Buying your first home: seven steps from budget to taking possession
A first purchase can be split into seven steps: work out your budget, understand the mortgage, view and compare flats, sign the provisional agreement, sign the formal agreement and apply for the mortgage, pay stamp duty, then complete and take possession. Each step has its own documents and payments to prepare.
Step 1: work out the cash you have and what you can afford each month
Start by separating two figures: the cash you must pay up front, and what you will pay each month afterwards. The one-off costs are the down payment, stamp duty, legal fees, agent's commission, renovation and removals. The monthly costs are the mortgage repayment, management fee, rates and government rent.
Keep several months of living expenses in reserve when you do the sums. Do not put all your cash into the down payment.
Step 2: find out how much you can borrow
The size of the mortgage depends on the loan-to-value ratio, your income and the bank's valuation of the property. The bank bases the loan on the lower of the purchase price and its valuation, so you can ask banks for a valuation before you make an offer.
Some banks offer mortgage pre-approval, which tells you roughly how much you can borrow before you start viewing. Pre-approval is not final approval: the bank will still assess the property after you sign.
Step 3: view and compare flats
When you compare, work out the price per square foot on the same measure of area, and note the age of the building, the direction it faces, the floor, the management fee and the travel time. At the viewing, check around the windows and on the ceiling for signs of water seepage, and find out whether the building has had any major repair plans in recent years.
- Confirm that the area shown in the listing is the saleable area.
- Ask whether the flat is sold with vacant possession or with an existing tenancy.
- Ask whether the building has received a repair order or is preparing for major repairs.
Step 4: sign the provisional agreement for sale and purchase
The provisional agreement for sale and purchase (the provisional agreement) is legally binding. It sets out the price, the deposits, the completion date and the condition in which the property is handed over. The buyer pays the initial deposit on signing. If you back out after signing, the deposit you have paid is forfeited and you may bear other liabilities set out in the agreement.
Before you sign the provisional agreement, check that the seller is the owner shown in the Land Registry's records, and see whether there is any undischarged mortgage or other registration against the property.
Steps 5 to 7: formal agreement, stamp duty and completion
After the provisional agreement is signed, the solicitors for the buyer and the seller prepare the formal agreement for sale and purchase, and the buyer pays the further deposit on signing it. You then apply formally for the mortgage, arrange the bank's valuation and pay the stamp duty within the time limit.
On the day of completion, the bank releases the loan to the solicitors, who pay it to the seller together with your balance, and you can take possession. When you do, check the condition of the flat, count the keys and note the water, electricity and gas meter readings.
| Stage | What the buyer does | Main payment |
|---|---|---|
| Provisional agreement for sale and purchase | Check the terms and the owner's identity, then sign | Initial deposit |
| Formal agreement for sale and purchase | Sign after your solicitor explains the terms | Further deposit |
| After signing | Apply for the mortgage and pay stamp duty | Stamp duty |
| Completion | Pay the balance and take possession | Balance of the price, legal fees |
Common questions
How much cash do I need for a first home?
The cash you need is the down payment plus stamp duty, legal fees, agent's commission, renovation and removal costs. The down payment depends on the price and the loan-to-value ratio you obtain. The stamp duty calculator works out the duty from the price.
Can I cancel after signing the provisional agreement for sale and purchase?
The provisional agreement for sale and purchase is legally binding. A buyer who does not complete after signing forfeits the deposit paid and may bear other liabilities set out in the agreement, so check every term before you sign.
When is stamp duty paid?
The agreement for sale and purchase must be stamped within a set time after it is signed, and the solicitor usually handles this for you. The actual time limit and the amount of duty are as published by the Inland Revenue Department.