Remortgages

Borrowing money to pay off your mortgage and secure that borrowing against your house, is known as remortgaging – essentially it is swapping one mortgage for another.

If the current mortgage deal that you have doesn't suit you because of for example a change in circumstance or if there are better deals available from other lenders, remortgaging enables you to adjust the terms of your mortgage to better suit you and to take advantage of any better deals that there may be out in the market place.without having to move house.

With interest rates at a record low, remortgaging is growing more and more popular as existing borrowers seek to move their mortgage to a lower rate of interest without having to move house.

Arguments for and against Remortgaging...

Reasons to Remortgage:

There are lots of reasons why remortgaging is the right decisions but each depends on the circumstances of the individual household, however one reason remains universally true - to save money and the amount that it is possible to save, can be considerable.

Moving up the Property Ladder

Some mortgages can be moved from one house to another. As well as transferring your existing mortgage, you may need to top up with additional borrowing to purchase a larger or more costly property in which case it is simpler to take out a new mortgage for everything ( redeeming the existing mortgage and paying the extra money needed).

Your existing mortgage doesn't suit your current circumstances

Your salary may have increased or decreased or maybe you have come into a windfall or an inheritance. Either way you may wish to increase or decrease your monthly payments. You may want more flexibility in how you pay your mortgage and your existing mortgage deal does not offer enough flexibility to suit your current circumstances. Your circumstances may be such that you may need to be able to miss a payment or have a payment holiday (for example a change in employment, returning to education, deciding to go travelling).

It could be that you are tempted by the new types of mortgage products coming on to the market such as the new off-set mortgages. It is important to note though that mortgage packages with extra features may come at a cost in the form of higher fees and interest rates.

You’ve got other debts elsewhere which charge much higher interest rates and you want to wrap all your debts into one.

Often referred to as debt consolidation, the advantage of doing this, is to escape from the high interest rates charged on unsecured loans and credit cards by converting the whole of the debt to the considerably lower rates offered on mortgages and this may enable you to lower your monthly outgoings considerably.

You need to think very carefully before you opt to secure all your debts against the title to your house. If you are unable to keep up with your payments, you may be at risk of losing your home. Another thing to consider is that borrowing more money to pay off debts over the term of a mortgage is likely to cost you more in the long run as 10% over five years is less than 5% over 30 years.

Reasons Not To Remortgage:

Remortgaging is not for everyone and the question as to whether or not to remortgage depends on individual circumstances.

Money, timing and personal circumstances are key factors in considering whether or not to remortgage. When deciding whether or not a remortgage is the right for you, you will need to weigh the savings against the cost. Think carefully if you fall into one of the following categories:

Your existing mortgage is already the best on the market

The mortgage deal that you already have may be the best on the market. However, it is important though, not to get too complacent as there are always new mortgage products coming on to the market so it is important to keep a constant eye on the market.

You may be locked into an unfavourable mortgage deal

The early repayment penalties on your existing mortgage may be so high as to make remortgaging unviable. It may be possible that your existing lender will agree to let you switch to a better deal with a reduced repayment charge

If you own less than 25% of your house

If you have a high loan to value mortgage (meaning that you borrowed more than 75% of the value of the house) the fact that the mortgage on your house is more than 75% of the value of the house may make it difficult for your to get a good mortgage deal with another mortgage lender

The value of the house may have gone down along with the value of your equity in it, so the amount you owe is a bigger proportion or it may be that you owe more on the mortgage than the house is worth - known as having negative equity.

Changing Circumstances

Your personal or family circumstances may have changed, for example you may have changed job or employment status or if a couple one of you may have given up work to start a family. Lenders may not be so ready to lend to you because you no longer fit their criteria. If you have little or no equity in the house you will have to stay with the mortgage that you already have.

Poor Credit History

If you have missed payments on a credit card or loan or defaulted completely, you are unlikely to be able to get a remortgage deal if at all. The criteria that lenders are using to assess the eligibility of borrowers for a mortgage is getting tighter and tighter especially with the recent banking reforms. In the aftermath of the credit crunch, lenders will only lend to those people who have a spotless credit record.

The Size of Your Mortgage is less than £50,000

The cost of remortgaging may mean that it is not worth your while remortgaging especially if the amount you owe is less than fifty thousand pounds. Remortgage fees can be in four figures and may outweigh any savings made on mortgages below fifty thousand pounds.

Buying a Home

Download "Buying a Home - Guide"

Buying a Property is both an exciting and a stressful experience and the decision as to what property you buy will have a far-reaching impact on your life and that of your family

The purchase of a property is a major financial commitment which may be with you, in the form of mortgage payments for the next 30 years or so.

Buying property for the first time is a very daunting process and appears to be a maze of procedures, paperwork and different professionals and agents vying for your time and giving advice all at the same time.    There are a lot of dos and don’ts and making the wrong decisions become very costly.  It is easy for a first time buyer to very quickly become confused, stressed and generally bewildered without the right guidance from the start.

In this blog we aim to help you through the maze using the most straight forward route and in a jargon free manner.

In this Step by Step Guide, we break the process down into four parts:

I.     Deciding on the Property you want to buy

II.    Looking for the Property you want to buy

III.   Selecting a Property

IV.   Buying the Property

By following a clear structured approach, you will be able stay in control and your property purchase is likely to not only proceed more quickly but also be relatively stress free.

I - Deciding on the Property You Want to Buy

It is important to be clear from the start as to what Property you want to Buy. Changing your mind halfway through the process can be costly and may cause significant delay.
When deciding on the Property to buy you need to consider the following:

1.    How much can you afford to spend on a Property?

A.    Getting a Mortgage
B.    Deposit
C.    Financing the Purchase from other sources

2.    The are you want to live in

3.    The type of Property you want to buy:

A.    Freehold
B.    Leasehold
C.    Shared Ownership
D.    New build

1. How much can you afford to spend on a Property?

How much you can afford to spend on a property will depend how much money you are able to obtain to buy the property and this will in turn, depend on the level of your income and savings. 

You have sufficient savings to purchase a property without having to borrow money, however, the majority of house buyers need to borrow money to purchase the Property. How much money you will be able to borrow will depend on the level of your income, your age and your employment status.

A.   GETTING A MORTGAGE
Unless you have significant savings or another ready source of money, you will need to raise a mortgage in order to purchase a property.
 
A Mortgage is a type of loan which is secured against the property you buy. The mortgage lender will lend you a sum of money to enable you to purchase the property and in return will have to repay the lender in instalments, usually monthly and over several years ( typically 25-30 years).
 
The most common sources for mortgages are banks and buildings societies. 

Applying for a Mortgage
You can apply for a mortgage either by approaching the bank or buildings society direct or by engaging the services of a mortgage broker.

A mortgage broker will advise you on the process and will be able to match your needs and financial profile to the most suitable lender.

It is important to get your mortgage application right first time as more than one application to different lenders can have a detrimental effect on your credit scoring making it more difficult to get a mortgage. 

Factors that determine whether you can get a Mortgage
When considering whether or not to offer you a mortgage the lender will check the following:

Affordability Can you afford to make the repayments? The lender will look at: Your current income and whether that income is from steady employment or relies partly on commission, overtime or benefits. Whether you are employed as P.A.Y.E or are self-employed.  Your day to day expenditure for example, regular bills, food, energy and so on. Any other loans or credit cards you may have. It is important that you do not over commit yourself when taking out a mortgage.  If you are unable to keep up with your mortgage repayments, the Lender may repossess the property and you will lose not only the property but also all the money you may have spent on the property. Credit Worthiness The lender will conduct a credit check with credit agencies to check: Whether you have ever been late paying a financial commitment such as a loan or payment on a credit card Whether you have ever been made bankrupt or received a CCJ made against you. The credit agency will give the lender a credit score which they will use to decide whether or not to offer you a mortgage. Deposit The lender will want to know what sort of deposit you are able to pay towards the property – usually a minimum of 10% of the purchase price will be required.  As a general rule greater the amount of deposit, the more favourable mortgage terms you will be able to get from the lender.   Age In order to get a mortgage, you must be at least 18 years old.  Lenders generally require you to be able to finish paying the mortgage by the time you are 75.   Character References Lenders may require references from for example, your employer and your current landlord (if you are in rented accommodation).

B.    DEPOSIT
As a general rule, you will be required to pay 10% of the purchase price as a deposit reach the Exchange of Contracts stage of the conveyancing procedure.
   
As mentioned above, your mortgage lender will usually require you to finance the deposit from your own resources.

C.    FINANCING THE PURCHASE FROM OTHER RESOURCES
Financing the purchase from other resources means buying without the need for a loan from a financial institution and is often referred to as a ‘cash purchase’ or a ‘cash buyer’.
Being a cash buyer may mean using your savings, or money from the sale of an existing property or borrowing the money from family or friends.   You may be able to finance the whole of your purchase from other resources or just part, splitting the finance between part cash and part mortgage.
 
If you are financing your purchase from other resources your conveyancer you will be asked to provide evidence as to the source of the money you are using to purchase the property. This is required under the statutory Anti Money Laundering Regulations. Your conveyancer will also carry out checks on anyone else that may be making a financial contribution to the purchase.

Another factor to consider, is that any other person that provides money towards the purchase, may obtain a legal interest in the property. 
If you intend to fund the purchase of the property partly by mortgage, you will need to obtain the consent of the mortgage lender to any contribution from any friends or relatives.

2.     The area you want to live in

Choosing the area in which to buy a property is the second biggest factor to consider.

The area in which you buy the property will have a significant impact on your quality of life.  

It is important to choose the right area, not just for your own peace of mind – it is an important factor when considering the saleability of the property when you come to move on.

Factors to look at when choosing an Area to buy a Property:

• Is the area near or within reasonable travelling distance from your place of work?
• Long commutes can reduce your quality of life and push up your cost of living. Good travel links may also enhance the value of the Property.
• Check out the local population –
• Are they the type of people that you would feel at home with? For example, if you have a busy social life, or have lively children you may not fit in with a street with pensioners.
• There are several websites that you can use to find out about an area, these give you data on the average age of the population, employment, income level, crime figures and so on.
• Local papers will give you an overall feel of the area.
• What is the centre of the town like?
• A town centre with lots of charity shops and empty units is an indication of a declining area, whereas a centre with new businesses indicates an upward shift.
• Check out the  Local Council’s plans for the area  (‘the Town Plan’)  on their website
• Is there development planned near the Property?  Examples could be industrial estates, factories or infrastructure projects such as HS2.   It would be a pity to buy a property with a view only to have a new block of flats built, blocking that view a few years after you move in.
• Think of the future
• Will the property still be right for you in five years’ time?  For example, if you plan to start a family a one-bedroom flat may prove to be constraining ; a larger property in a  child friendly area (not on the main road and with play parks) may be more suitable.
• Check out the local schools
• A good school is usually an indication of a good area, not only for those with children in mind but also for the value of the Property in general.
• Don’t dismiss the surrounding areas
• Areas within close striking distance of a popular up and coming area will usually see the value of their properties rise as part of a ‘ripple effect’.
• Visit the area at different times
• An area which is peaceful during the day may turn into a noisy hotspot at night.    There may also be certain days in the week that are quieter than others
• Environmental Issues
• Check the area out on the Environment Agency’s site - is there a landfill site or sewerage works nearby?  Is the area prone to flooding?

 

3.    Type of Property   

A.    Freehold

When buying a Freehold you are buying the property and the land on which it is built.  There is no legal limit of time to your ownership of the property. 

Owning the Freehold title to a property means that you can do as you please to the property subject only to any covenants and restrictions (that may have been placed on the title by previous owners and your mortgage lender) and the statutory planning laws

B.    Leasehold
When buying  a Leasehold property  you are buying the legal right to occupy the property (to the exclusion of the owner of the Freehold) for a set period of time.  When you buy a leasehold property you become a ‘Leaseholder’.

The length of the period of time for which you can occupy the property is known as the ‘Term’ and the right to occupy the property  is granted (or ‘demised’) to you by the owner of the Freehold (‘the Landlord ’) under the conditions set down in a deed known as  the Lease. The property and the land that you are allowed to occupy and use is known as ‘the demise’ and this is set down within the lease.  

Unlike Freehold properties, you cannot do as you please to the property.   The Lease will set down rules as to what you can and cannot do.

Although there are leasehold houses, leasehold properties are typically individual flats in blocks of flats or in houses that have been converted into flats.

When living in flat, you will have to pay a service charge to the landlord to pay for the maintenance of those parts of the building and grounds that are not part of your flat or demise for example, common hallways, stairs, roof, foundations, grounds and pathways.  You should factor these costs when deciding whether or not you can afford the property.

Typical Terms for the grant of a lease are 99 years, 125 years or 999 years, though a different term can be agreed between the Freeholder and the Leaseholder.

When you buy the property you may find that some of the term of the lease has been used and you may be buying only the remaining years of the term – an example in the case of flat where the term of the lease is 99 years and the seller has owned it for 19 years – you will be buying 80 years of the term.

The longer the term left on the lease the more valuable the property for example, a property with 990 years left on the term is more valuable than one only 90 years left.

It is possible for a leaseholder to get the term of the lease extended by the landlord and there are statutory rules that give leaseholders the right to have the lease extended.

It is possible for the tenants or leaseholders in the building to buy the Freehold from the landlord and again there are statutory rules governing this.

If you are buying the property with a mortgage, you need to be aware that lenders will have a minimum term of lease that they will accept.  As a general rule of thumb, lenders are unlikely to accept a lease of less than 70 years remaining on the term.
 
C.    Commonhold
Common-hold  is a type of landownership which is a middle-ground between Freehold and Leasehold.    Under Common-hold the individual flats in a building are owned as individual Freehold properties and the rest of the building and grounds  which is not within any of the flats( being the hallways, stairs, roof , foundations, pathways, gardens and so on (‘the Common Parts’) )  are owned by a Common-hold Association.   Each owner of a flat within the building will be a member of the Commonhold Association.

The advantage of Common-hold is that because each flat is Freehold the period of time in which they can be occupied and used by the owner is not limited which means that the value of the flat will not decrease .    At the same time, the owner of the flat can ensure that the Common Parts are maintained.

Common-hold property is relatively rare and a significant number of mainstream banks and buildings societies will not provide mortgages to purchase common-hold property.

D.    Shared Ownership
Shared ownership properties are where you only buy a share of the property and rent the remainder of the property from the Freeholder/ landlord, an example would be to purchase a 50% share and rent the remaining 50% share from the landlord.   These properties are usually sold by local authorities and housing associations.

Once you have purchased your initial share, you can purchase further shares usually in increments of 25% over how many years you occupy the property.   This is known as Staircasing. Once you have purchased 100% of the property (known as Final Staircasing), you will own the property outright.

Shared ownership properties are subject to strict rules governing their sale.  Generally you will need the consent of the landlord to sell the property and will have to sell it to a person nominated by the landlord. 

With Shared Ownership properties you  will not be able to let the property out until you have achieved Final Staircasing (100% ownership).  

Once you have you have achieved Final Staircasing, there is usually  a ‘ Pre-Emption Period’ of 21 years during which time  you have to offer the property back to the housing association or local authority from whom you purchased the property, before you can sell on the open market.

Some housing associations will charge a transfer fee typically of 1% of the Sale Price when you sell your share in the Property.

Shared ownership properties are a less costly way to purchase a property, however they are more complex to deal with and attract higher legal fees.     .

The rules restricting their sale may also have a detrimental effect on their resale value.


E.  Newbuilds
Newly built properties can be Freehold, Leasehold, Commonhold or Shared Ownership.

Newbuild properties often come with incentives to entice you to buy.  These incentives  range  from  discounts off the sale price, the developer paying the stamp duty land tax, to new carpets and white goods (dishwasher, washing machine and so on).

Newbuild properties generally come with a newbuild warranty which covers the owner of the property for at least 10 years from the cost of repairing any structural defects in the property.

People often like to buy newbuilds because there is no work to do on them, no repairs required or decorating – the owner can move straight in and live comfortably.  Others do not like them because they are bland and lack the character of older properties; all the properties on the estate are the same and there is less scope to ‘put your own stamp on them’.

Depending on the development, new builds are generally smaller inside than older established properties.  In 1920 the average four bedroomed house was 1,647 square feet whereas today the average three bedroomed house is 925 square feet.  

The developers’ need to build as many properties  as possible on a piece of land to get maximum financial gain from the land and this  will govern the size of the properties built.  On a more exclusive development where the properties are more expensive the rooms within the property are likely to be bigger.

There are schemes available to help first time buyers purchase a newbuild property. The most well-known scheme is the Government’s Help to Buy Scheme whereby the Government provide a loan of up to 20% of the property which means that the buyer only has to find a 5% deposit.  

Some of the bigger developers have other schemes to help first time buyers and it is worth visiting the developer’s website to find out details.

New build properties do lose value in the early years after their construction.  If you have purchased at a discount or with the help of one of the schemes mentioned above, you may have less money left (after paying off any mortgages secured against your property (known as ‘equity’), to buy your next property.  This can cause a problem if your family is outgrowing your property or if you need to relocate for work.


 

Homes for £1! Sounds almost too good to be true!

Homes for £1! Sounds almost too good to be true!

This is a project run by local authorities firstly in Liverpool and now in Stoke-on-Trent, where run down properties are sold for £1 each and a loan of £30,000 is given to complete necessary repairs on the property.

There is a range of properties available 2 bed terraces, three bedrooms hours and even some flats. There have been thousands of applicants for the project and the properties are allocated randomly to successful applicants. To qualify for the project you have to meet the following criteria:

·         You must have lived in the area for the past 3 years

·         Have a joint income of £18,000 - £25,000 or £30,000 if you have children

·         Must not own any other property

·         Must have been employed for the past 2 years

·         The new house must be your main home for at least 5 years

·         You must have the right to live permanently in the UK

The £30,000 loan is required to be paid back over the next 10 years, with an interest rate of 3% above the base rate.  This currently works out around £293 per month, which is cheaper than a mortgage or renting.  People who are lucky enough to get one of the £1 properties are required to renovate it and bring it back life. The aim of this is to reignite run down, derelict areas into family homes. This will have a knock on effect to current residents living next door to these vacant properties and will hopefully build community spirit throughout the neighbourhood.

 

There are 710,000 vacant homes in England which has been a trigger for the £1 home scheme. In the current economy with housing lacking, it is vital to bring these empty properties back to family homes. The £30,000 loan from the council towards refurbishing each property will be spent on council approved contractors with the owners choosing which type of kitchen and bathroom they like. If the house is sold within 10 years the owner will be required to hand over a share of the profit made.

What’s your opinion on the £1 home scheme?

Second part of Help to Buy brought forward!

Second part of Help to Buy brought forward!

The second phase of the Help to Buy government scheme has been brought forward from its previous launch date in January 2014 to 7^th of October 2013! David Cameron has expressed his understanding that the need for this is now.

The second part of the Help to Buy Scheme is a mortgage guarantee, the government will back up to 15% of the mortgage for borrowers with deposits as little as 5%. The aim is to make mortgages more readily available. However there is still a strict process borrowers will have to go through to obtain the mortgage such as rigorous affordability checks. The property being purchased will have to be the sole property and cannot be bought as a second home or buy to let.

There are already several lenders signed up to the scheme although it has not yet been revealed how much the government guarantee will cost the lender. The lender will have to pay a fee for the mortgage guarantee, in the case of a property getting repossessed and not being able to recover the loan from the sale the government will cover 15% of the loss. This is to deter lenders from allowing loans to anyone and everyone and ensuring the loans are affordable for the borrower.

First time buyers and existing property owners are eligible for the scheme and the second part is for new and existing properties. Some banks are welcoming the news of the scheme being brought forward, offering longer opening hours in busy periods, although mortgage brokers fear a flurry of new applicants.   

New interest rates on these new government backed mortgages are yet to be revealed as is the fee for the lender. Applicants can apply for the scheme as early as next week.

Should Stamp Duty be re-vamped?

Should Stamp Duty be re-vamped?

When you move home there are many expenses involved; solicitor fees, new furniture, mortgage fees, surveys, deposit and on top of all that STAMP DUTY. For such a large amount of tax Stamp Duty does not actually make a huge contribution towards paying for hospitals and schools. The issue lies with first time buyers not being able to get on the property ladder and growing families not being able to move up the ladder. It also prevents people from moving to better jobs and the elderly from downsizing.

Stamp Duty is currently applied on property priced between £125,000 and £250,000 at 1%, then 3% up to £500,000 and then 4% up to £1million and finally 5% up to £2million. There is also a higher 7% bracket for the super-rich!

Some people are moving less due to this high tax. Back when it was introduced in 1993 at 1% on property over £60,000 this was above the average property price. This then was a fair and relative tax; it is now out of proportion. If the tax was cut more people would be able to finance moving and therefore the amount of tax would balance out again. I’m not saying it should be abolished altogether (although that would be nice) but more fair, so the 1% begins above the average house price bracket so it serves the same purpose as when it was introduced.

There is currently a scheme attempting to stamp out stamp duty. Where you can visit the website and enter your postcode to contact your MP.

http://stampoutstampduty.org/

Second Part of the Help to Buy Scheme Revealed by George Osborne

Second Part of the Help to Buy Scheme Revealed by George Osborne

In a recent meeting with mortgage lenders and housebuilders, George Osborne explained the terms of the second part of the Help to Buy Scheme to be launched in January 2014 on property purchases up to the value of£600,000.

There are worries that the Help to Buy Scheme will inflate house prices and lead to a housing bubble. The Homeowners Alliance is also sceptical that it may cause people to take on huge mortgages.

George Osborne has laid out strict terms for the scheme hoping to avoid these negative issues. Purchasers applying for the scheme will undergo strict income checks and will be made to sign a declaration to declare that they are not using the loan guarantee to secure a second home. These checks will determine whether the buyers can afford the mortgage.

The aim of the scheme is to allow more people to be able to afford a home loan without having to save for a large deposit. Ministers claim that the second part of the scheme could enable up to 190,000 new mortgages each year over the 3 years of the scheme.

Lenders will have to pay a fee, the amount which has not been concluded yet, for each mortgage guarantee. The lowest interest rates are usually on mortgage with a LTV of up to 60%. This makes borrowing a lot more expensive for potential buyers with small deposits. The second part of the scheme aims to enable lenders who offer mortgages with a high LTV a chance to buy a ‘guarantee’ on the portion of the mortgage between 80% and 95%.

Potential borrowers have to go through ‘stress testing’ and income verification to ensure they can afford the mortgage. Anyone with a bad credit history will not qualify for the scheme.

For more information visit our dedicated Help To Buy website www.helptobuy.me.uk

Solar Panels - Do they require planning consent?

Solar panels are becoming a more and more common sight on domestic properties. This presents a challenge to conveyancers when dealing with the sale and purchase of houses. It is only in recent years that conveyancers are coming across houses with solar panels and they need to familiarise themselves with the legal position regarding planning consent – when acting for a buyer, the conveyance cannot afford to get this wrong or their client may find themselves facing enforcement action from the local authority once they have moved into their new home.

So what is the position regarding Planning Consent?

Generally, the installation of solar panels is permitted development and no planning consent is required. There is however conditions that need to be met before the installation can be considered permitted development -

 

 

a)     Solar panels mounted on houses should  -

i)      Be installed on that part of the building that will cause a minimal effect to the external appearance of the building and should be removed when no longer required.

ii)     Be lower than the highest part of the roof and project less than 200mm from the roof slope or wall surface.

iii)    Not be installed on a building that is within the grounds of a listed building.

iv)   Not be installed on a scheduled monument.

v)    Not be installed on a wall facing the highway, if the property is within a conservation area or in an area of Outstanding Natural Beauty or a World Heritage Site.

 

b)    Standalone solar panels should-

i)      Not be higher than 4 metres and must be more than 5 metres from the boundary of the property

ii)     Not have an array that is more than 9 square metres or 3 metres in width and depth.

iii)    Not be installed on a wall facing the highway, if the property is within a conservation area or in an area of Outstanding Natural Beauty or a World Heritage Site.

iv)   More than the first standalone solar panels – after the first installation any subsequent solar panels require planning consent.

 

Although planning consent may not be required, the solar panels may require Buildings Regulations Approval.