10 steps to buying a home

Step 2: planning your finances

Having as big as a deposit you can comfortably afford means you borrow less and will pay less interest leading to lower monthly repayments. The more you can save for a deposit, the less you will have to pay back in the long run.

This is why it is a good thing to start saving early.

Three things affect the amount that we will lend you:

1. The market value/purchase price of the property
2. The loan to value of the property
3. How much you can afford

When buying a property, your mortgage is not the only cost you will have to consider. There will also be valuation or survey fees, an arrangement fee (if applicable), legal expenses, stamp duty (document duty in Guernsey and Alderney, recordal fees in the Isle of Man), and insurance cover. If you are selling an existing property there may be estate agent fees too.

How much can you afford?

We will help you to work out all the various costs before arriving at a final figure.

Your Mortgage Arranger will be able to calculate the actual amount your mortgage will cost, and help you to plan your budget accordingly. Together you will ensure that you can comfortably meet your repayments.

As a general rule, your monthly mortgage (and other monthly financial commitments) should not be more than half your monthly income after tax.

Step 3: which mortgage suits you best?

A repayment mortgage

This is the most popular type of mortgage. With this type you repay part of the capital each month along with interest on the outstanding balance. So your payments will gradually reduce the mortgage over an agreed number of years. It will be repaid in full by the end of the agreed term so long as you make each payment when it is due.

An interest only mortgage

When you have an interest only mortgage, your monthly payments only pay the interest charged on the amount you borrowed. This means the interest only balance (the capital) doesn't reduce and you'll need to have separate plans to pay this amount by the time your mortgage ends.

There are two types of Repayment and Interest Only mortgages:

1. Fixed Rate Mortgage

Unlike most mortgages, where the interest rate can change, increasing or decreasing your monthly repayment, a fixed rate mortgage stays at a constant rate for a given period, typically two, three or five years, no matter what happens to general interest rates. Therefore, with this type of mortgage, you will know how much your monthly payments will be.

This could be particularly suitable for a first time buyer, who would appreciate the ability to budget expenditure. You can choose (from the current range of options) how long you would like the mortgage rate to remain fixed for, with the confidence that whatever happens to interest rates in the meantime, the rate you pay stays the same.

A redemption/partial repayment charge will be made if, during the period of the fixed rate, you either redeem the mortgage in full or make a part repayment.

2. Tracker Mortgage

With our range of tracker mortgages, the rate you pay will be set at a fixed percentage above the Bank of England base rate depending on the amount borrowed.

Whenever the base rate changes, the interest rate you pay will follow within one month. The amount of your monthly payment is reviewed regularly.

Tracker Products - If your product tracks a rate, such as Bank of England base rate, and that rate falls below zero, we will not change your margin. However if the combination of the tracked rate and the margin means that your interest rate does fall below zero, your interest rate will ‘instead’ be zero, until the combined rate goes above 0% again.

How much will I be paying?

Unless you have a fixed rate mortgage, the amount you pay will depend on the interest rate charged. Your monthly payments may vary from time to time as mortgage interest rates go up or down.

You could repay some of the capital borrowed earlier than originally planned – either by increasing your monthly repayments, perhaps when you receive a pay rise or promotion, or in one or more lump sums, perhaps after receiving an inheritance or following the maturity of an investment.

This will enable you to reduce your monthly interest payments. However, if you make an early repayment on some types of mortgage there will be an early repayment charge. Your Mortgage Arranger can provide more details.

Still not sure about the most suitable mortgage for you?

We are able to combine the various types of mortgage we offer. You can discuss the alternative options with your Mortgage Arranger (although we do not offer advice).

Step 4: looking for a property

Decide what type of property you are looking for – a house or a flat, freehold, leasehold or share transfer.

Normally a house is sold freehold, which means that you own it entirely, for as long as you like.

Flats may be purchased in a number of ways, including Freehold, Flying Freehold, Leasehold and Share Transfer. Your legal advisor can explain the differences and how they impact ownership.

Once the lease has come to an end the property reverts back to the freeholder. Therefore it is important to have a lease of sufficient length if you wish to sell the flat later. This will also affect our lending decision.

During the period of the lease the freeholder will maintain the structure of the overall building, which includes the flat and the surrounding land. You will be charged a 'ground rent' or 'service charge' each year for your share of these costs.

Viewings

When you are considering buying a home it is a good idea to visit the property at different times of the day to find out, for example, if the street is noisy at night or whether it is particularly busy at lunchtimes.

Don't visit only when the sun is shining. If you visit during a storm, you may be able to spot a leaky roof or poorly fitted windows.

Making notes on the particulars, if you are buying through an estate agent, can be very useful and help you to compare properties. It is also important to check for things like damp. Issues like this can cause delays or extra costs later in the process.

Where to look

Once you've decided which type of property you would like to buy, you can begin the search.

Existing homes

There are three main sources of information available for purchases of existing homes:

1. Estate agents

As a home buyer you do not have to pay estate agents' fees, but you should remember that agents act for the seller. Once you have explained to them what you are looking for, they will be able to provide you with details of any suitable properties and make appointments for you to see them. You will normally negotiate the price with the estate agent rather than the seller. It is a good idea to contact several estate agents and ask to be put on their mailing lists.

2. Advertisements

Occasionally, people wish to sell their homes themselves rather than employ an estate agent. You will normally find they advertise in their local newspapers and if you reply you will find yourself dealing directly with the seller. Most advertisements, however, tend to be placed by the owner's estate agents.

3. Social media

Social media such as Facebook and Twitter can be an effective tool for finding and viewing properties as they first come on the market.

New homes

If you are interested in buying a new home, you may be able to approach the builder directly so that you can benefit from any discounts or free fittings, for example kitchen appliances or carpets, that may be on offer. Builders normally advertise their properties through local newspapers and sometimes through local estate agents.

One advantage of buying a new home is that you avoid 'chain' problems, which often occur when the seller decides not to sell because his or her purchase has fallen through. Buying a new home also gives you a 'clean slate' to work with.

Step 5: making an offer

Once you've found your ideal home, you can make a formal offer. The amount you offer should be based on how much you can afford, how much the property means to you and how you would feel if someone 'outbid' you with a higher price as well as the market value of the property.

Before you decide what to offer, it is a good idea to check how the asking price compares with neighbouring properties, how long the property has been on the market and whether the seller has found somewhere else to buy.

Many sellers fix their asking price above what they would be willing to accept because they expect potential buyers to offer less than the 'advertised' price. Don't be afraid to negotiate. You can always increase your offer and carry out any price negotiations through the estate agent or builder, but if you are buying privately, you may agree the price directly with the seller or the seller's advocate/solicitor.

Once you have agreed a price, you should tell your advocate/ solicitor. Remember that making and accepting verbal offers may not be legally binding and therefore neither you nor the seller would be committed to the purchase at this stage.

Always take legal advice before signing any documents or paying any deposit.

Step 6: applying for your mortgage

Once your offer has been accepted, you will need to finalise the arrangements for the mortgage with your Mortgage Arranger. Mortgage application forms are available from all our branches, but we would advise you to complete it with the help of your Mortgage Arranger.

To ensure your application progresses as smoothly as possible, it is important to bring all required paperwork to your appointment with your arranger.

When meeting your Mortgage Arranger to complete the application, or if you are handing in the completed application, please ensure the following original documents are also provided, if applicable:

• proof of identity and residence, such as the original or a certified copy of your full passport, or your full driving licence, or any other official document containing your photograph and signature
• three months’ bank statements for all accounts that you have
• your last three months’ payslips (if you are salaried) or last 12 payslips (if you receive weekly pay)
• your National Insurance card or number
• details of your existing mortgage if it is not with Lloyds Bank International, the amount borrowed and the date your mortgage started and the outstanding balance
• three months' credit and store card statements (if applicable)
• details of any other loans, your original loan agreement and the current balance of your loan(s)
• if you are self-employed – your last two years’ certified accounts and your personal income tax assessments for the last two years
• details of the property you want to buy such as particulars from the estate agent/builder, or the address, purchase price and estate agent’s details
• the name and address of your advocate/solicitor
• details of any existing life/endowment policies and investment products that you may have
• confirmation that you have the deposit that you intend to put down on the property
• confirmation of last three years of bonuses
• rental income confirmation
• if you are a resident in Jersey you will need your registration card
• if you have received funds in the form of a gift, you will need a letter from the donor stating that the money is a gift and is not expected to be repaid
• confirmation of your repayment vehicle if you are choosing an interest only mortgage.

The original document can be given to your Mortgage Arranger who will be happy to photocopy and certify it for you.

Step 7: surveying the property

When you apply for your mortgage it is important to check the value of the property that you intend to buy.

Valuations

As a lender we also need to make sure that it is worth more than the amount you wish to borrow. Therefore, before we can complete your mortgage we will need to have a 'lender's valuation' carried out by a valuer acting for the bank, selected from an approved panel of valuers. You can find a more detailed explanation of this and other types of valuation below.

Please bear in mind that once the survey is commissioned you must pay for it whether or not you proceed with the purchase and whether or not the property is suitable as security.

Lender's valuation

This is the cheapest option and the minimum we require for a Lloyds Bank International mortgage.

This is simply a valuation that helps us to decide how much we can lend. It will not necessarily highlight any structural problems and you should not rely on the valuation to decide whether to buy the property or to determine how much you should pay for it. We strongly recommend that you have a more comprehensive survey done for your own peace of mind.

Homebuyer's report

This is a 'mid-priced' option and is appropriate for most people because it provides enough information to highlight potential problems and could influence your decision to purchase the property or help you negotiate a lower price. It is less detailed than the full structural survey, but includes an inspection on the general state of repair and condition of the property and, provided it has been carried out by a Lloyds Bank International approved surveyor, will also be acceptable as a valuation for mortgage purposes.

Full structural survey

This is the most expensive of the three options but is well worth considering. If you are buying an old property or one that you think will need extensive repairs or alterations, this type of survey will bring to your attention any structural work that needs to be done and may prove invaluable in helping you to avoid costly mistakes or to negotiate a lower price if any problems are revealed.

A full structural survey can also cover the requirements for a mortgage valuation providing you use a Lloyds Bank International approved surveyor and let us know about the survey in advance.

Your Mortgage Arranger should be able to give you an indication of the costs for each type of survey.

When purchasing a flat in a block building, the valuer may have issues accessing the whole property. This should be considered and checked when deciding on which type of valuation to get.

The mortgage offer

Once your application has been accepted, we will normally make a mortgage offer based on the purchase price. However, if the valuation is lower than the purchase price, we will only base our mortgage offer on the valuation figure.

You will receive your offer in the form of a letter from us which sets out the details of the mortgage such as the interest rate, payment method, mortgage term and repayment amounts.

Step 8: legal process

Before the purchase of your new home goes ahead, a legal advisor will need to complete all the legal work for you – a process known as conveyancing.

A legal advisor may be an advocate/solicitor/conveyancer.

Before you make a decision, do ask for an estimate as to what the legal fees will be.

Your legal advisor should carry out a number of searches and enquiries on your behalf, such as:

• checking the title documents to make sure the property is owned by the seller and can legally be sold
• making sure there are no proposed developments that could affect the property, such as a road widening scheme (only in Jersey and IOM)
• ensuring that there are no breaches of building regulations or planning legislation (only in Jersey and IOM)
• checking for any restrictions on the way the property is used, such as rules covering TV aerials, satellite dishes or commercial vehicles (only in Jersey and IOM)
• ensuring finance and surveys are in place before advising you to place a deposit.

Step 9: insuring your home

Home insurance is compulsory when taking a mortgage and must be in place when you legally transfer. This can be several days or weeks before you actually move in.

Ensuring your property has adequate insurance cover is not the only thing that you should consider. You should also ensure that you have sufficient cover in the event of your death, illness or disability. We do not offer home or life insurance, for further information please speak to an independent advisor.

If you have a family or plan to start one, you need to ensure that, should you die, they will not be left with the mortgage debt. Insurance is available to cover almost any eventuality, and making certain that you are well covered is nearly as important as making sure you have the right mortgage.

Buildings insurance

This will cover the bricks and mortar of the property and it is vital that you have your policy ready to take effect as soon as you become legally responsible for the property.

Life assurance

It is particularly important that you consider this when taking out a mortgage. You can arrange life insurance that will pay off your outstanding mortgage in the event of your death so that your family will not be left with this financial burden. Some policies also offer the option of serious illness and disability cover, which will pay off your mortgage if you are diagnosed as having an illness or disability covered by the policy.

Contents insurance

This will cover the contents of your home against a wide range of threats including fire, flood, malicious damage and theft.

You will normally want to have cover from the time when you move your belongings into the property. Contents insurance is something we strongly recommend you get, although it is not a legal requirement.

Bear in mind that if you're buying a flat, it is likely that the landlord/co-owners' association or share transfer company will be responsible for insuring the building rather than you personally. Your legal advisor can advise you accordingly.

Step 10: moving in checklist

Set a date

First you need to decide on the date that you can move into your new home and agree with all parties. This is particularly important if you have a place to sell and need to co-ordinate a date with the people moving into your existing home. Matching your dates will prevent you from having to pay for two properties. Should you be currently renting, you will need to give your landlord a leaving date.

Book the removers

If you are hiring a removal firm to move your belongings, obtain quotations from a number of firms and make a provisional booking. Some removers will also pack for you, which may be advisable. See the section on packing below. If you are looking to hire a van and carry out the move yourself, you should also book it early. Make sure your belongings are insured during transit.

Contact services

Before you move you will need to contact all services – electricity, gas, telephone and water – to arrange final bills and reconnection at your new home.

Send out change of address notifications

Start letting everyone know that you are moving.

Order carpets and furniture

You may wish to measure up for new carpets and curtains; however, it is wise not to commit yourself to ordering until after the completion date (or after conditions of sale have been signed in Guernsey and Alderney) in case the purchase falls through.

Start packing

Approximately two weeks before you move, start packing everything except necessities and last-minute items. Some removers will provide you with boxes for this, but if your removal firm will not take financial responsibility for breakages unless it has packed everything itself, leave the packing to the removers. Remember to have all the essentials to hand for moving day itself.

Moving can be hard work, particularly if you decide to do all the moving yourself. Planning ahead will help everything to go smoothly.

Lending is at the Bank’s discretion and you must be 18 or over and resident in Jersey, Guernsey, Alderney or the Isle of Man to apply. Security will be required.