Sunday, October 7, 2012

House Week Part 6: The Fine Print

To wrap up House Week, the last piece of the puzzle to put in place is how we made the house ours. As I said yesterday, we saw the house in late April and it piqued our interest. We saw it on a rainy day and it felt so cozy, and unlike anything we'd seen before, that it really stuck with us. So we scheduled a second viewing for the next week to see it again and decide whether or not it was something we were serious about. After that second viewing, we called the estate agent and made our initial offer.

The offer was of course rejected, and we decided to take a different tack than our previous property negotiations; we basically decided what our highest offer would be and just went in with that. If the seller ended up wanting more, we would walk away. The agent took our offer to the seller and she accepted it, but with the condition that she was waiting to hear on an offer of a property she wanted in Wales. If she didn't get the property, she might not sell the house at all. We went into the first Bank Holiday weekend on tenterhooks, waiting for a call letting us know whether there would be a deal – or not.

The Irishman got a call the next Tuesday from the estate agent, and it turned out that the seller didn't get that particular house in Wales... but she wanted to go through with the sale! We were ecstatic, but had been burned before, so we just quickly went into business mode to lock down the purchase. We called our lawyer, got him in touch with the seller's lawyer, and started talking about the possible dates for exchanging the sale contract and completing the sale, and we spoke to our mortgage broker about getting the load finalised. The seller was moving to Wales for personal reasons, and needed to be in a new home fairly soon, so she wanted to hurry the purchase along as quickly as she could. We were happy with that, but knew nothing would be final until the exchange of contracts; exchange, as it's called, is the moment the sale becomes legally binding – until that point, either party could pull out of the sale with no financial penalty. Luckily for us, the seller wanted the house listing pulled from the estate agent's offices and websites so that any sellers of homes in Wales couldn't track her sale and find out how much money she would be getting. This was good for us because it meant there was little chance of us being gazumped - that is, somebody else coming along and offering more for the house and pulling it out from under us.

The next steps for us consisted of a lot of waiting. The lawyer proceeded to conduct a document search on the property with Hackney council; this is to make sure there aren't any series legal issues with the house itself (liens against it, all works were conducted safely, etc). These searches tend to take around 2 weeks, but unfortunately for us Hackney's computerized system went down over Christmas 2011 and probably STILL hasn't been fixed. They advised us there would be delays as the searches had to be performed manually and there was a significant backlog.

Meanwhile our mortgage broker came back to us with good and bad news: the good news was that there were several good deals going on mortgages, fixing low interest rates for up to 5 years even for buyers putting down low deposits. We wanted to go with a fixed rate for stability. Even though mortgages are really cheap on tracker loans that follow the Bank of England base rate, we wanted to know exactly what our monthly outgoings were going to be for a set period of time. As we were putting down a 15% deposit and will need to repay our respective parents for the loans, we wanted to be sure that we could afford to do both in the event of a dramatic interest rate rise should the economy pick up.

The bad news our mortgage broker had for us was that we probably weren't eligible for any of those deals given my non-resident status. When we first started working with this broker, he was confident that given my length of stay in the UK, my job, my salary, etc, we wouldn't have a problem being accepted for a mortgage. We easily got an AIP for a hefty sum early on in the process with Halifax, which is considered a good lender and made us look like excellent prospects as buyers to estate agents. However when it came to shopping around for the best deal on mortgages, I was considered a risk or "an exception" for many banks and lenders. Our broker was good at knowing which banks we couldn't approach at all (Santander) and which ones he might be able to sneak us through using his connections (Northern Rock). But at the end of the day, because of the lack of lending in the market overall and the volume of mortgage applications being submitted for good deals, most banks were not reviewing exceptions and we weren't able to take advantage of the deals. We ended up getting our mortgage with Halifax, which is apparently the only bank who will lend to non-permanent residents, with an interest rate at least 1.5% more than the next option.

I wasn't pleased, to be honest, because I felt like my expat status was again costing me more to do normal life things. The Irishman genuinely rued that he hadn't asked me to marry him sooner so that we could save money on our mortgage (romantic), because all the bank wanted was a piece of paper I am 6 months away from obtaining. We actually located a specialist Tier 1 immigrant mortgage broker for a second opinion, and he kindly reviewed our offer and basically said to go with it as he couldn't get us anything better. At this point, we were under quite a lot of pressure to finalise the mortgage because the mortgage company needs to perform a survey of the house before the loan is agreed and the seller hadn't had the surveyor come through yet. Her lawyer started chasing us up, worried that the sale wouldn't go through, and we had to fast-track the mortgage process to reassure her we were committed.

Once the loan went through, we basically spent the summer waiting. We didn't hear from Hackney council on the searches until the end of July and when we did we got bad news: there were concerns over the legality of some of the building works that had been done to the house (things that were the reasons we were buying the house). So again, we had to again while the seller and her lawyer investigated the issues. It wasn't 100% resolved for us, but the seller took out an insurance policy for us that protects us against the loss of value of the property if something were to go wrong. Our lawyer advised us that was good enough, and we moved forward with the sale.

Because of the seller's timeframes in trying to move into a new place quickly in Wales, we had to fast forward the sale process bigtime after all of the delays during May, June, and July. We exchanged contracts around the first of August, and completed on the 10th. Usually people exchange contracts and have a longish wait to move into their home; we had 10 days to pack up and move! We also only had 10 days to transfer funds globally. Because we weren't sure whether the sale would go forward, I didn't move money from the US until we were locked into the sale. I had money in mutual funds and an IRA, the latter of which I will have to pay a tax penalty on for emptying before a certain age, and I didn't want to incur those penalities unnecessarily. So I liquidated those accounts and then had to figure out the quickest and least expensive way to get the funds from the US to the UK. I ended up writing my dad a check for the money, and he had Bank of America wire all of the funds to me in the UK – there was a $25 charge, I think, and it arrived in 3 days. I also had to go to the bank I had an ISA with in the UK to transfer the balance; the sum was too big to do online or over the phone.

At this point, all of the money becomes funny money; the number of zeros is laughable and the value is more as quantities on a spreadsheet rather than actual money you own. It's a weird feeling. Especially because the money is just going going going every which way. Here's a short list of the funds you need to proved on the day you complete the sale:

  • Down payment (15% of total agreed house price)
  • Stamp duty (3% of total agreed house price – this is in addition to the price of the house)
  • Mortgage fee (the price you pay for the privilege of getting a mortgage, around £1000)
  • Lawyer's fees
Like I said, funny money – you get rather blasé about the whole thing after a while, probably as a coping mechanism for dealing with the sheer amount of money you're spending in one fell swoop.

The day we completed the sale, I thought I would be giddy and feel some sort of amazing relief. But I had a rather busy day at work and The Irishman cycled to the estate agent's office to get the keys alone. I met him after work and we immediately went to IKEA to buy a bed for our guest room, as we needed something to sleep on for the first few weeks until our new bed arrived. I had dreams of doing the whole "Chinese takeout sitting on boxes with cheap champagne" romantic new homeowner moment, but we didn't have time! We had to finish packing so we could move into our new home the very next morning.

So there you have it! That's how we bought our home. Friends of mine in the US tell me this process is so different from how it's done in America but I have nothing to compare this experience with. Obviously I learned a lot about the UK property market and house buying process, so if you have any questions please feel free to post them in the comments or email me personally.


  1. I'd love to see pictures of the house! Congrats!

    1. Hi Andrea - your wish is my command - I'll post some photos of the house and our DIY/renovation plans this week xx

  2. SO MANY QUESTIONS STILL that are mostly not relevant because we're at least a year from renting a house/flat together (damn international love and bureaucracy) but ONE IMMEDIATE QUESTION:

    when you say "The Irishman genuinely rued that he hadn't asked me to marry him sooner" does that mean you're engaged !?!?!?

    1. HAHAHAHAH no... Don't you think you would have heard about by now ;)

    2. Also I totally knew when I wrote that sentence that somebody would think that! It's just that's exactly what he said. Oh well!

  3. This is so interesting and i'm definitely going to bookmark it so I can return to it whenever I buy a house! Glad you are settled in now :)

    1. Hi Beth, thanks for reading and for your comment - love your blogs! xx

  4. So glad that everything worked out for you guys. I'm a bit of a real estate junkie, so I've enjoyed reading your posts. Buying a house in the US sounds a whole lot better than the seems that there are more protections for buyers in the US. I can't believe how the estate agents take advantage! Ethics, anyone? In any case, congratulations and I hope you guys enjoy your house for many years to come.