Month: November 2018

Buy-to-Let Mortgages for First Time Buyers & First Time Landlords | Q & A Series

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For the remainder of the year I will be dedicating all posts to answering Questions from our readers. Have you got a question or would you like me to cover something I haven’t written about in the last few weeks? Scroll down to the bottom of this post and reach out to me via any of the listed channels. 

“I live at home with my parents, but I want to buy a property and rent it out. Is this possible?”

Reading Time: 5 mins

Yes, this is called a Buy to Let property and you’ll need a 15% deposit. However, you cannot buy these kind of properties using a Government scheme.

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Today we are going to focus on the Buy to Let Mortgage, but you also have the consumer buy to let and consent to let route.

Here’s a quick breakdown of the other two types of letting routes which we are not going to discuss today:

Consumer Buy to Let – you lived in the property, bought another place/moved back home, got consent to rent out your property from your mortgage provider and eventually remortgaged with another lender on a consumer buy to let mortgage.

Consent to Let – You have a residential mortgage, for whatever reason, your lender gives you permission to let your property for a specific amount of time (e.g 1 Year) or indefinitely. Once you’ve come to the end of this agreed time, you move back in to the property, sell the property or get indefinite permission to Let and Remortgage elsewhere on a consumer buy to let Mortgage product.

How to guide – It’s fairly simple:

  1. Find a property
  2. Find out the average monthly rental income in that area
  3. Agree a purchase price
  4. Deposit – have you got at least 15%? **
  5. Apply for a Mortgage
  6. Understand that once the valuation takes place, the surveyor isn’t only valuing the property, but giving a figure for your expected rental income
  7. You get your Mortgage Offer
  8. Touch base with your solicitor and continue the Post-Offer process with them. ..

 

** Some lenders offer 90% LTV (this means a 10% deposit) products for Buy to Let Mortgages. However for a first time landlord, you will have to find the right Broker and search high and low for the right lender as not many lenders lend to First-time buy to let buyers – the common trend is that you have to have your residential property for at least 6 months before buying a BTL.

 

Tax – Something else to think about.

No income goes unnoticed and this is particularly the case for rental income.

The income tax rates for the 2019/2020 tax year are as follows:

  • Higher rate tax band (taxable income of £46,351 to £150,000) = 40%
  • Additional rate taxpayer (taxable income of over £150,000) = 45%

Tax bands are slightly different in Scotland

If you earn £15,000 from renting out your property, for example, the first £11,850 is tax-free, so you will only pay 20% tax on the remaining £3,150, which comes to £630.

However, bare in mind you may also have a full-time job, your rental income will be added to your annual salary, which may increase what you pay in tax.

In any case, the HMRC will work this out for you when you declare your income.

Things to consider:

1.Tax Return – Make sure you do one online before 31st January (or a paper return by the 31st October)

This is important, so that when you remortgage or buy another property, your rental income can be evidenced and used for affordability. Even if your income is below the threshold and your rental income is not taxed, your Tax Return will still need to be done evidencing £0. You also don’t want to get in trouble with the law! 

2. Do you want the property in your name? Limited Company maybe? Explore your options and benefits.

3. Extra income is great, however remember to take unexpected expenses in to consideration. Have an account solely for your rental income and Mortgage payments and leave all miscellaneous money/profit in there. Why? If your tenant doesn’t pay the rent, you need to replace the boiler or an unfortunate event takes place that your insurance doesn’t cover, you don’t want your property to become a devouring burden. The aim of the game is to make your property pay for itself and then some…

4. Managing Agent. Are you going to have your property run by an Estate Agent and simply collect your income at the end of the month? They will respond to any call outs, ensure you get your rent on time even if the tenants don’t pay, deal with your insurance and gas safety certificate etc. Explore your options – remember nothing in life is free, you have to pay the agency.  The management of your property could cost you 10% of your rental income. Are you wiling to take this deduction for peace of mind?

I hope this has helped! I would love to hear your thoughts.

Comment below, get in touch via my various platforms.

Remember if you have a question, the next 4 Mondays could feature yours – just ask!

LinkedIn Ashanta Charm

Twitter  @AshantaLC

Instagram  @Ashanta_

5 Year Plan

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Reading Time: 5 mins

So today we are going to discuss the 5 Year plan and the importance of having a plan. My 5 Year plan has never failed me and I have always accomplished what I’ve set out to achieve.

When I was 16 I started my 5 Year Plan and was able to achieve every single goal throughout the years and when time seemed to be closing in on me, I attained my final goal days before my 22nd Birthday.

So let’s dive right in to it, what type of goals did I set and how did I go about achieving them?

I had my key goals and these were broken down with sub goals or you could almost call them sub tasks that would catapult me closer to the main goal.

  1. Buy a House 21
  2. Start dating and be engaged 21
  3. Pass my driving test 21
  4. Be in my career job 21
  5. Gain weight 21
  6. Overcome complexes and step out of my comfort zone
  7. Be mentally strong. If you stand for something, don’t let an institution, work or anyone shake/break that.

As you can see, my goals were pretty vague, however the older I got, the more padding I added to them and by the end of the 5 Year period, I was in a much better position than I thought possible.

Over time, my goals became SMART:

  • Specific
  • Measurable
  • Attainable
  • Realistic
  • Timely

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  1. I completed on the purchase of my house 14 days before my 22nd Birthday
  2. I started dating at 19 and got engaged at 21
  3. I passed my driving test at 21
  4. I started working in a huge Financial Institution at 20 and embarked on my Mortgage Career
  5. I went up a dress size
  6. I overcame all personal weight related insecurities and my dress sense affirmed this!
  7. I’ve always been head strong, but I started to become apologetic about it and almost lost my own opinion and stance on given situations hence the goal. By 21 I was definitely mentally stronger and began to challenge the status quo. I stopped saying “yes” and started asking “why”?

Once I had achieved all of my goals, I began thinking about my next 5 year plan. I looked back on all that I had achieved, was extremely proud of my 16 year old self and decided to up the ambition and set new goals a few days before I turned 22. These goals will expire when I turn 26 – I have already achieved a few and am deep in the process of attaining the others. Will I make it? Yes I will!

TEMPLATE

If you’re having difficulties making goals, use the SMART guide above and break your goals down in to 7 Key areas

  1. Relationships (Intimate, family, friends etc)
  2. Investment (Buying a house, shares, business plan?)
  3. Career (Where do you want to be in 5 years? Get your foot in the field, attain relevant qualifications)
  4. Personal Development & mentality
  5. Health/Appearance
  6. Spirit, Character, Core (What do you stand for? Who are you? What are your beliefs?)
  7. Miscellaneous (Something you’ve always dreamed of)

I hope this has helped! I would love to hear your thoughts and goal attaining methods. Comment below or get in touch via my various platforms.

LinkedIn Ashanta Charm

Twitter  @AshantaLC

Instagram  @Ashanta_

5 Year Plan – Have you done yours?

Credit Do’s & Don’ts

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Reading Time: 5 mins

Once you turn 18, the world of credit is accessible to you.

You can have a phone bill in your name, credit cards, utility bills, take out various finance options, open an ISA and are now eligible to pay *council tax. The world of finance is your oyster and your options are not limited to what I’ve listed above.

This sounds exciting, everything you’ve ever wanted is at the end of an application, but this is where the problems begin. If you are not aware, the financial backlash can be crippling.

Any negative mark on your credit file takes 6 years to clear. You may be happy to wait 6 years as by this point from 18, you’ll be 24. However, again as the theme of this blog is property acquisition, some lenders are not happy to lend to anyone that has ever had a default, CCJ etc regardless if this is shown on your updated credit report or not.

Do’s

  • Pay your bills on time
  • Avoid non-official credit websites
  • Disassociate yourself from anyone with bad credit
  • Get on the electoral roll
  • Build healthy savings
  • Be aware of when Direct Debits are scheduled
  • Keep your childhood bank account right through to adulthood

Don’t

  • Live in your Bank overdraft (If you don’t have one, the better)
  • Avoid checking your account balances**
  • Make multiple credit applications just because you can
  • Buy everything on credit when you can afford to pay by cash
  • Frequently open and close Bank Accounts
  • Have a credit card balance higher than 30% of your credit limit***
  • Be linked to multiple addresses
  • If you know that you’re going to apply for a Mortgage, DO NOT take out any form of credit for a minimum of 3 months, preferably 6 months if doable.

 

**Some people don’t like checking the balances of their current accounts. They’re scared to see how little money they have left and subsequently go in to an un-arranged overdraft

***Credit limit £2,000, do not use more than £600

 

Tip: If you started following my blog, you will know that for the last 12 weeks there has been a theme titled, “Mortgage Monday’s”. If your ultimate desire is to acquire a mortgage hence your following of this blog, I’d highly advise that you are registered on the voters roll, this boosts your credit score and legitimises you in the realm of credit.

*Council Tax – if you come from a single parent home, whilst you and your siblings are all under 18, your mum/dad is entitled to a 25% single persons discount. That means that if your annual council tax is £2,000, your parent will only have to pay £1,500. As soon as your eldest sibling turns 18, your parent is no longer eligible for this discount and has to pay the full £2,000. It’s only right that you chip in!

Council tax is calculated per household, not per person.

FAQ’s

  • My parent took out finance in my name and now I have a bad marker on my credit file. What should I do?

You have 2 options.
Option 1 contact the financial provider, explain the situation and see if this can be resolved via Experian. You will need to provide your parents details so that they can take ownership of this problem – sooner rather than later.

Option 2 Take the financial hit. Try and make an agreement with the financial provider. Pay the outstanding balance sooner rather than later. This will be labelled on your credit file as paid. The marker will remain, but at least you’ve taken accountability and show potential financial providers that you will pay, eventually.

  • I have a CCJ on my credit report will I be able to buy a house?

Yes you will. There are some specialised lenders that target people with bad credit. The unfavourable nature of these lenders is that they have really high interest rates. Yes they will lend to you, however if you didn’t have any negative markers on your credit file, you would of been able to get a Mortgage from a lender offering you a 1.89% interest rate instead of the 5.08% interest rate from the specialised lender.

  • What’s the best company or website to keep an eye on my credit?

Experian.

They’re the only credit scoring site that I would suggest. If you’ve never used them before you get their full package for free for a whole month, thereafter it is ***£15 a month.

Experian break down your credit in to different sections and explain why your credit score is X out of 999. They also give you advice on what to do in order to increase your credit score.

Lastly, most if not all lenders use Experian in order to attain information on your credit, so it’s brainless! Have an account with the body that is solely influential on your future. They are also the body you’d call regarding point 1 and someone else defecting your credit. They have the capacity to remove/resolve markers on your account.

***If you don’t pay for the monthly membership, you get the basic overview of your account. They show you your credit score out of 999

The 2018 Budget – Things you need to know

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Stamp Duty – Travel – Income Taxes – Brexit

Reading Time: 4 mins

What does this mean for First-Time Buyers?

Nothing much has changed here.

However, for First-time buyers purchasing a property using the Help to Buy Shared Ownership scheme, an anomaly was fixed. Previously, buyers of a shared-ownership property would be taxed on the full market value of the home (up to £500,000) rather than only the share they were buying. If the full market value of the shared-ownership property was more than £500,000 the buyer would not have been eligible for any stamp duty reduction at all.

So, a buyer paying £125,000 for a 25 per cent share of a new home valued at £500,000 would still have had to pay £10,000 stamp duty – equivalent to five per cent of the sales price above £300,000.

Now, First Time buyers purchasing a property using the Help to Buy Shared Ownership scheme will only be eligible to pay stamp duty, if any at all, for the share they are buying. So, a buyer paying £125,000 for a 25 per cent share of a new home valued at £500,000 will not pay stamp duty.

Other stamp duty rates remain the same.

PURCHASE PRICE

STAMP DUTY RATE ON FIRST PROPERTY (1)

Up to £300,000

0%

£300,000.01 – £500,000

5%

What does this mean for people on £50K per annum salaries?

Previously, if you earned £46,350 per annum and above, you’d fall in to the higher rate tax payer threshold – you’d be taxed 40%

This has now been increased to £50,000 per annum – April 2019

What does this mean for the cost of travel?

No major changes have been made here.

Costs generally remain the same.

However there has been an introduction of a new rail card for 26-30 year olds providing 1/3 off most rail travel. This will be made available nationally by the end of the year.

Brexit? What happens now?

This is something that I will not dabble too deep in. After all, our Schools, Higher Education facilities and Government have barely wrapped their heads around this.

However, from the budget, it is clear that a lot of money is being pumped in to various regions to help supplement the immediate defects of suggesting and eventually leaving the European Union, however this is a grey area as we haven’t even established 1. Whether we’ll have a no deal Brexit 2. Whether we’ll have a Brexit deal 3. Whether there’ll be another referendum resulting in no Brexit at all.

The point I want to make here is the importance of understanding the political process and what your vote means. Keep your eyes peeled, ears open and remain attentive along the Brexit journey so that you know how the progress or lack of it, will affect you.

Read Newspapers, watch/listen to the news, question time and have a little fun with the internet -Ultimately, stay informed.