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Category : Mortgages

Mortgages

The ninth largest lender

The ninth largest lender

34% of first-time buyers relied on their parents for financial help, making the bank of mum and dad’, the equivalent of the UK’s ninth largest lender in 2017.

If you’re trying to get on the housing ladder, you’ll know how hard it can be
• The average price of a first home is over £200,000 in the UK (and £400,000 in London)
• The average first-time buyer deposit has more than doubled over the past decade from £15,168 in 2006 to £32,321 in 2016
• Only 29% of all first-time buyer purchases in 2016 were below the £125,000 Stamp Duty threshold.
• 28% of all first-time buyers with a mortgage opted for a 30 to 35 year mortgage term (in 2016)

With numbers like those left it’s little wonder that so many first-time buyers turned to their parents for financial support in helping them buy their first home. In fact, according to a recent report from Legal and General, the bank of mum and dad could lend more than £6.5bn in 2017, a massive 30% increase on 2016.

The money will help to buy £75bn worth of property and puts parents on a par with the UK’s ninth largest mortgage lender, the Yorkshire Building Society.

Is parental support sustainable?
The bank of mum and dad makes an average financial contribution of £21,600 for each property. And of the buyers who received support from their family, 57% received it in the form of a gift while just 5% were given the money as a loan with interest.

According to Legal and General a loan by the bank of mum and dad could wipe out just over half of a family’s available net wealth, raising the question of whether this type of support is sustainable over the longer term.

Your home/property may be repossessed if you do not keep up repayments on your mortgage.

If you’re looking to buy your first house with help from your family, we can help you find an appropriate mortgage deal for you.

If you’re still in the process of saving your deposit (typically 16% of the value of an average first home), we can help you explore the different ways to invest for your near, mid and long-term plans.

Buy to Let

Buy to Let Mortgage market changes

Buy to Let Mortgage market changes

The UK’s Buy to Let market is in a state of flux, with an extra 3% Stamp Duty on the purchase of additional properties and changes to the way a landlord’s income is taxed.

Landlords used to be able to deduct all finance costs from their rental income, with net profits taxed at their marginal rate. Starting in April 2017 tax relief available for buy to let related finance costs will gradually reduce each year. Phased over 4 years it will finally be restricted in 2020/21 to a basic rate of tax, currently equivalent to 20%.

In September 2016, The Prudential Regulation Authority (PRA) – those responsible for the prudential regulation and supervision of around 1,700 banks, building societies, credit unions, insurers and major investment firms – announced expectations of firms’ underwriting standards to apply to the Buy to Let market.

What you need to know

The PRA changes mean that landlords:

  • face tougher affordability assessments which take into account borrower’s costs including tax liabilities, verified personal income and possible future interest rate increases.
  • must provide evidence that rental income covers their mortgage payments by a minimum of 145% at an interest rate of 5.5% for all products other than longer term (five years plus) fixed rates.
  • with four or more properties, will have their whole portfolio assessed for affordability by the lender – even where other Buy to Let mortgages are held with different lenders.

With all of these changes many landlords may find their portfolios are less profitable.

Incorporation

According to research by the National Landlords Association (NLA), one in four landlords are considering setting up limited companies to negate the tax changes. If you hold a property in a company, your profits are liable for Corporation Tax at 20%, however, if you hold an investment property personally, your rental earnings are combined with your other earnings (such as income from your job) and taxed as Income Tax up to 45%.

At first glance a company structure could look more tax efficient, especially if you are a higher rate tax payer. But before you consider incorporation you should take into account the cost of commercial mortgages.

There’s no doubt the changes in the Buy to Let sector can cause some confusion but we can help find the most appropriate solution for you.

This information does not constitute tax advice. For more details on how this will affect your circumstance you should consult with an independent tax adviser.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

Your property may be repossessed if you do not keep up repayments on your mortgage.

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

downsizing your home

The downside of downsizing

The downside of downsizing

The decision to sell up and move to a smaller property could come as a result of children flying the nest, the need to free up cash, or both. Whatever the reason, there are costs to downsizing that are important to know about before you make the move.

The ‘hidden’ fees
Research from online estate agent OwnerSellers.com suggests it costs an average of £17,843 to downsize, thanks to estate agency fees, stamp duty, conveyancing fees, surveys and removal costs. These add up to a sizeable chunk that can eat into
any equity released from the sale of the house.

The figure is based on downsizing from a detached family home in England worth £381,211 to an average two-bedroom apartment costing £268,174. In principle the move would free up £113,037, but when you take into account the additional costs this drops to £95,194.

Reducing the cost of downsizing
If you’re thinking of downsizing, there are ways to reduce the fees you’ll incur. For instance, if you’re looking to relocate, you might be moving to a cheaper area where properties don’t attract as much stamp duty. Estate agency fees can vary so it pays to shop
around for offers; like free valuations, or no up-front fees, or perhaps choose an agent who’ll sell your property for a fixed fee.
If you still require a mortgage after downsizing, we can help you find the right mortgage rate for your circumstances, particularly as we have access to some exclusive deals that you may not be able to get on the high street.

Researching all the costs up front, from stamp duty and estate agency fees to conveyancing and finding the right mortgage can help make downsizing work out for you financially.

Please talk to us if you’d like any help or advice on your next property move

Your home/property may be repossessed if you do not keep up repayments on your mortgage.

First Time Buyers

Buying for the first time

Buying for the first time?

For first time buyers, getting onto the property ladder may seem like a daunting process, but there is help available.

With demand outstripping supply in many areas, the average UK house price has been pushed beyond the reach of many of the UK’s estimated 335,750 first time buyers. A report from The Land Registry (based on data from November 2016) shows an annual price increase of 6.7%, taking the value of the average UK property to £217,928.

When you consider that first-time buyers would typically put down around 20% against their first home, it’s no wonder that finding a sufficient deposit is becoming increasingly difficult – especially for those currently renting. In fact, one of the major lenders reported the average first-time deposit has more than doubled since 2007 to more than £32,000.

If you’re struggling to save a large deposit you may be able to find a mortgage rate of 90% or 95% – provided you can meet the lender’s affordability criteria.

The bank of mum and dad
Meanwhile research by the Social Mobility Commission has found an increasing proportion are turning to their parents for help buying their first home. In fact, over a third of first-time buyers in England (34%) are relying on the bank of mum and dad, compared to one in five in 2010.

The ‘bank of mum and dad’ has been a useful financial foot-up for many, but what about parents who want to help their kids but don’t have savings?

Government help
Although the Help to Buy: mortgage guarantee scheme ended in December 2016 the Help to Buy: Equity Loan is still available. The Government lends you up to 20% of the cost of your newly-built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. Equity loans are available to first time buyers as well as homeowners looking to move. The home you want to buy must be newly built with a maximum price tag of £600,000.

Other initiatives to help first-time buyers include The Help to Buy: ISA which helps you boost your savings by 25%. For every £200 you save you receive a government bonus of £50. The maximum government bonus you can receive is £3,000.

Sound mortgage advice can take the complexities out of the home-buying process and maximise your chances of getting an affordable mortgage.

At a glance:
335,750 first time buyers in the UK
x2 first-time buyer deposits doubled since 2007
34% of first time buyers rely on parents
£217,928 average value of a UK property

If you need help getting onto the property ladder please get in touch

Your home/property may be repossessed if you do not keep up repayments on your mortgage

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

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

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]
Mortgage Advisers

Buying for the first time?

Buying for the first time?

For first-time buyers, getting onto the property ladder may seem a daunting process, but there’s more help available than you might think.

With supply and demand at an imbalance, the average UK house price has been pushed beyond the reach of many first-time buyers. August data from Land Registry shows an annual price increase of 8.4%, taking the value of the average UK property to £218,964. When you consider that first-time buyers would typically put down around 20% against their first home, it’s no wonder finding a sufficient deposit is becoming increasingly difficult – especially if you are currently renting.

Help is at hand
A report from Which? shows that just over half of first-time buyers (52%) had to rely on financial support from a parent or family member in order to purchase their home. This ‘bank of mum and dad’ has been a useful financial foot-up for many.

If you’re not able to put down a large deposit you may be able to find a mortgage rate of 90% or 95% – provided you can meet the lender’s affordability criteria.

Government help
Although the Help to Buy: mortgage guarantee scheme came to an end in December 2016, the Help to Buy: Equity Loan is still available. Here, the Government lends you up to 20% of the cost of your home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. Equity loans are available to first-time buyers as well as homeowners looking to move, provided it’s for a new-build
worth less than £600,000.

The Help to Buy: ISA will help you boost your savings by 25%. For every £200 you save you receive a government bonus of £50. The maximum government bonus you can receive is £3,000.

Sound mortgage advice can take the complexities out of the home-buying process and maximise your chances of getting an affordable mortgage

If you need help getting onto the property ladder please get in touch.

Your home/property may be repossessed if you do not keep up repayments on your mortgage

Savings

Achieving your financial goals

Achieving your financial goals

We lead complex lives in an increasingly complex world. As your financial adviser we can help you better understand your financial challenges, goals and needs, and help you find appropriate ways to meet them.

Even a seemingly straightforward financial goal can involve numerous decisions and a lot of time and effort getting it right. Whether it’s buying a home, investing for the future or protecting the people and things you cherish, we’re here to help you make the right choices for your needs. Here are some of the services we provide, which our clients have told us they value the most.

Mortgages
With so many mortgage lenders offering products on the high street and online, it can be tempting to cut out the middle man. But when you’re making such a huge financial commitment, professional guidance can be invaluable, particularly if your needs are out of the ordinary. As well as arranging your mortgage we can also recommend specialist professional services that can help with other elements of your home-buying process, including solicitors and surveyors.

Protection
When using comparison sites and direct insurers, how can you be sure their “off-the-peg” solutions meet your specific needs? Using our expert product knowledge we can help you find the right solution for you. Whatever your particular need – be it income, family, mortgage or business protection – we can access high quality products from a range of handpicked providers; providers we have selected because they are proud to stand behind claims when it matters the most.

Investment planning
As well as your pension, you may have opportunities to invest lump sums – such as an inheritance or bonus – but are unsure about what strategy is best. As with all areas of financial planning, it pays to have a clear objective or vision. We can talk you through the important things to consider and help you create a balanced and diversified portfolio, taking into account your financial goals, attitude to risk, and any appropriate tax planning.

Retirement planning
The onus to create a comfortable retirement is falling increasingly on the individual, and the new pension regulations, whilst bringing welcome freedoms, introduce additional complexity to your at-retirement choices.

The right financial plan could help secure a more comfortable retirement – not just for you, but also for your loved ones and heirs. We can help you navigate the complexities of the new rules. Knowing what can be achieved and establishing the right strategy as early as possible can help you prepare for the future.

Inheritance planning
Passing our hard-earned wealth to loved ones often forms a big part of our ambitions. The right forward planning can help you maximise your heirs’ inheritance by minimising tax liabilities. We can help you put the right structures in place.

Of course, your needs in any and all of these areas will change over time, and regulatory changes can impact the effectiveness of any structures already in place, so we recommend a regular review to ensure that your plans remain on track and relevant.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

The value of investments and any income from them can fall as well as rise. You may not get back the amount originally invested.

[gem_quote style=”5″]To find out more about how we can help you, please get in touch.[/gem_quote]

Your home/property may be repossessed if you do not keep up repayments on your mortgage

Financial Advice

Are you considering remortgaging?

Are you considering remortgaging?

With continuing low interest rates, you may be considering remortgaging to save money.

Even if your mortgage provider has recently reduced its Standard Variable Rate (SVR), moving to a new mortgage deal could save you money. But before you’re tempted by an attractive introductory rate, it’s worth considering the bigger picture.

Should I stay or should I go?

It’s true that moving to a new deal could save you money, just remember to check that you won’t incur an Early repayment Charge (ERC) if you change your mortgage before the end of your current deal. It’s also worth factoring in any potential legal, valuation and administration costs that may be associated with signing up to a new mortgage deal.

Tougher lending rules

Mortgage regulation may also have changed since you took out your current deal. The EU Mortgage Credit Directive of 2015 introduced stricter lending criteria which has led to mortgage lenders having to take greater steps to check affordability – including on remortgages.

You can expect to be asked to show evidence of your income, such as payslips and bank statements, and your outgoings, including other debt repayments, household bills and living costs such as travel, clothing, entertainment and childcare.

Changing the type of deal

When looking at new deals, you may want to consider a different type of mortgage arrangement to your current deal.
For instance, you may decide you would benefit from the option of payment holidays, or a more flexible repayment arrangement.

If you have significant savings, you may want to switch to an offset or current account mortgage, where you use your
savings to reduce the proportion of the loan on which you pay interest.

Are you still covered?

If you’re thinking of changing your mortgage, remember to review your protection arrangements at the same time – especially if you don’t already have cover in place, or your circumstances have changed since you last reviewed your cover.

The value of personal, family, or income protection should not be underestimated if it means keeping the roof over your heads when you need it most.

With so many areas to consider, it makes sense to seek professional mortgage advice. We can help you weigh up the financial benefits of remortgaging, choose the most appropriate deal, handle your mortgage application and ensure your loan is properly protected.

[gem_quote style=”5″]If you’d like help choosing the right mortgage, please get in touch.[/gem_quote]

Your home/property may be repossessed if you do not keep up repayments on your mortgage