Scotland isn't much different from England in regards to its mortgage process.
You should first use a mortgage calculator to see how much you can borrow and when you will be mortgage ready.
Step 1 : An agreement in principle:
An agreement in principle basically means you have been down to a mortgage broker or a lender and had an initial assessment by a mortgage lender where the mortgage lender confirms they will be willing to lend you a specific amount. This gives you a lot of credibility when you start shopping for houses as the sellers or estate agents know that you are serious and have taken the first step in acquiring a mortgage. When you return to make a full application the mortgage lenders application or booking fee can go up to £250.
This is just the first of many fees you will need to pay including the land and buildings transaction tax which is referred to as stamp duty in England
Step 2: Appoint a solicitor
In Scotland your solicitor is the one who makes the offer on your property, puts together the title documents and deals with the change of title and the movement of funds. You can find a solicitor as the Law society of scotland's website.
Your solicitor will search the title of the property to ensure there are no legal issues with transferring it and to ensure the seller can legally transfer it.
Your solicitor will also check with the local planning authority to ensure the property has been built up to spec and no unauthorised changes have been made to the property which may cause you hard or cost you money to repair or potentially even devalue the property if you want to sell it.
The fee for these searches could cost up to £500 depending on where your solicitor is obtaining the information from. You can wait to carry this search after your offer on the property has been accepted if not you may risk losing your money. You can request the seller to make the outcome of any search a condition of the agreement and give you the right to renegotiate if you find any substantial issues with the property.
**Most sellers will agree to this but some will not. This is usually because of two things:
They have something to hide
They are conscious that you may use anything you find to negotiate unfairly and the whole process might become a waste of time.
What is a note of interest?
Once you spot a property you like, your solicitor will draft up and register a note of interest on the property. This means you are interested in it and will allow you to be kept up to date with any changes affecting the property.This might be things such as the property accepting a offer or a closing date for offers to be submitted or the fact that the property is being taken off the market for whatever reason.
Step 3: A home survey
A home survey is a critical part o the home buying process. People who do not carry out home buying surveys spend on average £5,000 for the year in renovations and repairs.
You should consider carrying out a home buying survey even if it is just for piece of mind alone. This will ensure you are not buying a property which is at risk of flooding or has serious structural damage and at the very worse it will give you some negotiating power if you have included this as part of your agreement.
The three main types of property surveys out there are the:
This is the cheapest and the most basic. Expect to pay no more than £300.
This survey is more detailed but still not detailed enough to look at structural issues. They may lift the carpets though. Expect to pay no more than £600
This survey is the most extensive. The house is looked at very in depth, considering its structural health and any potential risks that could affect it. Expect to pay anything above £600
You can read a more detailed guide about the property surveys here
The good news however is that in Scotland sellers have to include a home report to show interested buyers.The expert who prepares this reports has a duty of care to both the buyer and the seller and so the report is independent and not biased on what the seller wants included or removed.
This report will include:
An energy performance certificate which states how energy efficient the home is and from this you could gather how much you will be spending per month or year on your electricity and gas.
A property survey where the homeowner has legally provided a true account of the property including its risk of flooding any local authority warning due to alterations made to the home, the council tax band the property is in and any significant information that may cause detriment to prospective buyers or information prospective buyers will like to consider before making a decision on f to buy the home or not. This will also include the average yearly cost of running the home, the utility bills , on street parking conditions etc.
A survey report carried out by a royal institute of chartered surveyors expert. This report will contain any structural issues with the property , any recommendations , estimated costs of recommendations, the property valuation and the general condition of the house.
Step 4: The mortgage lenders property valuation
The mortgage lender will then value the property themselves. This is usually done online but they may also rely on the surveyors report in order know what valuation the property is at. If they chose not to rely on this report and ask you to get an new one then you will be required to pay a fee for it. That fee could range from £50 to £150.
Step 5: Make your offer
Now you have everything you need to make a decision on if you want the property or not.
You can now make an offer to purchase the property through your solicitor. Your offer won't be the only one going through. There will be multiple offers from other buyers. Your solicitor will be informed if your offer has been successful or not. It's hard to know what's a fair price if you cant see other peoples bids so ensure you always pay what you think is the fair amount for the property.
If your offer gets accepted then the sellers solicitor will contact your solicitor informing them and will then go on to issue what is know as a qualified acceptance.
This essentially states the terms agreed between you and the seller. After this is signed off you can review all documents( including title deeds, search documents etc) relating to the property sale before making a final decision to agree the sales contract with the seller. If you spot anything you don't like, this is the time to bring it to the attention of the seller so they can revert accordingly. At this stage you can still walk away from the sale.
Step 6: Signing and exchanging the contracts
Once all the agreements have been worked out above and the details have been agreed and signed. The two solicitors will exchange contracts, the contracts they exchange are known as conclusion of missives.
Some sellers will require you pay a holding deposit once this is signed as a way to ensure you go through the deal. You can still pull out at this point but because you are legally committed to the sale now, it will cost you enormously.
The deposit requirement of the seller could range between £500 to £10,000 depending on the price of the property.
At this stage your solicitor will inform you the terms of owning the property. This might be things in the title of the property that you need to be aware of. This might be restrictions on alterations of the property etc.
Step 7: Transfer of deeds
The seller will then sign the transfer of deed documents known as the deposition. You should receive a copy of this through your solicitor.
Step 8: Inform the mortgage lender
You should inform your lender the purchase is going forward. The lender will approve your application and instruct their solicitor to liaison with your solicitor and the sellers solicitor in regards to the transfer of funds and making sure all checks have been carried out properly.
The mortgage lender will charge you an arrangement fee for setting up your mortgage account. You can pay this fee upfront or add it to your mortgage. If you add it to your mortgage you should know that this will cost you substantially more as you are paying for it over a longer period of time. You can avoid this by overpaying your mortgage immediately after your mortgage starts with the amount of fees you added to it. Be sure to check that your mortgage lender does not charge you any overpayment penalties.
You will also have to pay an electronic transfer fee for your mortgage funds to be sent to your solicitor..
You can see a full range of costs charged by mortgage lendershere.
After the transfer date is agreed, Your mortgage lender will send over the funds to the sellers solicitors and note this down. If you pay by cash then your solicitors will send this money over for you.
Step 9: Pay your land transaction tax
Once all the processes above are completed and the sale is agreed your solicitor will have to pay your land transaction tax. You should provide this money and ,make it available to your solicitor to pay. This must be paid within 30 days of completing the sale.
In Scotland, homebuyers pay:
- 2% for homes costing between £145,000 and £250,000
- 5% for homes costing between £250,001 and £325,000
- 10% for homes costing between £325,001 and £750,000
- 12% for homes costing more than £750,000