, work out if you can afford the houses in that area. If this area is unaffordable, are there other areas close-by that fit your budget? Do you want to buy a new house or a house that is already occupied?

Think about how many rooms you need and, perhaps, plan for new arrivals in the future. If you have children, what kind of reputation do the local schools have. Are there suitable leisure facilities in the area where you are thinking about buying? Answering these questions will help you narrow down your new home search.

Working with Estate Agents

You need to remember that the estate agent marketing the house represents the seller. They are trying to maximise the price of the house for their client, the seller. Always keep that in mind. Estate agents will provide you with information on the house, arrange viewings and follow-up with you after a viewing. However, if you are interested in buying the house the estate agent is advertising for sale, please contact your solicitor and ask them to “intimate interest” in the house with the estate agent. This means that the estate agent will contact your solicitor if they decide to fix a closing date.

Viewing Properties

Make arrangements to view the properties you are interested in through the estate agent. Most sellers, on the advice of the estate agent, should “stage” their house for the photographs and for viewings. Remember, when you buy a house, you are buying it “warts and all” so it is important to notice anything that seems out of place or just not quite right.

Take the Home Report with you and look at any areas the Home Report highlights are in need to imminent or future repairs. Speak to the seller about these to try to understand how any wants of repair arose and what, if anything, they have done about it.

Visit the street where the house is located at different times of the day (and night) to get a feel for the locality. Areas that look quiet during the day can turn into massive car parks in the evening!

Legal Considerations

It is always best to appoint a solicitor when you start your search for a house. Your solicitor will advise you and guide you through the house-buying process. Your solicitor will also intimate interest in the property you want to buy with the estate agent and let you know about any closing date.

Once you are ready to offer, whether or not a closing date is to be set, your solicitor will discuss the terms of the offer they will submit on your behalf.

Conveyancing Process

The submission of the offer is the first stage in the process of buying a house. It is at this point the “conveyancing” starts. The conveyancing process is a process that transfers the title of the house from the seller’s name into your name. There are many aspects of the conveyancing process you should be aware of and our article “How do I buy a house in Scotland?” explains these. That article takes you through the entire conveyancing process for buying a house.

Land and Buildings Transaction Tax

Perhaps we should say a word about costs and not just Land and Buildings Transaction Tax, LBTT for short. In addition to the fee your solicitor will charge, there are several additional charges that are nothing to do with your solicitor. These are costs involved in the house purchase process and which your solicitor must collect and pass on to the recipient – usually a government agency. VAT will be charged on the solicitor’s fee. You will also have to pay registration dues to the Registers of Scotland for the Disposition (the deed transferring ownership of the property into your name) and the Standard Security (the loan document that is registered in the Land Register).

Your lender might also deduct any arrangement fee for the mortgage from the amount of loan you are taking out and you will need to make that up with your deposit to buy the house.
If we now return to LBTT. This is a tax payable by the buyer to Revenue Scotland which must be paid in certain circumstances. For a first-time home buyer, the charge starts when the price of the property is more than £175,000. If the house price is between £175,000 and £250,000, the LBTT is charged at 2% of the difference between the price of the house and the threshold of £175,000. There are additional LBTT bands where the price is more than £250,000 and these are shown in the following table:

You need to make sure you have the right amount of LBTT available to pay because your solicitor cannot register the title to your new house without the LBTT being paid.

If you would like to calculate the amount of LBTT you will pay on your house purchase, you can use the Revenue Scotland LBTT calculator.

Buying your first house in Scotland – what are the next steps?

If you do not know where to start, a good starting point is to appoint a solicitor. Your solicitor will advise you on the process and answer any questions you may have. Your solicitor can refer you to a suitable mortgage broker or financial adviser and you can discuss your mortgage needs with them.

In addition, your solicitor will speak with the seller’s estate agent and discuss any offer you wish to submit. When your offer is successful, your solicitor will look after all the steps of the conveyancing process until you pay the price and get the keys.

The solicitors in our firm have many years of experience advising clients on all aspects of house buying and selling. They are well versed in answering any questions you might have. They will advise you throughout the course of your purchase transaction.

There are many parties involved in the house buying process, but it is your solicitor who will look after your interests every step of the way.

If you wish to discuss buying a house, please contact us.