That's a big step. But amazingly it's sometimes generally considered cheaper to buy accommodation and pay back a mortgage than to rent in London in the long run. You have two categories:

• Freehold: you own the land (or shared freehold if you buy a flat, for example).
• Leasehold: you buy the accommodation (the building) but rent the land. Usually 99 years contract, this period can be longer and shorter. You must remember that the shorter it is, the less expensive the value of you property will be… until the end where you might have to leave the property (absolutely speaking); Most of the leasehold rents represent a peppercorn (very small amount, e.g. <£100 p.a.) in London, but can be increased substantially with service charges.

If you want to extend the leasehold or if you want to buy the freehold, you must calculate the value of the lease (term + reversion). For a house with a market value of £500,000 with 90 years lease, the amount could be £5,000-£10,000. If there is a conflict on the value of the leasehold, the Leasehold Valuation Tribunal determines all outstanding issues. The law has been amended to grant the right to more than 50% of the leaseholders to force the landlord to sell the freehold.
For more information, consult: http://www.lease-advice.org

Once you have decided the flat you want to buy, you can make an offer to the Estate agent, who will talk to the seller. Remember though that this is just an offer and if anyone else offers more when the advert is still in the window, you may miss the opportunity. Once the owner accepts the offer, this then becomes a legally binding offer (usually displayed as: "under offer"). There are now a number of property web sites that have huge databases of properties available for sale or rent. Before jumping online, there are a few tips to be aware of. You should go to a reputable site that is fast and easy to use with a good range and number of properties: [please note that there is different practices if you purchase property in Scotland]

• http://www.propertyfinder.co.uk
• http://www.rightmove.co.uk
• http://www.reallymoving.com
• http://www.smove.com

Here we need to study the difference between buying your main property and the buy-to-let market.

Buying your home

You can usually borrow up to 90% of the value of the property (95% mortgages are subject to additional insurance). The lender (a bank or a mortgage company) will typically lend you 3.5 times your gross annual salary (if you are joint buyers, you can usually borrow up to 3.5 times the value of the highest wage, and 1.5 the value of the lower one). A basic survey of the property will be arranged by the bank (the cost will be added to the mortgage). You can request a more in-depth survey but you will need to pay additional monies for this service.

Buy-to-let mortgage

If you intend to buy a property as an investment to rent it out, conditions are different. The lender can give you up to 75% of the value of the property. The value of the monthly repayment made must not exceed the expected value of the monthly rent income / 1.25. Therefore the lender will mandate a survey to value the expecting rent.
E.g.: if you expect a rent of £1000, your maximum repayment must be £800. If you repay interest only (assume 6%) it means that you can borrow up to £160,000 (160,000 x 6%/12 = 800) of a property (total value = £213,333 - 100%).

Remortgage your property

Without moving you can also decide to remortgage your property for different reasons: you want to save money by switching to a lower rate, you want to extend your borrowing in order to free up equity to use as a deposit of a buy-to-let mortgage…etc. The lender will mandate a survey of the property in order to value it. The cash available will be the difference between the mortgage you still have to pay and the new value of the property (minus 10% deposit).

The usual duration of the mortgage in Britain is 25 years.

You can find a mortgage planner by visiting a bank or broker websites:

• http://www.banking.hsbc.co.uk/mortgages/
• http://cgi.greenseahorse.com/clients/chelsea/index.html

You can consult a lot of banks' and building societies' mortgages with the website http://www.moneyextra.com/. A mortgage broker will be useful to help you find the cheapest rate and the best conditions (100% mortgage or 80% buy-to-let) by comparing with several banks and mortgage companies. For complex mortgages or if you want as much help as possible, we recommend Chelsea Mortgage Management (020 7629 6688) that can avoid a lot of hassle (but will take 0.75% fee).

You have several types of mortgages available:

• Capital repayment: this is by far the most popular option for mortgage borrowers. Each month you pay a sum to your lender, which consists partly of interest that you owe on your loan and partly repayment of your outstanding capital debt. You have to arrange life insurance separately. -
• Interest only: unlike resident borrowers, most buy-to-let investors opt for interest only mortgages, simply paying off the interest owed to the lender, but not the outstanding capital. This is repaid on the sale of the property. -
• Endowment plan: based on the stock market performance to repay the capital debt, it is now out of fashion due to falling investment returns. An endowment plan allows you to pay only interest and to put the principal in a saving plan, which provides interests. At the end of the plan your saving plan will be used for paying the principal. If the interests are higher than expected, you will get some money back. These sorts of plans have been used a lot at the beginning of the 80's and gave huge fees to the lenders. General advice is not to go for that option in the current market climate, as if you leave the plan at mid-term, you lose an important amount retained for the set-up fees.

and different interest rates:

• Variable rate: during the course of the loan, the interest charge can go up and down. The base rate tracker is the most popular, with lender charging at a set margin over the Bank Base rate for the life of the loan (typically BBR+1%). Lenders can offer a discount rate for the first years (but usually include a penalty if you leave before the end of the discount period).
• Fixed rate: More expensive than a variable rate, it fixes usually the rate for a few years only. However it provides security as you know in advance how much you are going to pay each month.
• Partly fixed, partly variable

Fees

Once you have made an offer to the agency and contacted a lender, you will have to find a solicitor. He is responsible for carrying out the checking of the documents on the property and liasing with the solicitor of the other party. You will have to pay several fees: stamp duty (1% of the value of the property < £250K, 3% if more, land registration fee, … for a total of about 1.5% of the value of the property (including the solicitor work).

When the mortgage is secure and the solicitor is ready, you can exchange the contracts and agree a completion date. Upon completion, you get the keys and the total amount of the mortgage must be paid to the seller at that point.

You will find addresses of solicitors through estate agents, yellow pages or lenders, but we recommend: Stephen Bishop - Tel: 020 7631 4141

Letting fees and tax

If you let a property, letting agents may charge anything from 10% to 17.5% of the rental income, depending on whether they simply find the tenants or offer the full management service.

Tax will be charged at your highest marginal rate of income tax - either 22% or 40%. You can deduct interest payments on your buy to let mortgage, maintenance costs, 10% a year depreciation of furniture, cleaning costs, ground rent, service charges, insurance, letting agent's fees…