Budget Needed For Buying An Overseas Property In London

If you are thinking of buying an overseas property in London, then there are a few essential steps you’re going to need to take in order to accomplish this. In this article, I’ll be walking you through the buying stages you need to know in order to achieve that great investment or second home in London.

Know Your Budget

Property in the city itself is a matter of compromise. For example, as an American, a one million-pound budget may provide a large multi-bedroom house in many places in the states, while in London you might have to settle for a one- to two-bedroom flat in most parts of Central London.

Stamp Duty

If you’re looking for a larger home, you’ll definitely need to look well outside the city centre. You’ll also need to consider the fact that London properties are subject to stamp duty. This is a set tax that you have to pay on top of your property purchase price, which starts at two percent but can go up to well over 12 percent depending on the price of the property, how you purchase it, and whether you’re an overseas buyer.

Stampede surcharge

If you’re planning to buy investment property in London as a buy-to-let, you’ll be required to pay an additional three percent Stampede surcharge on the cost, and there might be an additional surcharge as a foreign buyer.

Potential Ongoing Costs in London

Next, you need to understand your potential ongoing costs in London. There are a variety of different ongoing costs depending on the property you’re planning to purchase. Some examples of ongoing charges include service charges. When you’re in a building that’s shared by others, you’ll be responsible for paying your proportionate share of communal upkeep.

The service charge, at a minimum, will include the building insurance but normally goes beyond that to cover communal cleaning, porterage service, and for modern properties, amenities like a gym, pool, resident cinema, etc.

Ground Rent

Then there’s ground rent, which is an annual rent paid to the freeholder who owns the underlying land.

Council Tax

Next is council tax, which is different from area to area. You have to check the council tax for the neighbourhood where you’re going to consider buying, but in essence, it covers the communal services of that area, such as trash collection, police lights, etc.

TV licence

Then you’re going to have to consider a TV licence, which is a required annual cost for a TV or a computer. Even if you don’t own a TV, you’ll also have utilities such as water, gas, and electricity.

Income Taxes As A Landlord

If you’re planning to be a landlord with rental property leasing, then your income will be subject to income taxes. From the 2022–2023 tax year in England and Wales, you’ll be taxed on earnings falling between your personal allowance and income.

There are many tools using which you can get an estimate of the budget of buying a property in London. You can use an estimating affordability tool for this.

Find a Good Mortgage Advisor

Next, you need to find a good mortgage advisor if you’re planning to buy a property in London and require a mortgage. You’ll need a good specialist mortgage advisor to help navigate the mortgage process in the UK. The compliance rules are really challenging, so it’s important to find a specialist mortgage advisor who will be able to look through the entire market of options available to you as a foreign buyer.

It will save you a lot of time and stress, as well as having somebody on your side who’ll be able to assist you in purchasing the property at the best rate. You’ll need to find someone who can help you navigate the London property market, which is uniquely different.

What Does The Buying Agent Do?

While you can certainly do this on your own and have to deal with multiple agents who don’t really work on your behalf, if you are planning to buy a property in Hornchurch, consider Estate & Letting Agents in Hornchurch. They can navigate the process and will actually work for you.

  • Shortlist properties as per your budget.
  • Offer Insights
  • Recommend the best areas to look at.

Making An Offer

Once you review the properties and select one you’d like to purchase, you have to make an offer. You can do this yourself or with your buying agent. If the offer is rejected, you’ll need to make an educated decision on whether you want to increase your offer or walk away from the property.

It’s best to discuss your budget and get feedback from your agent as to whether the property is worth increasing the offer.

Arrange A Solicitor And Survey

Once your offer is accepted, you will need to arrange for a solicitor and book a survey. A solicitor-conveyancer attorney will handle the legal and title mark around the property.

They will liaise with a seller’s solicitor on any issues that arise and also submit searches to the local council to check whether there are any planning or local issues that might affect the property’s value.

There will also be a requirement from your mortgage lender for an evaluation survey to be conducted. They will arrange this with their own surveyor. This usually includes the mortgage itself, but you might be charged for the survey depending on the mortgage you select.

While you have to pay for these things as part of the purchase process, please note that your offer is not legally binding until you exchange contracts, which could be weeks or months ahead and after all the due diligence is done.

Exchange of Contracts

It is the final stage of the property purchase process. You’ll receive your contract reviewed by your solicitor, who will highlight any issues, and if you’re prepared to sign, then do so.

At the exchange of contracts, you’re legally bound to purchase the property, and you’ll pay 10 percent of the purchase price as a deposit to be held with your solicitor until completion

At completion, you have to pay the remaining money owed on the purchase property as well as any fees that are now due. On completion day, your solicitor will arrange for the transfer of ownership with a land registry or title for properties in England and Wales. They will also file the stamp duty land tax return and pay any stamp duties due.

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