The Regulations You Need to Be Aware of When Buying a New Home

Buying a home is both exciting and terrifying at the same time. It is a process that can throw surprises at you along the way, that can become increasingly expensive the more you dig and yet can leave you residing in your dream property when it concludes.

There are few regulations placed upon you as a buyer, but there are aspects of owning a home you should be aware of before you decide to purchase, especially if you are buying an older home. If you are purchasing a new build, then there is less likelihood of complications from a survey, although you should still have certain criteria satisfied.

The main regulation you should find useful is the Energy Performance Certificate, known as the EPC, which is mandatory for homes when they are built, sold or let. It covers aspects of thermal efficiency and gives your home a rating from A to G – A being the most efficient and thus likely to cost you less in energy bills. Now more than ever before, insulating your home is an important business, a topic we explored in our article Why is Property Insulation so Important?

As Property Industry Eye discusses, there is a drive to reintroduce a compulsory pack for home sellers, like the defunct Home Information Pack. It was a short-lived method by which a seller put together a pack of information about their home prior to it going on the market, much like a survey but conducted before a buyer had been found. They were compulsory until May 2010, but a similar project has yet to become mandatory in the UK. That means in terms of regulations, the only other ones you need to be aware of are directly affected by your survey, usually conducted by your mortgage company ahead of any purchase. These cannot be avoided, and they are intended to give your lender a clear picture of the property they are lending money against. These could throw up all manner of problems which need resolving before you are loaned money, or that you must pay attention to in the first six months of moving in.

Typically, older homes tend to fall foul of surveys, with electrics and damp being two of the key areas which you may have to look to carry out remedial work on. Electricity can be dangerous and in older homes, particularly those that have been advertised as ‘in need of modernisation’, you may have to have a full rewire carried out. Even if you only need certain parts of the system looked at, the NICEIC regulations are far-reaching and demand a qualified contractor to work on the property. Failed wiring, fuse box breakdowns, or even broken power sockets are all serious problems facing homeowners at any time, but in a new property you may not be aware of previous problems or potential ones.

However, HomeServe outlines how with electrical insurance cover you can protect yourself from any unforeseen dangers, and against the cost of expensive repairs in the event of breakdown or malfunction. It is especially important to pay attention to this aspect of your home not only when you move in, but in the months after the purchase. It is somewhat ironic that if you bought a faulty TV and the problem became apparent a week after you purchased it, you could return it, but you are afforded no such protection with your home.

If you are asked to carry out work that involves your gas supply, you will also need to consult a qualified engineered, one who is CORGI registered. This is less likely on a survey but is still something you should consider. Regulations around plumbers, decorators, bricklayers and the like are not as stringent and there is flexibility for you as the purchaser, but being cautious is still advisable even if the project does not demand a specific qualification, as electrics and gas do.

In terms of regulations that cover what you need to be aware of, the randomness of the survey is something to keep an eye out for. Some properties may have asbestos that needs removing, others may have bats in the loft – both of which are covered by certain regulations. If you are in any doubt, make sure you opt for a more expensive and thorough survey, as it is usually an option, and carefully pour over the recommendations and suggestions contained within.

This way, you can enjoy your new home not only when you move in, but for many years to come.

How Much Does a Bridging Loan Cost?

Bridging loans can be a quick and easy way to get the finances you need to secure the purchase of a property, avoiding the often lengthy process of applying for a traditional mortgage.

Generally, bridging loans have a higher rate of interest than a traditional mortgage or loan, which can make them seem an expensive way to borrow money. However, the important thing to remember is that a bridging loan is only ever designed to be used as a short-term measure. Unlike a mortgage, a bridging loan is designed to be used for 3 to 24 months. The advantage of using a bridging loan is that you can receive your loan quickly in order to secure the purchase of a property.

How much does a bridging loan cost?

The interest on a bridging loan starts from just 0.44% per month. However, depending on level of risk associated with the loan or your credit status the interested may be higher.

For example:

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Client A is looking to refurbish a property which is on the market for £100,000 and then resell. The property needs £50,000 of refurbishments and it will take around 6 months to complete. He agrees in principle a bridging loan of £150,000 at an interest rate of 1% per month. With a bridging loan he becomes a cash buyer and is able to negotiate the property down to £90,000, so he now takes a bridging loan of £140,000. Every month he will pay £1,400 in interest, so the loan will cost him £8,400 in total interest while he renovates the property. Now that the house is renovated he sells for £190,000. Now he can pay the loan back in full and he has made a profit of £41,600 on the property.

It is worth noting that other fees such as the lender fee (2%), the broker fee (1%) and any additional solicitor and valuation fees you incur are payable on top of your interest.

How does this compare to the price of a mortgage?

There are a lot of factors that can affect the rates of a bridging loan and a mortgage, but generally a bridging loan will have a higher rate of interests. This does not mean that bridging loans are always the more expensive option. Bridging loans are only used for between 3 to 24 months, where as interest on a mortgage is usually paid for around 25 years.

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A mortgage is a good option for anyone looking to borrow money long term, paying off the purchase of a fist property for example. Whereas a bridging loan offers a quicker way for property investors or owners to bridge the gap between one property and another.

For example:

Client B wants to downsize from a £500,000 property to a smaller £350,000 property.  Instead of selling and then having to rent in the interim or apply for a mortgage and risk missing out on the house they want, they choose a bridging loan. They take out a loan of £350,000 to buy the new property, knowing that they will pay it off in full once the original property is sold. They borrow at an interest rate of 1% for 3 months, until the first property is sold. Their total interest payment is £10,500.

There are lots of factors that can affect the rates on a bridging loan and if you have questions the best thing to do is seek advice from a professional. By getting in contact with a bridging loan broker like Octagon Capital you can feel confident that you are getting the best possible terms and rates on your loan. Different lenders will offer different rates and terms, using a bridging loan broker means you can explore all these options and find the best loan.