A buyers Market, not a sellers…

It’s no secret that Covid-19 has had a devastating impact on the entire world.

Millions have lost their jobs. Off of the back of this, many will have to take payment holidays on their mortgages, some may eventually fall behind on mortgage payments and some may even lose their homes due to repossession. 

What does this mean for the market?

I’m going to focus on 2 things today.

  1. It will be a buyers market, not a sellers 
  2. Lenders will have to recover a lot of unpaid debt and be a lot more frugal with who they lend to

What does this mean for you? 

The person with a home to sell…

  • Now is the time! Sell as soon as possible and sit on the funds. Move in with family, think about short term renting and sit on the proceeds of the sale as in a few months, you will be able to buy a bigger house for a lot less.
  • Fast forward a few months… If you take too long to take the leap to put your property up for sale, you may need to take an Offer much less than what you wished for.

Are you in a chain? There’ll be more about what can do next week… 

 The person with a home to buy…

  • Hold your horses. There are going to be many houses to choose from and many people desperate to sell them so this may work in your favour when it comes to negotiating on price. 
  • You may need to front more deposit than you may have initially planned due to Mortgage products being quite unstable. 90% Mortgages which require a 10% deposit have been pulled and reintroduced week by week. Lenders may also be a lot more picky with who they lend to, request much more information and be much quicker to decline applicants who don’t fit within their risk appetite 

Key take aways

Home Sellers

  • The time is now!

Home Buyers

  • Be patient. Fix your credit & save save save!

All information on my blog is opinion driven based on market trends, statistics and forecasts regarding the current situation. 

*Photo Source https://www.standard.co.uk/news/estate-agents-face-ban-on-for-sale-signs-6781275.html

Do HMO and Buy-To-Let properties require different Mortgages? | Q&A Series

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Yes. 

Whether you go directly to a Bank or use a Mortgage Brokers, something many Buy-to-Let property owners will find challenging is having a HMO.

What is a HMO?

A Household in multiple occupation. 

This means that a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’. … You must have a licence if you’re renting out a large HMO in England or Wales.

REMORTGAGE

Before your Mortgage Broker approaches or advises that you submit an application with a particular lender, it is important that you understand that lenders policy. This is because you could go through the credit search, application process and find out that your application is rejected once the valuation is carried out. This would be down to the fact that the surveyor has observed that your property isn’t a conventional BTL property, but a HMO.

PURCHASE

Ideally you would of applied to your local council for a HMO licence during the negotiation/Purchase Offer stage as the licence can take a while to come through. 

Featured Image source: Google

Help to Buy: ISA

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Reading Time: 3 mins

A Help to Buy ISA is something all First Time Buyers can benefit from. Whether you decide to use a Government Scheme or go the Standard Mortgage route, you can maximise your savings.

The Help to Buy ISA was an initiative the former Chancellor George Osborne and the Government set up to help First Time Buyers get on the property ladder in December 2015, however the scheme will be closed to new savers on the 30th November 2019.

You will only receive the Government bonus when you are close to completing on the purchase of your property.

The great thing is that a H2B ISA isn’t a per household account, but a per person account. So essentially, you and your partner can get a bonus as little as £600 or as high as £6,000

How much bonus will you get from the Government?

Savings below £1,600 = £0 from the Government as the funds are insufficient

Savings between £1,600 and £12,000 = A 25% top up from the Government

Savings over £12,000 = A £3,000 top up from the Government

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How it works:

  1. You open your Help to Buy ISA
  1. Make an initial deposit of £1,2000 and the maximum of £200 per month there after.
  2. Continue saving. Build up a strong balance
  1. Find a property in your price range, make an Offer and go through the Home buying process
  1. When you are close to completing on your purchase, your solicitor will apply for your Government bonus.

Things to consider

It’s important to note that there have been many occasions where the bonus is not paid to the applicants until after completion has taken place.

Yes, they got the money and wasn’t scammed out of the scheme, however, the bonus funds couldn’t be used towards the deposit.

If you don’t particularly need the bonus to make up your deposit, this is great as you’ll have funds available to kit out your new home and buy some very needed furniture, accessories and electronics after completion.

The downside is that if you had calculated the bonus in to the mandatory deposit amount which is quite time sensitive in acquiring around exchange etc, then you can find yourself in a bit of a pickle.

Your maximum ISA allowance per tax year is £20,000 – this includes a standard Cash ISA, Lifetime ISA and Help to Buy ISA*

*You cannot get a first-time buyers bonus on both the Help to Buy ISA and Lifetime ISA

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What to do?

If you’re a First Time Buyer, I’d 100% say to open a Help to Buy ISA NOW even if you have no desire to get on to the property ladder any time soon

Don’t depend on the ISA to complete/make up your deposit

See the Help to Buy ISA as a post completion fund. A fund to kit out your new home and cover any post completion unexpected expenses.

Selling your property

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Home Mover

Reading Time: 2 mins

Selling your property can be basic, however with so many different schemes and second charges, there are multiple factors to consider.

Today we are going to focus on a basic sale.

You are either:

  1. A home Mover
  2. Deciding to sell and rent going forward/move in with family.

“I’m not too sure about when, but I know that I want to sell my property this year”.

“I’ve got my eyes on a property, I’m ready to make an Offer, but I haven’t even put my property on the market yet”.

“I want to move, but I haven’t got my eyes on a property just yet, they’re just not ticking all of the boxes”.

My answer to all of the above is to get in touch with the local Estate Agency’s in your area and put your property up for sale.

Once it’s up, you can always take it down if you change your mind. The longer you procrastinate doing nothing, no one is viewing your property, no one knows you’re considering selling up and once you see a property you are interested in and tight deadlines follow, you’ll be anxious and overwhelmed with the process.

STEP 1: Contact local agents and explain your situation

STEP 2: Get them round to view your property and give you a rough idea of what your property is worth, what properties in your area have been sold for of late

STEP 3: Understand the agents charge policy. Some charge 1% of the sale price, other 0.5%, 0.25% etc and there are a variety of packages including pictures, Zoopla listings etc that you need to be aware of

STEP 4: Solicitor – find one. Just like with a purchase, you’ll need a solicitor to act on your behalf. They will liaise with the buyers solicitors to arrange particulars of the contracts, exchange and completion dates.

STEP 5: Funds – Once the sale is done and monies are received, your solicitor will pay off your existing Mortgage and the excess will be yours.

STEP 6: Buying a new home – The excess funds will be used as a deposit towards your new home. That’s why it’s important to sell and buy simultaneously.

OR

STEP 6: Renting/Moving in with family – The excess funds will be wired to the account of your chance savings, current, bond etc.

FAQ’s

What about Tax?

Private Residence Relief. You don’t pay Capital Gains Tax when you sell (or ‘dispose of’) your home if all of the following apply: you have one home and you’ve lived in it as your main home for all the time you’ve owned it. you haven’t let part of it out – this doesn’t include having a single lodger.

What if I bought my house under a government scheme or have a second charge in place?

Consult a solicitor. One that specialities in properties sold under your scheme/second charges before you put it up for sale. You need to understand the process, legalities and personal cost to you.

Step-by-Step Guide: Purchasing A Property

The Timeline

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Reading Time: 5 mins

So you want to get on the property ladder…

Please find a few things below that you’ll need to consider

1. What kind of property can you afford?

There are a range of websites and tools you can use which will tell you how much you can borrow in relation to your salary and savings. Most people buy a property via a Mortgage (which is basically a large loan to buy a house) alternatively, some people buy a property out right and they are known as cash buyers.

You use something called an affordability calculator. It will require your salary, debts/monthly outgoings and how much you have saved that you’d use towards your deposit.

Here are a few simple and extremely helpful calculators below:

Natwest Affordability Calculator
https://personal.natwest.com/personal/mortgages/mortgage-calculators/how-much-can-i-borrow.html

Habito Affordability Calculator
https://www.habito.com/mortgage-calculator

LTV Calculator
https://www.landc.co.uk/calculators/loan-to-value/

At this point, you can also approach a Mortgage Broker to advise you through your options. There’s nothing worse than making an Offer on a property you can’t afford! 1. You lose out on your dream home 2. It’s embarrassing, you don’t want to give an agent or a vendor the run around. Protect your name.

Do not be disheartened, remember the above results are not the be all and end all of your home buying dreams, there are various schemes that will enable you to own a property with as little as £2,500 deposit. You can find out more about those various schemes here.

2. Find your dream home

Now that you know how much you are “worth” and will be able to borrow, go and find your dream home. Remember to research the area. What will the commute be like in to work? How close are the local schools? Is the train station within walking distance from your house? What kind of reputation does the area have? Will your car be safe?

Sign up to various Estate Agencies for email alerts when properties within your desired area and price range are put on the market. Set up some viewings, go and view properties and get a feel for the area. Just because a property looks nice in pictures, doesn’t mean it’s right for you.

Tip: If you view a property in say the afternoon/morning, before you seal the deal and make an offer, drive through the area on a Friday/Saturday night to get a real feel for the vibe of the area.

3. Make the right Offer

Go online and google the area, right down to the road you are purchasing your property on. Use Zoopla to see how much similar properties to yours have been sold for.

Do not spend more than you can afford. Remember all of the other external costs – legal fees, stamp duty, the actual move, furnishing.

Has the vendor agreed to leave anything behind? Is there anything you’re not sure about? Get this all in writing! You have to be assertive, not all sellers are nice and compliant. You don’t want to exchange contracts, complete on your purchase and then find out that the kitchen has been gutted or the air vents have been removed – be very specific! Don’t depend on the agent or the solicitor, go to the property and do your own inventory.

4. Your Offer is accepted

MAJOR PROGRESS – Celebrate a little, but not too much…

Remember no-one is bound by any contractual legal agreement at this point.

Don’t get carried away.

5. Find a Conveyancer, also known as a Solicitor. 

Find a solicitor you can trust and has a good reputation. Sometimes a purchase is delayed or falls through because a solicitor is not chasing the other side or following up on their searches. If you’re not consistently checking in with them, they don’t push on. It’s also important that your solicitor is on the panel for most lenders.

Some Mortgage products come with free legals and some brokers can offer you the services of conveyancers for as little as £250.

6. Be Careful

At this point you and the seller are not legally bound to complete on the purchase until the exchange of contracts.

At this stage, someone could offer the seller more than you.

The seller can also decide that they don’t want to sell anymore

7. Secure a Mortgage. 

This shouldn’t take longer than 3 weeks.

Go through a Mortgage Broker or directly to the bank. At this point you will need to provide the property details, the contact details for your solicitor, contact details for the agent/vendor as the lender will want to arrange a valuation appointment. Also be aware of some Mortgage criteria related requirements. You will need to have at least 3 months payslips, 3 months Bank Statements and an up to date figure of any debt you currently have in your name. If your deposit is part savings and part gifted, be prepared to get the family member/friend to sign a gifted deposit letter. If you are in your current job for less than 3 months, be prepared to provide contact details of someone in HR as the lender may require an employment reference. If you’ve been in your current role for less than a year, be prepared to provide the details of your previous employer, job title and salary.

Remember: Just because you’ve supplied the broker/bank with an abundance of information, doesn’t mean that there won’t be any further questions. When your Mortgage application is submitted, it goes to a place called underwriting where credit checks are run, your documents are picked apart and further questions can arise. E.g “Why does applicant 1 send £500 to a Mr Sharp on the 3rd of every month? What is this for and will it continue after completion?” At this point, your Mortgage Broker will get in touch with you as they won’t have these answers, especially if it’s not a credit card/loan/hire purchase payment that you’ve already disclosed. Don’t be frustrated, just cooperate and provide answers.

8. Valuation

The lender will carry out a valuation on your property. Sometimes they will do a drive by valuation, sometimes they will go in to the property and analyse each room, the quality of the walls etc.

Sometimes a desktop valuation is done and the lender doesn’t actually have to physically go to your property.

If your property is too small, the lender will not lend (This is only a worry for studio flats).

Something to watch out for:

Your offer on a property has been accepted at £550,000
You are applying for a £400,000 Mortgage (75% max LTV product)
You have a £150,000 Deposit

Unfortunately…

Your property is valued at £530,000 once the valuation has been carried out

The property is undervalued by £20,000, therefore theres a shortfall.

You now have 4 options

  1. Increase your deposit to make up the 20K difference
  2. Go back to the vendor and renegotiate the purchase price
  3. Remain on the 75% max LTV product and rejig figures
    – £530,000 Price, £135,000 Deposit, Make up 20K from own resources due to valuation and mortgage shortfall.
  4. Pull out of the purchase, find a new property and update the lender once you have a Mortgage Offer to get the property details amended

 

9. Now that you have a Mortgage Offer, your Solicitor comes in to play

Your solicitor will carry out relevant searches and enquiries.

These include local authority searches, land registry etc.

Feel free to check in with your solicitor and apply respectful pressure if your purchase and move is time sensitive.

10. Dates – Negotiate the exchange of contracts and completion date

Your solicitor will liaise with the sellers solicitors to negotiate the above. If the sellers have already moved in to their new home, this can be swift, if your sellers are currently waiting for the sellers of their onward purchase to move out, this could delay your completion – this is also known as a chain.

11. Exchange date agreed, what’s next?

It’s time to get half of your deposit funds over to your solicitor. Anything over 10K will cost you £25 to transfer from any UK bank account. This is known as a CHAPS payment. Be very careful! Make sure you have confirmed and confirmed again the account details with your solicitor to avoid being defrauded. Personal advice, confirm via email, over the phone and then ask for payment details to be sent to you in the post if you’re not completely comfortable.

11a. If you are purchasing a freehold property, you will be required to have building insurance in place at the point of the exchange of contracts – this is a legal requirement. If you’re purchasing a leasehold property, this is not necessary as your service charge and ground rent covers this insurance requirement.

12. Get completion statement from your solicitor and deeds to sign

Your solicitor will send you a completion statement which outlines the remainder of deposit owed, stamp duty figure, what you owe for their services. You pay these expenses on the day of completion or a few days before.

At this point you also sign the transfer of ownership deed. This deed means that you accept ownership of the property. Your solicitor will send this to the sellers solicitor.

13. Completion

Your solicitor will draw down funds from the lender. The lender will send the funds to the solicitors account where the remainder of your deposit is. Your solicitor will then send all of these funds to the sellers solicitor and receive the title deeds.

14. COMPLETION. CONGRATULATIONS! You are officially the owner of your new home.

You receive the keys and can now move in to your new home.

15. The aftermath

Paying your stamp duty – Your solicitor has 30 days to pay this. You would of transferred your solicitor this money at stage 13

Your details will be registered with land registry

The title deeds will be sent to you by your solicitor

16. It’s all over. Sit back, relax and make sure you stay on top of your monthly Mortgage payments 🙂