Help for First Time Buyers
What You Need To Know
Why are First Time Buyers important
Looking for your first home - your first investment, can be a frustrating and, at times, soul-destroying task. Property prices always seem to rising faster than salaries. In addition, associated costs such as legal fees are also increasing sometimes faster than the rate of inflation.
Nevertheless, financial institutions continue to court first time buyers, with good reason. Without first time buyers, the whole property market would stagnate and so would mortgage providers' profits. Forward looking mortgage lenders need to take a long-term view of their customers' interests. If borrowers are treated fairly they are much less likely to shop around when looking for a loan on a new property. Over the long-term, retaining existing borrowers is much more cost effective than having to view for new borrowers in a competitive and ever changing market.
The First Step for the First Time Buyer
Before you start your search for your first property, some basic planning and calculations are essential. More than anything else, you need to know how much you can afford, which almost always means how much you can afford to borrow.
Points to consider
Most issues associated with the purchase of a residential property are not unique to first time buyers. However, if you have never been through the property purchase process, then there is a greater possibility that something might catch you out.
Two heads are better than one: When viewing a property, take your partner with you. You will have a great deal to absorb in a relatively short period of time, during a viewing, and it is easy to miss what may turn out to be critical details in the heat of the moment. Your companion may have noticed things that you did not and vice versa. If you feel that you have not taken in the whole picture regarding the property, arrange a second viewing.
Initial costs: Be sure to calculate ALL the preliminary costs associated with your property purchase. Most buyers remember to include solicitors fees, real estate transfer tax, brokerage fee and mortgage arrangement fees but do not always allocate enough money to cover furnishings (and remedial building work in an older property).
Amenities: Decide what type of amenities matter to you. Do you want to be near shops, kafenia and taverns or would closeness to the sea or the Locals matter more to you buying the right property is not simply a matter of bricks and mortar.
Public transport: Being close (but perhaps not too close!) to a main bus route is beneficial, especially if do not want buying or renting a car during your stay.
How much can I borrow?
The first thing you need to consider when buying a property is how much deposit you can afford to put down, how much you can borrow and which is the most suitable mortgage for your circumstances. You need to also have an idea of what other costs you will incur such as stamp duty, furniture, furnishings and professional fees.
First of all, make contact with a selection of mortgage providers. The amount that you will be able to borrow will depend largely on your income level and the size of the initial deposit that you can put down on the property. If in regular employment, a single person should be able to borrow at least three times their annual salary and a couple should be able to borrow at least two and a half times their joint annual salaries. Some lenders offer up to five times' annual salary on particular mortgage products, but conditions may be attached.
Whilst there are home builders who are purpose-building low cost properties aimed at first time buyers, it may be that when you have established how much you can borrow it is not enough or you feel you may be overstretched financially.
In that case you may have to consider some sort of co-ownership or co-financing – see above for more information on this.
First Time Buyer Mortgages
A mortgage is a loan made by a mortgage lender to a property purchaser. A deposit is the complementary amount of cash put towards your first property. The property is paid for with a mortgage and usually a deposit too. Sometimes parents will help with the deposit. Yours may be able to help you, particularly if they are still working or have a very small mortgage in relation to the value of their property.
To find out which mortgage is right for you, you need to seek advice from a good mortgage broker or an independent financial advisor who specialises in mortgages. Some advisors charge for their services. The mortgages specialist will take into account what outgoings you have – including any outstanding loans or debts. The specialist will suggest to you or advise you on which might be the best option for you.
Essentially the differences between the mortgages from the different lenders are the terms on which you can borrow, the terms on which you pay the money back and how much they will charge you for the privilege of being granted the loan. 'An interest only mortgage' is one where you have lower monthly payments but none of the actual loan is being paid off whereas a repayment mortgage means you are paying off the loan and the interest each month so you will own the property at the end of the repayment term.
You must never forget that if you and any co-owner defaults on the mortgage payments, then the mortgage company has a right to repossess that property.
Due to the difficulties facing first time buyers the mortgage industry has developed various different ways of making that first home affordable – though there may invariably be a slight premium for these.
More inforamtion on the easy way to finance your first home find here: "Mortgages in Greece"
Real estate transfer tax
The tax rate on transfer of real estate property of up to 15.000 Euros is 7% and 9% for any amount beyond 15.000 Euros of the 'objective value'. These rates increase by 2% when the property is situated in an area covered by a public fire brigade.
The real estate transfer tax is reduced to ¼ in the following cases
* Distribution of real estate property parts among co-owners
* Dissolution of partnerships and limited liability companies (Ltds)
The real estate transfer tax is reduced to ½ in the following cases
* Compulsory trade-off of neighbouring properties
* Merger of Societe Anonymes (SAs) or take-over of one by the other.
* Take-over of real estate property by the state for public use and for the public benefit
* Trade-off of real estate of equal value
Tax free is the purchase of the first-ever principal residence for Greeks or EU-citizens who maintain their usual residence in Greece, and for Greeks living abroad, worked outside Greece for the last 6 years and still remain registered with a Greek Community Register.
* Tax exemption for a non-married person - up to 75.000 Euros for a house or flat and up ot 35.000 Euro for a plot of land
* Tax exemption for married persons, divorced or widowed parents, and non-married persons, to whom the parental care has been entrusted - up to 115.000 Euros for a house or flat and 64.000 for a plot of land.
for the first 2 children - additional 23.000 Euros for each - 10.000 Euros for each for a plot of land
every further child - additional 35.000 Euros for each - 12.000 Euros for each for a plot of land
On the real estate transfer tax calculated as mentioned above, a municipality tax of 3% has to be paid.
Current legislation states that VAT will be charged on the supply of buildings whose construction licence is issued on or after 1st January 2006. This is a change from the above mentioned taxation. VAT is imposed at the standard rate of 19% for the transfer of new real estate properties, together with the part of the plot corresponding to such property.
Some new house-builders will pay this VAT for you as part of their incentive package.
Choosing expert help
Unless you are putting down a large deposit on the property, your mortgage company or lender will probably carry out a survey for their own purposes.
For your own peace of mind, and perhaps as a bargaining tool, you could have your own survey carried out. You can go to the expense of a full structural survey, or a cheaper survey that is less informative.
Having a survey carried out will give you some peace of mind, or alternatively it could highlight remedial work that needs doing, or even save you from buying an unsuitable property.
You will need to appoint a solicitor to deal with the conveyancing (legal formalities) of the property transfer.
Some solicitors charge their fee as a percentage of the value of the property and other as a fixed fee. Ask for quotes and seek personal recommendations.
Following the acceptance of a formal offer, the solicitor will make any pre-sale enquiries between you and the vendor and take you through the exchange and completion of the sale.
The solicitor will carry out one or more 'searches'. Your solicitor will deal with the Land Registry to transfer the property to your name. This happens after the completion of the sale.
Prior to the day you move in, normally known as the 'completion date', you will exchange contracts with the vendor. You will need the mortgage offer to be in place by the time you exchange contracts. Following completion, your name will be registered with the Land Registry and you will have to pay Real estate transfer Tax. The solicitor will arrange this for you.
A deposit of normally 10% of the purchase price is payable by you before your solicitor starts the research, to secure the property and take it from the market until the final contract can be signed. A day before signing the contract, the real estate transfer tax has to be paid to the tax authorities and at the date of exchanging of contracts, the vendor is getting the agreed selling price, your solicitor, the notary and the broker has to be paid as well as the fee for the registration.
Stages of purchase
Under normal circumstances a first oversea property purchase should be considered as a relatively long-term project. Proper planning and research can make all the difference in being able to attain a successful outcome.
Before you start looking for a property, try to save a decent sized deposit. If you are able to put down a deposit of 10 percent (or more) of the purchase price, you will find that the range of mortgage options available to you is much greater (and interest rates lower) than if you need to borrow all of the money.
Calculating how much you can afford
Estimate what your monthly outgoings will be after you have purchased your new property. The difference between your net income and your monthly outgoings is what you can afford as your monthly mortgage payment.
Remember, too, that you will have one-off expenses (for example, legal fees, transfer tax, cost of furnishings, etc.) to pay, before you can move into your new home.
Choosing a Property
Once you have worked out how much you can afford, decide what sort of property you are looking for and which features are essential or desirable:
* house, bungalow, flat or studio;
* off plan, new build or second hand;
* sea view and/or mountain view;
* number of bedrooms;
* pool (privat or common);
* garage or parking space;
* convenient for bus stop;
* convenient for local shops, pubs, restaurants;
Making an Offer
In case you are going for a resale property and after you have calculated exactly what you can afford and are satisfied with your mortgage options, you are in a position to make an offer for your chosen property. Clarify the position regarding which fixtures and fittings are included in the sale and decide whether you need a full survey in addition to the mortgage lender's valuation survey.
Exchange and Completion
After your offer has been accepted, your mortgage application has been approved and your solicitor has carried out all the necessary searches and other legal work, you are then in a position to exchange contracts with the vendor. Before the exchange of contracts, you pay a deposit (usually 10% of the purchase price). At this stage, you are committed to purchase the property and will suffer financial penalties if you withdraw.
A day before signing the final contract, the real estate transfer tax has to be paid to the tax authorities and at the date of exchanging of contracts, the vendor is getting the agreed selling price, your solicitor, the notary and the broker has to be paid as well as the fee for the registration. Your solicitor ensures that all documentation regarding the transfer, for the Land Registry, has been completed.
Once the property is registered in your name, you need to arrange insurance cover, contact utility companies and make arrangements for moving furniture, etc.