Monthly Archives : March 2017

Help to buy mortgages

What makes a good Buy to Let investment?

What makes a good Buy to Let investment?

With property prices continuing to rise, Buy to Let can be an attractive way to invest. But whether buying your first Buy to Let property, or adding to your portfolio, it’s important to consider what’s involved.

Being a landlord
As well as the obvious duties of finding tenants and making sure they pay their rent on time, there are also a number of legal requirements that you need to meet as a landlord. For instance, you’ll need to use a deposit protection scheme, have the right Energy Performance Certificates and arrange annual safety checks and certificates for the utility supplies. You’ll also need to keep the property well maintained and respond to requests from your tenants if and when an issue arises.

Managing your finances
Then there’s the question of managing your commitment to the mortgage lender. Interest rates may be low now, but if you’re on a tracker mortgage and rates go up, could your income stand the rise? What if you have a gap in tenants and the rent dries up temporarily?

In the short term, landlords can still deduct mortgage interest from their rental income before calculating how much tax they should pay. However, from April, tax relief on Buy to Let mortgage interest will gradually be reduced. The restrictions will be phased in over four years, resulting in tax relief only being available at the basic rate of income tax (currently 20%) from April 2020. This could impact on any profit you’re expecting to make on your investment so it’s important to take it into account now.

Research before you buy
In terms of the property itself, have you thought about the location you’re buying in? Take the time to look around the area you’re considering. Is it up and coming or going down and out? If you’re looking to rent to a young family, do the local schools have a good reputation? Does it have good commuter links for young professionals? It may sound obvious, but it’s a good idea to put yourself in the shoes of your potential tenants and ask yourself what they would want. Their requirements may be quite different to yours.

Work out all the costs
Buy to Let lenders may require the rent you charge to cover up to 145% of the mortgage repayments, with many now requiring 25% deposits, or even larger. Once you know your mortgage rate and the monthly rent you’re going to charge, you should also factor in maintenance costs.

And with stamp duty 3% higher than on a residential property, make sure you cover all the costs involved in buying your investment property – especially in view of the diminishing tax relief.

Protect your investment
It’s important to protect your property, its contents, and your ability to keep up with your mortgage repayments should the unexpected happen and there are a range of different insurance products designed to meet these requirements:

• Buildings insurance
• Contents insurance
• Landlord’s insurance
• Life insurance
• Mortgage payment protection insurance (MPPI)
• Critical illness insurance
• Income protection

Which product is right for you will depend on your individual circumstances, so it’s important to get professional advice as part of the process.

If you’d like to find out more about Buy to Let mortgages, please get in touch

Home Insurance

The cost of a burglary

The cost of a burglary

Figures have revealed that burglary costs the average homeowner over £2,800 in stolen valuables and almost £600 to pay for damage caused by the break-in. There were 713,000 domestic burglaries in 2015, and while you may see many of these reported in local newspapers you rarely hear about the cost to victims.

Fixing the damage
The damage burglars can cause during a break-in results in costs to repair doors, broken locks and windows, and damage to furniture.

Then there’s the cost of replacing stolen items – particularly jewellery, money and wallets, which tend to be the most desirable items to burglars. But it’s not just the intrinsic cost of these items; sadly the sentimental value can never be replaced.

Computers, cameras, watches and mobile phones are also desirable to thieves. Generally speaking a flagship phone will cost between £500 and £600 to replace and a digital camera between £100 and £250. But again it can be hard to account for the emotional cost of lost pictures and videos.

Protecting your home
Adding security devices to your home will help reduce the chances of your treasured possessions being stolen and give you and your family peace of mind. Installing a burglar alarm or external lights can help deter would-be thieves and you can buy timer switches that turn internal lights on and off while you’re away.

You could also consider upgrading to more secure locks on doors, windows, garages and sheds.

Getting the right cover
According to research carried out by the Association of British Insurers (ABI), one in five households could be underinsured because they don’t know how much their home contents are worth. If you’re unlucky enough to have to make a claim, having insufficient cover could leave you facing an unnecessary bill at a time when you and your family are struggling to deal with the disruption and worry caused by a break-in.

Here’s how to calculate the value of your contents:

  •  go through each room (include your attic, basement, shed and garage) and make an inventory of all your possessions
  •  file your receipts, or go online to work out the cost of each item
  •  tell your insurer about any expensive items you own to make sure they are covered
  •  contact your insurer to make sure new purchases are covered

Review your cover
Your home and contents insurance should be sufficient to repair any damage and cover the cost of stolen items. It makes sense to review your cover, especially after Christmas or birthdays when you may have bought or received expensive items.

[gem_quote style=”5″]If you’re concerned you may not have the right type of contents cover, or you think you might be under-insured, please talk to us.[/gem_quote]
piggy bank

Teaching kids about money

Teaching kids about money

As parents we teach our children a lot: to count, read, say please and thank you and, hopefully, be an example to others.

Research shows that parents also pass on their approach to finances. So exactly how are we teaching our children to be financially astute from a young age?

Pocket money
Compared to some of their European counterparts, British parents with children under 10 are more generous when it comes to paying pocket money. That changes from 10 upwards when they end up paying well below the European average.

Teaching the value of money
Your child’s financial education can begin as soon as they learn to count and a great time to start talking about spending and saving is birthdays or Christmas (if they‘re likely to receive a cash gift).

If your child asks for something expensive: an iPhone 7 for £599, or an Xbox One for £199, try to explain to them the time it would take to earn that amount of money. The minimum wage for a person under 18 is £4 per hour, which means it would take 150 hours or nearly three weeks working full-time, to save for that new iPhone.

How to budget
An important lesson to instil from a young age is not to spend more than you have. Dividing money into different pots is a great way to demonstrate this as it really helps your child to visualise where their money is going. They can also see that when it’s gone, it’s gone.

Try using two jam jars. Label one ‘Spend now’ and one ‘Save for later’. Talk to your child about how they would like to divide their pocket money or any cash gifts they receive between the two jars. If they keep their savings jar topped up, they can see that they have rainy day money if they need it when their ‘spend now’ jar is empty.

You could also add in a third jar ‘Donate to others’ to show your child that they can afford to help children who may not be lucky enough to receive pocket money for their own jars.

Talk to us about investing for yourself or your children

home insurance

Protection through the years

When it comes to protection insurance, we hold two firm beliefs:
1. it should form the foundation of your financial plan.
2. cover should be reviewed regularly to make sure it continues to meet your needs.

The latter is particularly important when you are at a particular ‘life stage’. Whether that’s buying a house, getting married, starting a family, setting up in business, or all of the above, protection insurance will help to protect your loved ones and your financial responsibilities.

So what type of cover is right for you?
• Term Insurance pays out a lump sum if you die within the agreed ‘term’ (the amount of time you have chosen to be covered for, eg. 20 years). Suitable for mortgage protection or while children are financially dependent on you.

• Whole of Life Insurance pays out a lump sum when you die, whenever that is, as long as you are still paying the premiums. Suitable for estate planning or to cover things like funeral expenses.

• Critical Illness Insurance pays out a tax-free lump sum on the diagnosis of certain life-threatening or debilitating conditions, like cancer, heart attack or stroke. You may decide to buy Critical Illness Insurance when taking on a major commitment, like a mortgage or starting a family, but it can be bought at any time to provide peace of mind.

• Income Protection Insurance pays out a regular, tax-free income if you become unable to work because of illness, injury and some policies cover unemployment. It could help you keep up with your mortgage or rent payments, as well as other living costs, until you’re able to return to work.

Things change – and so should your cover
You may already have one or more of these in place, but it’s still worthwhile reviewing your current cover levels – especially if your circumstances have changed. Ask yourself:

Whether your family could cope financially if either you or your spouse/partner died?

How much income would you have if you were taken seriously ill and couldn’t work?

Would your business survive without you or your key people?

How would your lifestyle change if you had an accident and couldn’t do the things you do today?

Contact us today for a Life and Protection Insurance review

downsizing your home

Parent landlords

Parent landlords

With house prices rising faster than salaries, the younger generation face having to find a much bigger multiple of their income to buy a home, compared to their baby-boomer parents.

Couple this with rising rent payments that stifle the ability to raise a deposit and you can see why ‘Generation Rent’ is a growing population and more kids are looking to their parents for help.

Parent landlords
In the UK, 730,000 parents rent properties to their children and a further 1.4m landlords have said they would be willing to take their children as tenants.

As both the cost of renting and buying a property increases, renting from a parent should help prospective first-time buyers get on the property ladder sooner rather than later. Especially given that just 5% of parents charge the market rate, 30% allow their children to pay whatever they can afford and 12% even go so far as to pay the bills for the property.

Buy to Let
If you have a property you’re considering renting to your children, or you’re thinking of Buying to Let to help out your kids, make sure you consider all the costs involved before you take the leap.

Solicitors, valuers and surveyors are not regulated by the Financial Conduct Authority.

[gem_quote style=”5″]If you need mortgage advice, or you’re looking to help your children onto the property ladder, please talk to us.[/gem_quote]