Useful pages - index

Getting a mortgage

Is it good to buy?
Finding a flat
Which lender?
Which type of mortgage?
The sums


At the start of this year (January 2004), I decided that it was time to buy a flat for the first time. I've documented the process as I've gone along, as a reference for other people - hopefully someone will find it useful.

Is it good to buy?

I rented places from the age of 18 up until 30. In fact, over those 12 years, I spent almost £50,000 on rent altogether. So, there's a perception that I've just been throwing my money into a big pit, with nothing to show for it, and that I'd be better off putting it towards a mortgage. There's some truth in that, but it's also misleading. For one thing, it's not wasted money as such - I paid for somewhere to live, and I got that, so it can be compared to spending money on food/travel.

The related idea is that it must be cheaper to buy than to rent, on the grounds that the landlord is making a profit, therefore rent - mortgage payment = £££! But it's more complicated than that. For instance, maybe property prices have gone up since the landlord bought the flat. Or maybe his payments are lower than mine would be, due to putting down a larger deposit. From what I can tell, it works out about the same as to whether you rent or buy. Also, in my case I was sharing flats for most of that time, whereas I'm now living alone, so that means that I'm looking at £600/month on a mortgage versus £400/month on rent.

More generally, this brings up the concept of equity. The basic idea is that if you borrow £100,000 to buy a property that's worth £100,000 then your assets and liabilities cancel out. Once you've paid off half of the mortgage, your equity has then increased by £50,000. Great! However, that relies on the property's value remaining constant. It may rise (which has certainly been the trend recently), but it may also fall.

Digressing slightly, a property crash can be caused when the constant rise in prices becomes unsustainable. If it gets to the point where first-time buyers literally cannot afford to buy any flats, then by definition that means that they won't buy any flats. This then means that people who want to sell (moving up the property ladder) can't find a buyer, and so they can't buy a new place. This then affects the people further up the chain, and so on. The solution is that the second time buyers have to drop the prices of their flats, to a point where first-time buyers can afford them. But then the second-time buyer can't afford the new flat they're buying, so the next people up have to lower their prices, and so on. In theory, this isn't a problem, since it will force prices to stabilise at a sensible level. But if things get out of control, you can get a price war - if everyone drops their selling prices by £10,000, then why should a first-time buyer come to you rather than to the flat down the street? You have to drop your price even further, and so on.

The upshot of this is that you could buy a flat for £100,000, and then find that a month later it's only worth £50,000. At this point you have negative equity. What do you do? You can't easily move - if you sell the flat, and get £50,000 for it, your mortgage lender will still want you to repay the full £100,000, so you'll need to find the remaining £50,000 yourself. And even if you can do that, it doesn't leave you any money left to actually buy a new place.

As I understand it, it's quite common in some parts of Europe for people to rent their entire lives. They increase their equity in a more traditional way, by putting money into a savings account each month. And I think this is a reasonable strategy.

So, if there are all these problems, why did I want to go ahead? Well, there are other reasons to buy. For one thing, there's more freedom; if I want to repaint the walls, or get a cat, then I don't need the landlord's permission for it. (Although there are some cases where you'll need the freeholder's permission to make alterations.) Also, there's more stability. In my final rented accommodation, the contract between me and the landlord had a two month break clause. That meant that I could give him two months notice that I wanted to leave, and he could give me two months notice that I had to leave; neither of us had to justify that decision. It may seem unlikely that the landlord would just evict me for a whim, but what if he decided that he wanted to convert the building into luxury flats?

One other "intangible benefit" - I've seen personal ads in the past that include "own house and car" as a requirement for potential partners. I'm starting to understand why, since this would demonstrate that you are financially secure (I elaborate more on the rigours of the credit checks below). So, this may be an advantage to some people. Personally, I'll stick with my motorbike rather than getting a car.

As for the "boom and bust" speculation about the housing market, I'm not too worried. At the moment, I think that prices are extortionate around London, and it would be good if they were lower. On the other hand, now that I've bought a place, it's in my interest for them to stay high! Ultimately though, I think these things tend to even out in the long run, so the worst case scenario is just that I sit tight, keep making my payments, and wait for prices to rise again. I can live with that.

Giving a specific example of this, I see from the lease that the cost of my flat went from £23,950 (January 1985) to £99,950 (January 2004). That isn't just due to home improvements!

Finding a flat

After I graduated in 1995, I lived in 9 different (rented) places. And I've lost count of the number of viewings I've been to. So, I had a pretty good idea of what I was looking for in a flat, which was beneficial here. One useful thing is to do pre-screening. I made heavy use of the internet while I was flat-hunting, taking as a starting point. Some estate agents also have their own websites, but these can be quite hard to find, unless you actually go to their shops and look at the sign in their window. Mind you, one thing I noticed was that the status of the flat was updated to "Under offer" very quickly (within a week of me making the offer), whereas it took almost a month after completion before the status was updated to "Sold". Whether this is coincidental or a deliberate deception by the estate agents is up to you to decide. Since it also took about two months for the "For Sale" sign to disappear from outside my flat, I lean towards the latter.

One difference between renting and buying is that the adverts tend to be more factual when buying. Typical Loot advert when looking for a place to rent: "3 large bedrooms". What does "large" mean? Whereas an advert for a flat that's for sale will normally quote the precise dimensions of each room, e.g. 10' by 14'. Some adverts use metric, and some use imperial. Personally, I'm more comfortable with metres than feet, but whichever way you like it, you can use a calculator to convert between the two. It's also useful to know the measurements of places that you've lived in, to give a basis for comparison. That way, you can say "Well, the lounge is a bit bigger than my room, but a bit smaller than Fred's room", and decide whether you'll be happy with that.

As well as the rooms, you will also need to consider the area and the price. You may have one of these things fixed, or you may need to weigh the relative values. E.g. would you rather have a 2 bedroom flat in Beckton or a 1 bedroom flat in Croydon? Would you be willing to pay an extra £10,000 to get off-street parking? It's good to take a general look at property listings, to get a feel for what's available.

This is probably obvious, but you also need to consider travel arrangements. In some cases this may be as simple as having to walk an extra 10 minutes to get to the station. In other cases, you may find that there's a balancing act between the cost of a travelcard and the cost of your mortgage. Anyway, it's certainly worth doing some research to find out how much it would cost you per month.

UpMyStreet is well worth a visit, since they will tell you information about an area you're unfamiliar with. Some of it is straightforward, e.g. the distance to the nearest supermarket. Other aspects are less tangible, e.g. demographic information and crime rates.

I saw a link recently to the homebuyer's checklist (regarding energy efficiency). I haven't used it myself, but it may be useful.

Standard things that you should take to viewings: pen, paper, estate agent's phone number. Possibly also a camera (ask permission to use it), a torch (in case you need to look into an attic), and a tape measure. It's also worth putting a checklist together of questions to ask, in case you forget anything.

One option when buying a flat is to go to an auction. Basically, there will be times when someone wants to sell a property quickly. This might happen if you don't pay your mortgage, and so the bank repossesses your flat and sells it to recover as much of their money as possible. So, the auction will be announced in advance, and a starting price given. Of course, you don't know what the final price will be. If you win the auction, you will need to pay the deposit (typically 10%) right away. Also, if you want to have a survey done then you need to arrange that before the auction. The risk is then that you pay the surveyor, and lose the auction, so that money is effectively wasted. So, I mention this here for completeness, but I don't think it's a good idea for a first time buyer.

Once you've found a flat, you will need to arrange a mortgage (see below) and a solicitor. In my case, the estate agents recommended a solicitor to me: Gallyers Lightfoot Marchbanks. I've been quite happy with the service that Simon Gallyer has provided, so I'd recommend them to other people.

One other difference between renting and buying is that you should understand the concept of a leasehold. Basically, if you buy a flat, then you own the space within the building (or at least you will once you've repaid the lender's money). However, you don't own the actual structure itself (and the land that it's built on) unless you get a freehold. If you get a leasehold, then that means that the person who owns the building is renting the space to you. A leasehold will have a fixed lifespan (typically 100 years), and this will get reduced as it passes down the line. So, if it's 80 years when you move in, the person who you sell the flat to may only get a 70 year leasehold. The shorter the leasehold gets, the harder it is to sell a property - nobody wants to get left holding the hot potato. So, freeholds are definitely a good bet if you can get them, but they are also more expensive than leaseholds. It is usually possible to extend the terms of a leasehold, but this is at the freeholder's discretion, and you will have to pay for this.

Which lender?

I've been a Lloyds TSB customer for the last 12 years, so my natural inclination was to go to Cheltenham and Gloucester for my mortgage. And this is basically why banks offer free gifts with student accounts - they are hoping that you'll stick with them for a long time to come. However, various people recommended that I should shop around, to see whether I could get a better deal elsewhere, which is sound advice.

One informative site to visit is CharcolOnline. And the Motley Fool offer some good advice here.

Although you can do preliminary investigations beforehand, you really need to wait until you've made an offer before you can proceed properly. The estate agents will probably be able to offer advice here, and may actually have a mortgage advisor on staff.

You should bear in mind that there are a lot of factors to consider, beyond the obvious ones. The big questions would be "what are their interest rates?" and "how much will they lend me?" However, you should also be aware of mortgage indemnity premiums, for instance. These are best avoided - the idea is that you pay 7.5% on the difference between 75% and what you borrow. This is a bank charge, rather than part of the mortgage payment, so you don't directly get anything for it. For instance, suppose that you take out a 95% mortgage on a £100,000 property. You would then have to pay an extra £1,500.00 for the privilege. Not all lenders require this - C&G don't, for instance.

How much of a deposit do you want to put down? In practical terms, assume that you'll need at least 5%. If you can stretch to 10%, then you'll get a better interest rate, but you may find that if it takes you an extra few months to save up that much money then house prices will rise in the meantime, so the larger amount will still only be 5% of the price! In my case, this is particularly relevant because the flat I bought is above a "commercial unit" (i.e. a shop). Apparently, lots of lenders required a 25% deposit for this, so other people who wanted to buy the flat had to drop out. C&G agreed to give me a 95% mortgage for that flat, which is the main reason that I stayed with them; it's possible that they made a special exception for me, because I've been a good customer in the past. (So, loyalty can work both ways, despite the philosophy of the "rate tart".) The issue here is that flats over shops can be hard to sell, particularly if the DIY shop downstairs gets turned into a chip shop later. If I default on my mortgage payments, the lender would want to sell the flat to recover their money, and so they want to be confident that they can do this.

The approach you need to take does seem a bit counter-intuitive to me. What I basically wanted was for the bank to do a credit check, and say "We'll lend you up to £X" so that I could then go out and find somewhere in that price range. The way it actually works is that a lender will publish guidelines on their upper limit for lending (e.g. triple your salary), but it will also depend on the particular property you want to buy. You can request a "decision in principle" once you have a particular property in mind, before you arrange a viewing. You'll need various details for that, e.g. how long is left in the leasehold, and when was it built? However, this can normally be sorted out within one working day, so it's a lot quicker than the real application. Opinions vary on whether it's better to get this before you make an offer (to show that you're serious), or afterwards (to avoid your credit rating showing lots of requests for info).

There is quite a bit of variation between lenders about how much they'll lend to you. I saw a newspaper report about one bank (The Bank of Ireland, I think), that was offering 10 x your salary. I personally think that's crazy - how are you going to afford the repayments? Particularly if the interest rate rises in the future... That said, they normally want a 25% deposit for that, or a parental guarantee (an increasingly popular option nowadays). The idea there is that if your parents have paid off half of their mortgage, they can offer that half of it as a contingency in case you default on your payments. Whether your parents will be enthusiastic about this is a separate question...

I did investigate the Halifax, which is something of a triumph for Howard their advert man. Anyway, they offer a pretty decent deal - 3.75 x your salary, with only a 3% deposit required. And they'll offer a decision in principle without needing such specific information; the idea is that you can say "I want to buy a flat in Croydon costing £130,000" and they'll say yea/nay. In most cases, they can give an immediate (automated) decision, but in some cases it will need to be referred to a human. And they provide a calculator on their website to help you work out how much you can borrow. So far, so good. I plugged in my details, and they said that they couldn't give me an immediate decision, but that someone would be in touch. That was in January, i.e. 7 months ago, and I haven't heard anything since. I suspect my application fell between the cracks - a lot of lenders seem to be quite new to the internet, and so it may be that nobody's checked the relevant email account yet. Anyway, their loss, but something to bear in mind.

One admin note: when the lender asked for my latest payslip (as part of the mortgage application procedure), that's as well as the standard name/address identification, not instead of it. "Latest tax notification from the Inland Revenue" is different from a P60. For a passport and driving licence, take them along to a local branch of Lloyds TSB/C&G - they'll make a photocopy, and sign to say that they've seen the originals. Also make sure that you get them back, and that they don't get left in the photocopier by mistake...

Which type of mortgage?

Basically, there are two main types of mortgages: repayment, and interest-only. With a repayment mortgage, each month's payment reduces the total amount you owe to your lender, as well as paying the interest that's accrued in the meantime. So, after 25 years, you will have paid off everything you owe. With an interest-only mortgage, you are only paying off the interest that accrues each month, and the lump sum that you borrowed stays the same. So, after 25 years, you will still owe your lender the same amount that you initially borrowed, and they will want it back.

The main advantage of an interest-only mortgage is that the monthly payments are cheaper. However, I think that you'd be crazy to go for this unless you have some plan for repaying the initial amount later. Hoping that you win the lottery between now and then isn't exactly shrewd financial planning! The way people generally do this is to take out an endowment policy. You may see references to "endowment mortgages", which is a combination of an interest-only mortgage and an endowment policy. The idea here is that you invest some money in an ISA, and then the broker (who manages the ISA) will buy stocks and shares with this. You can also put in more money from time to time. If all goes according to plan, then the value of your policy will fluctuate over the years, but by the time the mortgage amount becomes due, you'll have built up enough of a fund to pay it off. The same thing would also apply if you moved house after 5 years, in which case again you would need to repay the full amount you'd borrowed.

As I say, that's the theory, and I would emphasise that word. In practice, things don't always go that smoothly, and a lot of people have lost a lot of money when the values of their shares plummeted. In fact, there are currently investigations going on, to see whether people were wrongly advised about the level of risk involved. Anyway, the point is that I would not recommend taking out an interest-only mortgage - a repayment one is more reliable.

Once you've made that choice, there are then sub-categories, e.g. discount and fixed-rate. The idea here is that the Bank of England will vary the "base rate" of interest from time to time. This then has a knock-on effect to banks and building societies, when it comes to mortgages - they will normally charge 2% above the base rate. If you have a variable rate mortgage, then your monthly payments won't be the same over the 25 years. They could start out at £500.00/month, then rise to £1500.00/month. This is obviously going to be unfortunate, unless you get a large payrise at the same time. In fact, something like this did happen towards the end of the 1980s, which led to a crash in the property market, and a lot of people lost their homes. Buyer beware!

So, one way to deal with this is to have a fixed rate of interest. This is quite common for personal loans, where the interest rate will be fixed for the whole repayment period (e.g. 5 years), so when you take out the loan you know exactly how much you'll have to repay by the end of it, and what your payments will be each month. Gordon Brown (Chancellor of the Exchequer) would love it if everyone had fixed rate mortgages for the entire repayment term, since he could then raise the base interest rate without all the voters screaming at him (not a comfortable position for an elected official to be in). However, I haven't come across any mortgages that actually offer that option. There may well be some, but I haven't seen them. In practical terms, you can get a fixed rate for the first few years, and then you will switch to a variable rate after that.

Any fixed rate that you are offered will be higher than the current variable rate. Also, the longer you want it to be fixed for, the higher it will get. (The assumption is that the base rate will gradually rise.) Typical fixed rate periods would be 2 years, 3 years, 5 years, and 7 years. So, you partly have a choice between short-term and long-term benefits. To keep the numbers simple, let's assume that you would initially pay £100.00/month on a 2 year fixed rate mortgage, or £110.00/month on a 5 year fixed rate mortgage. And that either way, once the fixed rate period was over, the monthly payments would rise to £150.00/month. Which is better?

My first reaction here is to say that clearly the 7 year option is better for the prudent investor, since you pay an extra £10.00/month for 2 years, but then save £40.00/month for 5 years. However, on reflection I think that it's more complicated than this. For one thing, how long are you planning to stay in the property you're buying? Although the typical repayment term is 25 years, lots of people wouldn't actually stay for the whole length of that term, particularly with a first-time purchase. So, if you move after 2 years, you'd be better off with the 2 year fixed rate mortgage, since you've then saved £10.00/month over that period.

Another issue is that your circumstances may well change over time. For instance, if you've been renting furnished properties in the past, you'll need to buy furniture etc. once you've bought the flat. This means that there will be a lot of extra costs in the short term. So, you may be better off starting out with lower repayments, and then pay more later once you can afford it. Similarly, if you're expecting your salary to rise in the future, you may be able to afford higher monthly payments more easily at that point. Bear in mind that there's no point in saving money on the mortgage payments if you then wind up having to borrow loads of money on your credit card, and pay high interest rates on that.

A related issue here is the concept of overpayments. The basic idea is that if you have some spare money (e.g. from an annual bonus at work), you can use it to reduce the amount of money you owe on the mortgage. Some mortgages carry a penalty for paying them off early, but this wouldn't normally apply to relatively small payments (less than 30%). This is worth doing if you can afford it, particularly early on (when the interest is highest). Some banks may then let you take a "payment holiday" later, by saying that you've already paid the mortgage for those months.

One other idea is an offset mortgage. The idea here is that you pair off your savings with your debts, and don't earn/pay interest on the matching amount. For instance, suppose that you have £5,000 in savings, and a £95,000 mortgage. You wouldn't earn any interest on your savings account, and you would only pay interest on £90,000 of the mortgage rather than the full £95,000. Since the interest you pay will always be higher than the interest you earn, this is a good deal - the incentive for the lender is that you need to have all your accounts in the same place. However, as a first time buyer you probably won't have a huge savings account, so it's not really relevant.

Another interesting idea is Ijara/Murabaha mortgages. The issue is that Muslims aren't supposed to pay interest on money that they borrow, which can cause problems if they want to buy property. The solution is that the bank will buy the property for you, then either charge you rent on it until you finish paying off the money you borrowed, or sell it to you at a higher price. Either way, the loan itself is interest-free. Since I'm not a Muslim, these aren't really relevant to me, but I'm glad that the options are available for people who are.

Personally, I opted for a discount rate mortgage - this gives me 1% off the bank's rates for the first 3 years, then the standard variable rate after that. So, this gives me the cheapest initial payments, but I might wind up paying more in the long run. Or I might not. The thing is, a situation like this is a gamble. If you take out a fixed rate mortgage for X years, you are basically saying "I am betting that the interest rate will rise above that level during this period". If it does, you're better off. If it doesn't, the bank is better off. My view is that the bank knows a lot more about market conditions than I do, so since they are selecting the interest rates on offer for the fixed rate options, they are going to stack the odds in their favour. Also, I deliberately haven't gone for the maximum amount that I could borrow, so this gives me some "wiggle room" if interest rates do rise, i.e. I can afford larger monthly payments if I have to. And (tie-ing in with the point I mentioned above), I may well move in 3 years, once the discount period is over. Also, I don't have any financial dependents, so that gives me some more flexibility; if I make a mistake, I'm the only one who suffers.

So far, it's been a mixed success - the interest rate has increased three times since I took out the mortgage, so my monthly payments have increased from £555.08 to £596.97. That corresponds to a change in the Bank of England's base rate of 4.00% to 4.75%, i.e. from 5.00% to 5.75% in my case. I don't quite remember what the available fixed rates were when I took out the mortgage, but I think 5.75% was the lowest available. And of course, it is possible that rates will go back down, in which case I'd benefit.

When it comes to repayments (leaving aside interest-only mortgages), the key phrase is "amortisation schedule". The maths is a bit complicated, but there are tools to help you calculate it, so that you can see how much of each payment is going on capital, and how much of it is interest. This will then let you know how much of the capital is left to repay at any given time. It will also show you how your payments change in line with interest rates. Excel can do this for you, as can Microsoft Money. In fact, MS Money has some other clever features here, including a bar chart that says "Here's what the house is worth, here's how much of it you still owe". I've been using it for years to manage my accounts, and I strongly recommend it.

The sums

When you're looking at the mortgages on offer from different companies, and you want to know how much you can borrow, they will typically refer to a multiplier of your basic salary. For instance "3 times your salary for one person, or 2.5 times your joint salary for a couple". This is based on your gross salary (i.e. before tax and national insurance are deducted). However, there are some extra complications here.

Basically, if you have any other loan payments (e.g. a personal loan, or store cards, or a credit card), then your monthly payments there will be taken into account. For instance, suppose that your salary is £25,000.00/year. And suppose that you pay £150.00/month on various loans. The bank will then say "Ok, £150.00/month = £1,800.00/year. Therefore your effective gross salary is £25,000.00 - £1,800.00 = £23,200.00. So, the most you can borrow is 3 x £23,200.00 = £69,600.00 rather than £75,000.00."

It may seem that loan payments are weighted disproportionally, but that's the way it works, so you're stuck with it. That said, don't immediately rush to pay off your credit card - you'll be much better off with £5,000.00 in your current account (to pay your deposit) and £5,000.00 on your credit card than you would be if you had a zero balance on both. Also, if you have a solid track record of making loan payments on time, this will count in your favour when the lender checks your credit rating. In fact, I have a Preference Account (from Capital Bank), which is basically a credit card with a cheque book. That was paid off when I started, but I've been using it to pay some of my costs, to preserve my current account as much as possible (in case anything unforeseen arises).

Speaking of credit ratings, I've applied for various loans/store cards over the years, and the checks I've gone through for this mortgage application are far more rigorous than any of the others. That's understandable, since it's also the largest amount of money that I've ever asked to borrow, but it can be a bit imposing.

There is also a budget analysis form that has to be filled out later in the process. This asks for your current monthly expenditure in various categories: council tax, insurance, endowments/pension, utilities, telephone, housekeeping, travel, children, television, entertainment/clothing/spending, other. The basic idea is that the lender will then look at your net monthly income (tax and national insurance are now deducted), subtract the amount you spend on existing loan payments, the proposed amount you'll spend on the mortgage, and the amounts you specify here. This then leaves your monthly surplus, i.e. how much you'll have left from your wages after you've paid all your bills. This surplus has to be above a certain threshold, otherwise they'll turn you down. However, I don't know what that threshold is; it may well depend on various factors, such as age and gender.

In fact, although I referred to bills just now, they are really evaluating your lifestyle. So, if you routinely spend all your spare money on beer and pizza, that won't look good. In practical terms, this was the last stage of the process for my application, and I didn't have any trouble with it. I'd guess that if you get to this point, it's just going to be a formality unless you say "I spend £1,000.00/month on Cuban cigars". For one thing, you'll presumably be used to saving some money from your pay cheque each month, in order to have gathered your deposit together. You may be tempted to lie here; all I'll say about that (ignoring any moral aspects) is that you are making a legal statement that you have filled out the form accurately, so you could get into trouble for that. And they can probably verify your claims by checking your recent bank statements. Mind you, one mixed blessing is that they ask for your current expenditure, not what you're planning to spend in the future. This could be good or bad, depending on your circumstances. For instance, I previously shared a house with 3 other people, and we split the cost of ADSL equally between us. So, by installing ADSL at the new flat, I'm spending 4 times as much on it, and thus it was better for me to give my current (former) level of spending. On the other hand, if I'd said "I can't afford it if I'm living alone, so I'll just use dial-up access", then I'd have preferred to predict my future level of spending. Swings and roundabouts, really.


As well as the purchase price of the flat itself, there are other short-term costs to consider. You have to pay some of these before the sale is confirmed, so be aware that you could easily lose money in the process. I've know a few people who've lost £1000.00 this way. The key problem is "gazumping", i.e. someone else making a higher offer than you. Under Scottish Law, once the vendor has accepted your offer, that's final. Under English Law, he's welcome to accept as many offers as he likes, and nothing's final until you've exchanged contracts.

So, here are the typical costs I know about - bear in mind that these will vary between properties.

Total: about £3,175.00. And in my case I'm putting down a 5% deposit, so that's another £5,000.00.

Some of these are discretionary. For instance, you don't have to get a survey done, and I'm only having the electrical inspection done because the surveyor recommended it. But it could ward off any nasty surprises down the line. What you'd expect is that if the surveyor does find a problem (e.g. woodworm), then you'd either pull out of the purchase or get the vendor to knock a few thousand off the asking price to allow for the money you'll have to spend on repairs after you move in. The bank will send their own surveyor round, but they won't tell you what he reports, unless you arrange to pay them an extra charge.

One interesting website that I've come across is Don't Buy This House. The idea is that you can buy a copy of a survey that someone else has had done for £5, rather than arranging your own. That's certainly cheaper than getting your own survey done, but you may find that the details mentioned are out of date (for better or worse). Also, they only have a limited range of properties available. Still, it seems like a good place to start.

Speaking of websites, I think that applying for mortgages online is a good idea. However, it can be a bit confusing. In my case, the status stayed as "Submitted on 14/01/04" throughout the entire process, even after completion, so that can basically be ignored.


When I exchanged contracts, I had to get the flat insured. Buildings insurance was compulsory, whereas contents insurance was optional, but you can generally get a good discount if you get them together. Ideally, this would have been sorted out in advance (before signing the contract), but I wound up doing it afterwards.

Personally, I went to MoreTh>n. The lease agreement said that I had to get my insurance from them, the idea being to have one company that covered the entire building (shop on the ground floor, two flats above it). They actually relaxed that rule, but I couldn't find any other companies that were willing to do buildings insurance for a flat (I tried C&G, and 1stQuote), so I wound up going there anyway. As a disclaimer/incentive, if I refer someone to MoreTh>n for home insurance, we each get a £20 Marks & Spencer voucher, so let me know if you're interested in this.

When I arranged the policy, they needed info about the flat (window locks, door locks, rebuild value), and couldn't read it from the vendor's policy due to the Data Protection Act. I phoned the estate agent (to talk to the vendor) and got the window/door info, but he couldn't remember the rebuild value. The estate agent said to look at surveyor's report, which did have a line for this, but it was blank. I phoned the surveyor, but the guy who wrote the report was on holiday until the following week. One of his colleagues looked at his notes and said "Ah yes, rebuild cost is N/A, because it's in a block". But he was able to give me an approximate figure (£36,000). The problem is that you can't rebuild just the middle floor of a building; you'd need to allow for anti-gravity generators, and it would look a bit stupid floating in mid-air. That complicates the price, and also explains why not many insurance companies will deal with flats.

I later had a letter from my solicitor, saying that the buildings insurance should be £78,880 (the surveyor told him £76,000) rather than £36,000, so I wound up changing it. I then got a letter from the freeholder's solicitor after that, asking me to increase the cover to £100,000, which I did, to match the cover for similar properties in the area. However, one of the insurance people that I spoke to said that the insurance value should be less than the market value, since I'm not paying for location when rebuilding, so this may be an excessive amount. In a situation like this, you need to balance out (potentially) wasted money with goodwill to the lessor.

After I'd arranged the initial policy, I realised that I forgot to mention C&G and the lessors, since their (financial) interest in the property had to be noted. As a general guideline, it's definitely worth organising this type of thing properly, since it's easier to set it up properly at the start than it is to modify the policy afterwards. Something else to be aware of is that some insurance people are more helpful than others, even within the same company. So there's a definite benefit to calling back if the first person can't help. For instance, the first person that I spoke to said that I'd have to wait for the documents to arrive by post, whereas the second person agreed to fax my solicitor within 2 hours. Since I was already running late on this, that was very helpful to me.


Here is a list of the various stages that I went through. There were brief flurries of activity, interspersed by long periods of waiting. One general issue is that the post normally arrived after I left for work in the morning, which slowed things down a bit. I did view another property before I saw this one, but I haven't given details here, since it's not directly relevant.

This list is fairly long, so a quick summary - I made an offer on 14th January, exchanged contracts on 17th March, and completed on 30th March.


Friday 9th: Found the flat on the website, but the estate agents said that lots of banks wanted 25% deposits because of it being above a shop. Applied for a decision in principle on the C&G website.

Saturday 10th: Looked at the flat from the outside. Also wandered round the area, making a note of estate agents website addresses from their windows.

Monday 12th: Got a decision in principle from C&G ("yes"), phoned estate agents, arranged a viewing for Tuesday evening.

Tuesday 13th: Viewed the flat.

Wednesday 14th: Phoned estate agents and made an offer. This was accepted, and I started the full mortgage application on the C&G website. The estate agents recommended a solicitor to me.

Thursday 15th: Spoke to solicitor, he said from exchanging contracts -> completion is typically one month, and can be just two weeks.

Friday 16th: Spoke to estate agent, no chain.

Saturday 17th: Received a letter from the solicitor, providing a quote for his services.

Monday 19th: Posted letter to solicitor with £250.00 cheque.

Tuesday 20th: Received letter from estate agent. Flat marked as "under offer" on

Wednesday 21st: Had a call about the survey (left on answerphone), and C&G documents arrived.

Thursday 22nd: Returned call from surveyors; turned out that they'd got my number instead of estate agent's number.

Friday 30th: Got payslip back from C&G. Had a message on the answerphone (landline) from Frost Brothers.

Saturday 31st: Phoned estate agent - they just wanted to check whether there was any progress on my mortgage application, but I said no. It turned out that they'd got my landline and mobile number the wrong way round on their form, so they corrected that.


Thursday 5th: Budget analysis form arrived in the post. Filled it in, sent it back (1st class pre-paid envelope enclosed).

Friday 6th: Got a letter from my solicitor, saying that the vendor's solicitors haven't sent a draft contract yet. Also got a letter from BBG Surveyors (quote, information pack).

Saturday 7th: I filled in the surveyors' instruction form, and posted it back, with authorisation for them to charge £350.00 on my credit card. I'm getting a "SecureMove" survey.

Monday 9th: Call from estate agents. They were a bit confused about my survey (booked for Thursday), since there had already been a surveyor round. I guess that if I'd been more organised then I could have arranged for the bank's guy to do a report for me, to save two trips. I updated them on progress of mortgage application, and they confirmed that the vendor isn't waiting for anything from me.

Wednesday 11th: Another letter from solicitor. The vendor's solicitors haven't sent him a draft contract yet, because they're waiting for more specific information from the vendor. So, it's the other guy who's slowing everything down. Hope he isn't holding out for a better offer.

Saturday 14th: Received a copy of the mortgage loan agreement from C&G. I read this, signed one copy (witnessed by flatmate), and sent that copy to my solicitor. Retained other copy for my own reference. Meanwhile, they have apparently sent a Mortgage Deed to my solicitor, which I need to sign. No change in status of application on website.

Thursday 19th: The surveyors posted their results to me.

Friday 20th: I phoned my solicitor - he now has the info he needs.

Saturday 21st: Got survey report through. Phoned estate agent. Tried to phone electrical engineers, but they only work Mon-Fri.

Monday 23rd: Phoned electrical engineers, arranged inspection. They said they normally have a 7-day turnaround (often faster), which is good.

Tuesday 24th: Had a call from the estate agent - the vendor says that the leak is fixed, and the jug was just left there from a few weeks ago. And the electrical engineers have phoned them to arrange an inspection this week - Monday? Wednesday? Should have written that down... Also had a letter from the solicitor when I got home, with a draft copy of the lease.

Thursday 26th: Posted letter to solicitor, saying that I'm happy with lease and fixtures list. Got a letter from him (crossed in the post), referring to the surveyor's report.


Tuesday 2nd: Got a letter from the electrical engineers, with the results of the inspection. A lot of technical stuff that went over my head ("Type of Earching: TN-S"), but the summary at the end said "satisfactory" which is good.

Wednesday 3rd: Wrote to solicitor, to tell him about the results of the electrical tests, and saying that I'm happy to exchange contracts, so I'd like to complete as soon as possible.

Thursday 11th: Need to pay deposit to solicitors via bank transfer or bankers draft (£4997.50). They provided me with their account details, and a reference for me to use (my name). I couldn't do an online transfer, because there are two options: payment to a company or to an individual. They didn't appear in the bank's list of known companies, so I couldn't take that option. If I specified their details as an individual, I couldn't enter a reference, so they wouldn't know who the money was from. My bank contacted the solicitors to set this up, but I didn't hear back from them, so I decided to get a draft instead. I arranged to meet the solicitors the following Tuesday to exchange contracts, and they told me to bring my passport with me.

Tuesday 16th: I got a banker's draft, and went to see solicitor to exchange contracts. There were a couple of minor typos in his letters ("leek" and "John P Kirk") - he amended the latter with biro. The contract also referred to a 10% deposit - he said that I needed to sign it, and that when he spoke to the vendor's solicitors he'd change it to 5%. He said that this didn't commit me to a 10% deposit, and he was correct, but it made me a bit uncomfortable. I asked for a copy of drainage report (about £40), mainly for completeness. the solicitor seemed a bit surprised (although he'd suggested it), so I'd guess that most people don't bother. I never actually heard anymore about this, so I'm guessing he forgot about it. The solicitor was supposed to call me later that day to tell me when we can complete. I tried to call him at about 16:30, but he was on the phone, so I left a message.

Wednesday 17th: Spoke to solicitor at about 9:30 - no exchange of contracts yet. He had a call from the other solicitor yesterday at 17:25, and then when he called back he got an answerphone. Therefore no completion date either. Had a call from solicitor later (on work landline) - vendor offered 30th March as a completion date, which I accepted, so he's now going to exchange contracts.

Thursday 18th: Letter from manager at estate agent, confirming the flat purchase. He said that they can only release keys on the completion date when instructed to by the vendor's solicitors (i.e. I can't turn up there at 9am and demand them).

Tuesday 23rd: Letter from solicitor, confirming the exchange of contracts, and acknowledging receipt of insurance details. The main purpose of the letter was to request a cheque for £1,922.64 to complete the purchase.

Wednesday 24th: Wrote back to solicitor, enclosing cheque for £1922.64.

Thursday 25th: Sorted out BT line (the other guy is cancelling on the 30th, so I'm starting the same day).

Saturday 27th: Received a letter from my solicitors, confirming receipt of my cheque and the updated insurance policy.

Tuesday 30th: Call from Frost Brothers at 11:10, telling me that it's all completed, and I can come and collect keys. Went down, collected keys from estate agent. Nothing to sign, no proof of ID required, just "here you go, bye". So, that was easy! Phone was connected properly.


Saturday 3rd: Letter from solicitor saying that everything's finalised, and a similar one from C&G (first mortgage payment due today, a bit higher than usual). Also, water bill.

Friday 9th: Saw that the solicitors firm was showing up in my "transfers and payments" list in internet banking. Not sure when it appeared.

Friday 23rd: Status of flat on website shifted to "sold".

Sunday 25th: Wrote to Croydon Council (two separate letters) about joining the electoral roll and paying council tax. I downloaded the electoral roll form from the website, whereas they sent me the council tax form.

Fri 30th: My flat was removed from the website.


Sunday 2nd: Received council tax bill, but addressed to "The Council Tax Payer" rather than to me specifically. Also a letter from C&G enclosing the lease, and a letter from my solicitor saying "everything's finished now, and do you want a will?"


Tuesday 1st: "For Sale" sign gone from outside flat.


I have now completed everything, so I'm officially the owner of this flat. I decided to have some building work done before I moved in, which wound up taking longer than expected - I'll create a separate web page for that later. I'm also developing some software to help with room planning (i.e. working out where to position furniture), and to solve the "Dirk Gently problem" of whether a sofa will fit up your staircase. These will be available for free download once they're finished.

This page was last updated on 2004-08-24 by John C. Kirk

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