London working, outside London Living: 5 Steps to making it outside London.

Today we are going to be discussing something that is very close to home for me – the big commute!

It’s no secret that London is the place to be in order to receive a quality salary. This tends to be because salaries incorporate the extortionate costs of zone 1-3 travel and the general cost of living. Let’s not forget that London is the heart of the UK. London is home to the Bank of England, the worldwide beloved Big Ben and the Houses of Parliament to name a few! 

Throughout my career from retail right through to the financial sector I have always met people that lived in areas I had never heard of either on the outskirts or far out of London. They’d always express how affordable it was to maintain a high quality of life, whilst commuting to London and still having a considerable amount of disposable cash.

I have had the experience of renting in London for around 6 years and the most I have spent on rent is £1,200 per calendar month for a 1 bed apartment and then an additional £500 on bills & groceries. That’s a whopping £1,700 to have a roof over my head and food in my stomach. Let’s not forget that we haven’t even discussed the cost of travel, luxuries and unexpected miscellaneous expenses. I’d say my monthly expenses were not too shy of £2,500 – crazy!

Living outside London I have realised that I am able to keep the same quality salary, whilst reducing my outgoings, in turn being able to save more and invest elsewhere. Not to mention that the house prices are extremely affordable. I went from paying £1,200PCM on rent, to under £500 on my monthly Mortgage. 

Thinking about making the big move?

Here’s some tips and things to consider… 

5 Steps to making it outside London:

  1. Drive. Get your driving licence so that you don’t have to depend on your partner, taxi’s or public transport. Honestly, public transport is shocking! You can expect a bus every 30mins. 


  2. Commute. Live somewhere that is within walking/cycle distance of the train station. If you live far from the train station, you will have to drive, pay for parking or a taxi and this is counterproductive.


  3. Flexible working. The current climate has meant that the hands of many employers have been forced to be more flexible with their employees. Not commuting in to the office everyday can take some pressure off both financially and physically, this also allows you to recharge your batteries, in turn making you a lot more productive. 


  4. Opt for a bigger space. Outside London the pound goes a lot further. If you can, opt for a house/apartment with a spare room. Make this your office. Try to avoid working on your bed hunched over on your laptop. And if you can stretch a bit further, go for somewhere that has a garden or a lovely communal outdoor space.


  5. New Normal. Have an open mind. Things are going to be different, try new things. You can’t expect that London ambiance, because after all, it’s not London. 

Image Source: https://www.newstatesman.com/politics/uk/2018/02/houses-parliament-are-falling-down

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

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.

IMG_0231

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_

Credit Do’s & Don’ts

Credit Image

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

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.