Tag: Mortgage

The Numbers – You know that budget? Double it!

Ashanta CharmLeave a comment

6 Years ago we bought our first property. It was so long ago that I feel like I had a little process amnesia.

Being a first time buyer was soooo much easier than being a home mover. The extra baggage creeps up on you and you don’t realise that you’ve accumulated so much stuff!

Let’s get down to the numbers.

My husband is a numbers man. He wants it all to be accounted for on the spreadsheet and adds a £200 buffer to absolutely everything! It really annoys me because I’m all up for rounding up to the nearest 10, but £200? He takes it too far!

Well, it seems as if Mr Charm was on to something.

The costly thing isn’t in things you accounted for costing a little more than expected, but it’s in the things that you had no intention of spending money on requiring money to be spent!

To give you an idea, we always knew that we had to give the house some make up. Lick of paint, furniture, art etc. We accounted for painting all the rooms and a newly fitted kitchen/bathroom for personal reasons, not really a super necessity.

As time progressed so did the need for that budget to be stretched.

Natural floorboards meant the risk of worms, stray bits and with a young child, anything that is a risk to master charm will be seen to. We had to get the floors sanded, treated and polished.

There’s also the other unaccounted area – the garden! We hadn’t had a garden for so long that upkeep and the importance of a sturdy fence was not at the forefront of our minds.

Limp water. Nothing boils my blood more than a limp shower. Power shower or nothing! That’s what we were dealing with. The bathroom was due a facelift, but lead times were a nightmare and was we really going to live with limp water for that long? I think not.

It turns out that all of those £200 add ons were welcomed and helped us in some stretched situations.

Lesson learnt? Double that budget & don’t be a home Reno snob. Another added learn for me was to let my husband get involved, two heads are better than one and after all, this is OUR home not mine!

How to Guide: Dealing with Solicitors and ensuring your Property Purchase is dealt with in a timely manner

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Over the years we have discussed putting in the ground work to ensure that your credit is up to par and you have the right processes in place to save more than you spend.

We then went on to discuss the Mortgage Application process, affordability and the difference between a Mortgage Broker and going straight to a High Street Bank.

In the midst of the above we discussed the valuation process, covenants and the enemy of progress that is known as Japanese knot weed.

We’ve briefly touched on making an Offer on a property and ways in which you can justify offering 5 to 10 thousand pounds less than the asking price.

Today we are going to focus on the last leg of the property acquisition process – Solicitors!

It is so easy to get tangled up in a tumbleweed of legal jargon and be scared away by the legal process, but it is quite simple, especially with Residential purchases.

Below are my top 3 tips to dealing with solicitors and ensuring your case is dealt with in a timely manner.

  1. Fill out all questionnaires and property packs following the instructions of your solicitors to a T. If it says to use block capitals and black ink, do it! If for whatever reason the solicitors forget to do something later on down the line, they can turn that delay back around on you and claim that they were waiting for “correctly filled out forms”.

2. Reply to all emails in a timely manner responding to ALL questions. If you need to do a little bit of research, do it. Don’t reply to an email in parts. Respond answering all questions in one go. Be very specific and over share if you think any detail will help. Delays often occur when solicitors have a response to question 1 & 3, but are waiting for a response to question 2. This may come weeks later and get lost within the email thread.

3. Searches. These need to be done promptly as some can take up to 6 weeks to come back. Some solicitors require some sort of payment before carrying out any searches as these are non-refundable and will need to be paid for whether the transaction goes ahead or not. Pay the fee and get the ball rolling from day 1.

There are so many other details we can dive in to, but the top 3 have sometimes been the difference between someone completing on their purchase in 7 weeks and someone completing in 7 months.

How does Equity work?

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The concept of equity is quite simple and in practice is a great way to see a return from an investment.

Whether you are purchasing a family home or a buy to let property for rental purposes, the location and aesthetics of the property are crucial for its potential.   

E.g

2016
Purchase Price £220,000 
Mortgage Attained £198,000 (10% Deposit)
4 Bed property bought just outside of the M25 
Walking distance from station
Local supermarkets not far
Good school catchment area
En-suite Bathroom

2020
The same house sells for £300,000
The Mortgage balance has been decreasing repayment after repayment for the last 4 year
Mortgage Balance (guesstimate) £188,000 (Dependent on interest rate)

This means that on the property you bought for £220,000 in 2016, you have made £80,000 as the value has gone up by this much across the 4 years.

When you sell the property for £300,000 you will clear the remaining Mortgage balance of £188,000 and be left with £112,000

You will then have other fees like solicitor fees, capital gains tax (on the *gain, not the sale price) and if you sold your property before the fee free period on the Mortgage product you are locked in to, you may have to pay an exit fee.

*The gain here is £80,000

All in all, worse case scenario you are left with £90,000. That is a profit of £68,000 when you take away the £22,000 deposit you initial invested for the property.

This is why many people buy properties well outside of London, fix them up and then sell them on. The money that can be made is mind blowing. However, that is only possible if you get it right!

Next week I will be speaking about what questions to ask and what to look out for when you go for a house viewing.

The Enemy: Japanese Knotweed

Ashanta Charm1 Comment

What is Japanese Knotweed?

Japanese knotweed (Fallopia japonica) is a weed that spreads rapidly. In winter the plant dies back to ground level but by early summer the bamboo-like stems emerge from rhizomes deep underground to shoot to over 7ft, suppressing all other plant growth.

Why having Japanese Knotweed at a property is a no go…

It’s pretty self explanatory, but from a Mortgage perspective, most surveyors will note Japanese Knotweed as a negative find at a property and will deem a property unsuitable for Mortgage purposes due to the aggressiveness of it. However other surveyors will note Japanese Knotweed as a problem and insist that it is seen to and removed by a specialist before giving the property a value.

Loopholes

Not all home owners know that their property has Japanese Knotweed, which means potential buyers won’t know either and if not noticed when a survey is done on the property, good news, you’ve got away with it. However when you decide to move on and the weed has grown out of control and is noticeable, you may find it very costly and difficult to get the property off of your hands.

It’s not a good idea to hide the presence of knotweed

Whilst it may make the sale easier, the TA6 form now has a specific question about knotweed.  Concealing the presence of knotweed could prove to be an expensive mistake, as the buyer may have a case for misrepresentation and against the seller and report the acting agent to the authorities for breach of CPR regulations. 

What can be done… 

Removal

  1. The two main knotweed removal methods are herbicide treatment and physical removal. 
  • Herbicide Treatment is lower in cost but takes at least one growing season, often more. It’s the least disruptive method, but not suitable where there are plans that result in substantial disturbance of the the ground e.g. construction or landscaping works.
  • Physical Removal such as Environet’s Resi-dig-out™. This eco-innovative removal method can be completed any time of the year, and takes a matter of days. 

2. Don’t buy that property if Japanese Knotweed is present. Do your due diligence.

Mortgage Payment Holidays: What happens after the 3 months are up…

Ashanta CharmLeave a comment

Mortgage Payment Holidays – You do not get to miss 3 months worth of Mortgage Payments and then continue with your usual payments there after. 

The Mortgage payments that you miss during the holiday period are added to the overall balance of your Mortgage. 

Once the holiday period is over, your new monthly Mortgage payments are higher as your Mortgage balance would have increased due to the 3 months of missed payments being added. 

Your new monthly payments will increase by £10 – £100 or so. This is dependent on your current monthly payment amounts, current interest rate and overall outstanding mortgage balance. 

Find out the facts. Know how much your monthly payments will increase by before committing to a Mortgage payment Holiday… 

The 3 month break is great, especially if you’ve lost your job, have been placed on furlough or are going through financial difficulty, however once that time has passed, your monthly outgoings will increase and won’t be what they once were. 

Some people have panicked and taken a Mortgage holiday because the option is there, it was all over the news and they thought, “why not?”. However in 3 months time, these people will be less pleased when their monthly payments increase by £80 and disrupt their monthly outgoings. 

During the holiday period, save as much as you can so that you are prepared for any further rainy days.

Alternatively, if you can, plough on, cut back a little and avoid the payment holiday all together. 

Financial Hack: Turn £100 in to £21,600 – Your 18 Year Old dependent will thank you!

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The most daunting thing is the creation of life and the responsibility to lead, teach and grow the little human you’ve brought in to the world. 

They never chose to be here. That was down to us and our significant other. Now that they are here, we have to ensure that we set them up for success and entrench some core values. 

Many people are broken and make warped adult decisions due to a fragile childhood, non existent good examples and lack of nurturing. 

Financial Hack: Turn £100 in to £21,600

As 2 parents, you can both individually set aside £50 a month for your child – Or £100 as a single parent.

Over 12 months this £100 equates to £1,200

Over 18 years this £100 a month totals to £21,600

Once your child hits their 18th birthday they’ve already been given a head start. You can give them these funds, but also teach them financial intelligence. They can continue what you started 18 years ago and build on the funds (£100 per month), purchase a car or invest in their education. 

The options are limitless, but the important thing is that you’ve led the way, given them a booster and your dependent will most definitely thank you for this!

Does having bad credit mean that I can’t get a Mortgage to assist in the purchase of a property?

Ashanta CharmLeave a comment

No.

Great news. Bad credit doesn’t mean that you can’t obtain a mortgage, nor does it mean that you won’t be accepted for a loan or credit card. 

However, what it does mean is that you will be hit by higher interest rates and less favourable products. 

What is a product and an interest rate?

Interest rate – this is the rate a bank or other lender charges to borrow its money. The current Bank of England base rate is 0.75%

The Bank of England base rate is the UK’s most influential interest rate and its official borrowing rate. It is currently 0.75% – a historically low figure. The base rate impacts all other interest rates. When the rate is low, it costs you less to borrow money, however lenders are free to make their rates as high or low (no lower than 0.75% otherwise they will not make profit – just break even) as they see fit.

Product – lenders bundle their interest rates and incentives in to something called a product. For example a product for a first time buyer with Halifax could mean a 1.68% interest rate over a 2 year fixed period with a 2% early repayment charge and £500 cash back to assist with legal fees. Products vary and can be packaged with multiple or no incentives.

Expanding on the above example, this means that over the 2 year fixed period, your monthly payments will reflect the 1.68% interest rate. If you decide to Remortgage or sell your property earlier than when the 2 year fixed period ends, you will have to pay a 1%+ fee (% depends on the terms) of your remaining mortgage to do so. 

Interest Rates & Products – These are things you need to take in to consideration. Some people would rather go with a lender that has a product with a slightly higher interest rate which allows them to exit the deal early without a penalty. 

These kind of products are good for those that are Remortgaging due to their current product expiring, but wanting to keep their options open and not be fixed in to a lengthy deal as they have the intentions of selling/moving in the near future – within the year or so. 

Does having bad credit mean that I can’t get a Mortgage to assist in the purchase of a property?

No.

Having good credit means that your options are limitless. You can get favourable deals from high street lenders with low interest rates and great package deals.

Having bad credit, defaults and missed payments means your options are limited. You are limited to specialist lenders who lend to people with a less favourable credit file. Due to this, the interest rates are high, come with a product fee and little, but mostly, no incentives. An example of this kind of Lender is Pepper Money.

Someone with “bad credit” will be offered a Mortgage with a 5% interest rate at a specialist lender opposed to someone with “good credit” who has more options and can get a Mortgage from a high street lender with an interest rate as low as 1.42%.

Why do specialist lenders have such high interest rates?

This is because they’re offering something that you can’t get anywhere else – they can take advantage. Having “Bad credit”, you are also a liability. How do they know you are going to pay? How do they know that you aren’t going to continue with the same behaviour pattern seen on your credit file? Interest rates that are 3x higher than their high street competitors mean that a specialist lender reclaims like for like funds 3x quicker than said high street lender. Remember the Bank of Englands base rate is 0.75%. Most lenders have accounts with the Bank of England so benefit from a low base rate whilst also benefiting from the profits of a high interest rate when lending to others.

Bad Credit: County Court Judgement, missed payment, default, settlement of unpaid debt within the last 6 years etc.

Good Credit: Active credit card with less than 20% limit in use, none of the above.

Exception: Sometimes a high street lender will want an explanation for a negative marker on your credit file.

For example, “Why did Mr X miss a payment on his mobile phone bill 2 years ago twice?”

Reasonable explanation would be: There was confusion with the Direct Debit dates and account the funds should be retrieved from. This was resolved with the mobile phone company and won’t happen again.

Be responsible with your credit. Your future house buying self will thank you.

My property has been valued at £0 because of Cladding – HELP!

Ashanta CharmLeave a comment

Stay away from flats with ACM material and/or flammable cladding.

Think with me: If you are having difficulty obtaining a Mortgage to buy it, you will have difficulty Remortgaging and selling it!

You can usually spot the flats that may cause you issues with a naked eye. 

A flat with cladding

If the surveyor that goes round to value your property is cautious of the material on the exterior of the building, this hesitance alone causes a delay for you. 

This delay is caused as you will be required to prove that the material on the exterior of the flat is not flammable. This is in the form of a fire report that the Estate Agent, Managing Agent or vendor should have. 

Valuers have become increasingly concerned, because Advice Note 14 means the owner has to say the building’s material is fully safe, which is very difficult to do while the building waits for inspection results and while everyone waits for the government’s cladding test outcomes.

Surveyors and mortgage lenders are requiring building owners to demonstrate that cladding meets Advice Note 14’s criteria. If they can’t, the properties are valued at zero.

Most building owners cannot immediately provide these assurances, so they are having to get trained professional engineers to carry out lengthy and costly checks, holding up sales, purchases and Remortgages.

If you’re currently suffering this issue as a Home Owner Remortgaging your property, then the best person to speak to regarding this kind of report is the leaseholder/the managing agent. If the building hasn’t undergone a fire and risk assessment since the Grenfell tragedy, then this is probably currently in the works and you will not be able to do much until you have the results of this report back.

Grenfell Tower

It is extremely inconvenient and disheartening, however you have to understand that there are hundreds, maybe even thousands of buildings nationwide that have to adhere to this new advice note since the multiple lives lost in the Grenfell fire due to the deadly flammable materials used on the block of flats. 

As you can imagine, a surveyor is not going to deem your property as suitable security for a Mortgage if they cannot prove that it adheres to relevant legal requirements. 

Advice to those wanting to Remortgage a property with cladding issues Stay with your current lender and do a rate switch. This is simple, you choose a new product from their latest Mortgage product range and avoid going on the variable rate. A valuation is not required for this. You can make this kind of switch in branch, over the phone and sometimes online.

Advice for those wanting to Buy a property with cladding issues
Avoid avoid avoid. Don’t do it. Walk away.