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Making the Most of Your Housing Budget

Making the Most of Your Housing Budget

Your choice of location will be a significant factor in the ultimate cost of your property.  It, therefore, makes sense to choose it wisely, especially if you are on a tight budget.  Here are some tips.

Get to know an area before you think about buying there

Buying a property generally involves a lot of up-front costs.  Right now there is a freeze on Stamp Duty, but this is only intended to be temporary.  Even with that freeze in place, however, there are other costs like surveying and conveyancing plus the cost of moving yourself and your belongings from A to B.

The longer you stay in a property, the longer you have to absorb those costs – and vice versa.  This means that if you’re on a tight budget it’s vital to think about what could happen in your life over the next 3-5+ years.  Then think about whether or not a given area would still be a good place to live if your circumstances were to change.

Think particularly carefully about what might happen if you wanted or needed to change your job.  Would you still have a decent chance of getting another one within reasonable commuting distance?  Unless you can confidently answer yes to that (or are really secure in your current job), you might want to carry on renting and/or look in a different area.

In short, buying a property in an area which is wrong for you can be very expensive.  If you’re on a tight budget in the first place, it’s especially important to avoid this mistake.

Think about the type of property you need (and want)

Similar comments apply to choosing the right type of property for your needs.  Think about how your lifestyle might change over the next 3-5+ years and see what this means for the type of property you will need.  This is particularly important if you’re planning, or even considering, having children.  Think carefully about the practicalities of babies and toddlers.

For example, having a baby or toddler in a top-floor flat may be fine if you have a lift (or preferably more than one).  You may not, however, want to be negotiating multiple flights of stairs when you have a pram or a pushchair.  Instead, you might want to focus your search on lower-floor flats and/or mid-terraced houses.  These are similar to flats in that you have neighbours on either side, but do not require you to go upstairs with a pram or pushchair.

Look for areas which are in the process of redevelopment

If money is tight, then you may struggle to find a suitable property in an established, desirable area.  At the same time, you may not want to buy in an area with a very questionable reputation.  The compromise option may be to look at areas which are currently not particularly desirable, but are safe and acceptable and look like they might have decent prospects.

Start by looking at areas which are on the fringes of (or just outside) either desirable areas or key transport facilities (or both).  Your budget will dictate how far out you need to go.  Then use local knowledge and/or research to identify areas with growth potential.

Look at the facilities available locally, both practical and leisure.  Firstly, you want to be sure that there is enough in place already to meet your needs.  Secondly, you want to get an impression of where the area is headed.

For example, what is the ratio of budget-friendly facilities to premium facilities?  Are there any new economic developments planned for the area?  Are there new transport facilities planned?  If there are, you may have a window of opportunity to grab a bargain before these changes are priced into the local housing market.

 

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

 

 

What do house hunters want most?

What do house hunters want most?

COVID19 has forced many of us to reassess the way we live and work.  Over recent months, the line between life and work has become increasingly blurry for an increasing number of people.  Working from home may not quite be the new standard for everyone, but it is the new normal for a lot of people and looks set to stay that way for the foreseeable future.  A recent study by finder.com suggests that this may be influencing house hunter’s priorities.

The space race is on

Priorities one and two were if a property had outside space (and the size of that outside space) followed by the size of the property itself.  These were cited by 33% and 28% of people respectively.

It’s hard to see this as being anything other than an understandable reaction to the lockdown.  Families with children, especially young ones, will probably have a very strong wish for safe outdoor space for them.  Even people without children (or pets) may feel reassured to know that they have access to safe outdoor space, especially if there is any prospect of gyms closing again.

Indoor space matters too.  If you are only working from home occasionally, then a decent home office is a “nice-to-have”.  If you’re working from home all the time, then it’s a whole lot more important.  In principle, the need for home office space may be temporary, albeit long-term temporary.  In practice, it is looking increasingly like home working is going to become much more a feature of work long into the future.

Transport still matters

Priorities three and five were parking and good transport links.  These were cited by 24% and 21% of people respectively.  It’s interesting that people are citing parking more than good transport links, albeit only slightly.

This could signal a growing preference for the privacy of cars rather than the potentially germ-infested environment of public transport.  It could also signal that people are prepared to move further away from the main commuter links and drive to them if necessary.  After all, if you’re only going to be in the office one or two days a week instead of five, then you might be perfectly happy to trade a longer commute for more space and/or lower prices.

Quality of life

Four of the top ten features related directly to quality of life.  These were:

#4 The property being in a nice area   22%

#6 Being closer to family/ friends         17%

#7 Being close to amenities     16%

#8 Situated in an area with a low crime rate    14%

It’s interesting that people are currently mentioning the crime rate as being a key factor in their decision-making process, albeit one which is fairly low on the list.  This could be a sign that people are becoming increasingly concerned about what the future may bring and the impact it could have on their personal security and the security of their property.

Maintenance costs and looks don’t matter too much

The cost of running and maintaining the property and how the house looks were cited by 14% and 12% of people respectively.  This put them on ninth and tenth place on the list.  Possibly this reflects the fact that maintenance costs can often be improved.

It is interesting that only 12% of people cite how the house looks.  This does rather fly in the face of conventional sales wisdom.  Real estate professionals regularly tell their clients to make sure that their homes look as good as possible and give them tips on how to do this.  It’s difficult to interpret this point, but one very feasible suggestion is that buyers are prepared to overlook a questionable exterior if the property meets their needs in other ways.

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

 

The (Mortgage Payment) Holidays Are Over

The (Mortgage Payment) Holidays Are Over

Autumn is very clearly on its way.  Schools, colleges and universities are reopening.  At least some workers are heading back to their desks.  In short, the summer holiday season is over.

So too, is the financial holiday season.  The furlough scheme is winding down and borrowers are being encouraged to move back to their regular payments.  This means that anyone with a mortgage may want to think carefully about their finances over the immediate, medium-term and long-term future.  Here are some tips.

Build up a cash cushion

Currently, it’s anyone’s guess what will happen with the credit markets.  That being so, there’s an even more compelling case for building up a cash cushion to give you some protection from life’s hard financial knocks.  How much of a cash cushion you will need and want will depend on your situation, but something is better than nothing.

Review your insurance

Similar logic applies here.  Insurance cover is a predictable expense, which saves you from the worry of how you’re going to deal with an unpredictable expense.  It’s particularly valuable to people who would struggle to “self-insure” through savings/investments and/or access to credit.

Work on your credit rating

If you have credit, then you want to pay the minimum amount of interest for it.  There are various factors which determine how much interest you pay.  One of them is your credit rating.  It, therefore, makes sense to do what you can to make it as good as it can possibly be.

Step one is to get hold of a copy of your credit record from the main credit reference agencies.  In the UK, these are Equifax, Experian and TransUnion, plus Crediva.  Make sure that there are no mistakes in it.

Then take care of any basics, like putting your name on the electoral roll and checking that any companies with which you do business have your current contact details.  Also, make sure that these contact details are entered as consistently as possible.  For example, if you live in John Smith Street, then always enter it as John Smith Street rather than John Smith St or any other variation of your street name.

If you have any credit accounts you don’t use, then take the time to close them properly.  Then focus on managing anything that remains.  Make sure that you do everything possible to make at least your minimum payments in full and on time.  If you really can’t then speak to your lender rather than just missing the payment.

If you’re dealing with debt, then focus your efforts where they make the most difference.  There are two ways to go about this.  One is to tackle the debt with the highest interest rate and then move on to the debt with the next highest interest rate and so on.  This is known as snowballing.  The other is to start by paying off small balances, close the credit accounts and then move on to snowballing.

The second approach can be useful if you want to try to get a better deal on credit such as a balance transfer.  This is because it clearly shows a potential lender that you no longer have the opportunity to run up further credit on the original account(s).

Actively look for the best deals you can find on everything

First of all, question every purchase before you decide whether or not to make it.  Ask yourself if you really need it and if the answer is no, ask yourself if you really want it enough to justify the financial impact it will have on you.

Secondly, when you do go ahead and make a purchase, do your research and make sure that you are getting the best possible deal on it.  This goes for small purchases too as the cost of them can soon add up.

For more information, help and advice, please contact us

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

Is It “Back to BAU” for the Mortgage Industry?

Is It “Back to BAU” for the Mortgage Industry?

The COVID19 lockdown brought the UK’s housing market to an emergency stop.  It has now started moving again but still has to keep the Coronavirus very much in mind.  At present, it looks like this is going to be the case for the immediate future at least, but what does the longer-term future hold for the mortgage industry?

A move to (more) remote working

While the government has called for office workers to return to their desks, the response from business has been varied, to put it mildly.  Some business leaders are clearly eager to get staff back together.  Others seem to be perfectly happy to continue with home-working, at least part of the time.

For the financial services industry, including the mortgage industry, working from home permanently could raise a lot of serious challenges.  In particular, it raises questions about physical security and data security.  These challenges may not be insurmountable, but they may take time and effort to resolve.  In other words, it may not, currently, be possible for mortgage professionals to be fully and permanently remote, even if it was what they wanted.

On the other hand, it may be very possible for mortgage professionals to interact with clients (and colleagues) remotely.  The age of the client will not necessarily be a barrier to remote interaction.  This was demonstrated by the equity-release sector, which has been using telephone and video calls to replace in-person advice sessions.

The benefit of this to the business would be that advisors could be based in a central location rather than needing to travel to clients.  The benefit of this to the customer is that (part of) the cost-savings from this could be passed on to them.  There could also be a proviso that customers who felt they really needed a face-to-face advice session could still receive a personal visit from an advisor.

Increased reliance on virtual valuations

Having a reliable system for home valuations is key to a functioning property market and hence to a functioning mortgage market.  That said, however, there is a difference between “reliable” and “unchanging”.  The fact that the mortgage market has been able to continue functioning without physical valuations shows that they are not always necessary.  They may be desirable, but that raises the question of how much value should be placed on a want rather than a need.

This may be a question the mortgage industry has to start answering sooner rather than later.  The answer may be to keep using virtual valuations for lower-value and/or standardised properties and use physical valuations for higher-value and/or unusual properties.  This approach could potentially reduce costs and streamline processes without placing the lender at serious risk of either deliberate fraud or human error.

More flexibility for verifying a person’s identity

Even in the 21st century, a person’s signature can have huge legal significance.  Admittedly for really important documents, like wills, a person’s signature alone may not be sufficient.  There may need to be additional witnesses and/or notarisation.

This fact created a challenge for the legal profession, which had to come up with a way to allow legal documents to be signed and witnessed while maintaining social-distancing rules.  The current approach is to use “window witnessing”.  Essentially, the relevant person signs a document while being literally watched through a window.  The person then hands over the document to the witnesses who sign it themselves, while maintaining social distancing.

Although this deals with the immediate situation, it doesn’t exactly take advantage of the capabilities of technology.  Going forward, the legal and financial services industries, including the mortgage industry, may benefit from pushing for more use of digital signatures and, if necessary, video-witnessing.

 

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

Understanding the “post-COVID” Notice Conditions

Understanding the “post-COVID” Notice Conditions

As part of the post-COVID transition, the government has introduced a new package of support measures for renters.  Here is a quick guide to what you need to know.

The new rules in brief

From now until (at least) 31st March 2021, landlords will need to give tenants a minimum of six months’ notice before commencing any legal action to regain possession of their property.  There are five exceptions to this where shorter notice periods may be applied.  These are:

  1. breach of “Right to Rent” rules (3 months)
  2. over 6 months of accumulated rent arrears (4 weeks)
  3. anti-social behaviour (4 weeks)
  4. making a false statement (2-4 weeks)
  5. domestic abuse (2-4 weeks)

Additionally, from 20th September, if legal proceedings are raised, landlords must provide judges with all relevant information about their tenant’s circumstances, including the impact of COVID19.  If they do not, the judge may adjourn the proceedings.

What the new rules mean in practice

Realistically, the only one of these rules which is likely to be a major issue for landlords is the one about accumulated rent arrears.  This is likely to be particularly grating for landlords with mortgages.  They will be expected to make their monthly payments even though they have no income from the property.

Hopefully, most, if not all, landlords in this situation, will have insurance and/or some other way of making the payments.  If not, then they may need to work with their lender to determine a path forward.  This may involve an agreement to sell the property as soon as feasible.  In the worst case, it may involve foreclosure.

The path towards the long-term post-COVID future

In principle, nobody knows what the future will bring until it arrives.  In practice, the current direction of travel in Westminster seems to be one of more protection for tenants.  At some point, the government (or a government) is going to need to address the increased risk this creates for landlords.  Until then, however, landlords are going to need to select their tenants very carefully (or exit the residential buy-to-let) market

Rather ironically, however, landlords will also need to be very careful not to put themselves on the wrong side of the law when they select their tenants.  Firstly, it is legally questionable to place a blanket ban on letting to tenants on benefits.  It’s also questionable how much sense this makes given that tenants can end up on benefits during a tenancy.  Secondly, landlords must be very careful to avoid breaking the Equality Act 2010, particularly when carrying out “Right to Rent” checks.

Alternatives to residential buy-to-let

The dynamics of the UK’s property market mean that it’s hard to see residential buy-to-let becoming unprofitable – provided that investors approach it in the right way.  At the same time, it’s understandable that some buy-to-let investors may want to investigate other options.  Here are some you may wish to consider.

Taking in lodgers

Instead of letting out whole properties, you could look at properties which are large enough for you to live in yourself and have space left over to let out.

Short-term lets

In cities, short-term letting has become somewhat controversial.  In rural areas, however, short-term lettings often provide a much-welcomed boost to the local economy.  At present, the “staycation” market is keeping the sector going very nicely.  Over the long term, it’s to be hoped that international tourists will return.

Holiday lets are one area which might actually benefit from Brexit.  If the UK’s exit from the EU leads to a weaker pound, then the UK will become more affordable to international tourists.

Commercial property

Even if there is a reduced demand for office space, there will still be a need for other kinds of commercial property.

For more information, please contact us

Getting the right mortgage for your move

Getting the right mortgage for your move

Even a global pandemic couldn’t keep the UK’s housing market closed for long and now it’s very much back in business.  In fact, it’s moving into peak house-buying season.  This means that both buyers and sellers need to think about what they need to do to make their moves happen.  For most buyers, that means getting a mortgage.  In fact, it means getting the right mortgage.

Getting the right mortgage can make such a huge difference to the overall state of your finances, that it’s worth taking expert advice to get the very best match for your situation.  It may save time if you consider the following points before your appointment.

Do you want a fixed rate?

Currently, this is likely to be a major issue for many (potential) borrowers so it’s worth thinking about carefully.  The key point to understand is that the major benefit of a fixed rate is stability.  You will know exactly how much you are going to pay each month over the payment term.

There is, however, a cost to this stability.  Lenders know that they are the ones shouldering the risk of interest-rate rises and they factor this risk into the cost of their products.  In other words, a fixed-rate mortgage may end up costing you more than a competitive floating-rate product.

What’s more, fixed-rates are offered for set periods (again to mitigate risk).  This means that you need to think about what you will do once the fixed period ends.  If you simply drop onto your lender’s standard variable rate, you may well end up finding yourself getting a very poor deal for your money.  You could ask your lender to switch you to a new product.  If, however, they won’t, or you don’t like their other offers, then you’re looking at paying the more expensive rate or remortgaging with all that implies.

A note on negative interest rates

There has been some speculation in the media that the Bank of England could end up implementing negative interest rates.  This may leave borrowers wondering what it could mean for them.  The first point to note is that, at present, the issue of negative interest rates is pure speculation.  The second point to note is that, even if it does, there is absolutely no guarantee that it’s going to result in a bonanza for borrowers.

Those on a fixed rate are not going to see any change.  That’s exactly what a fixed rate means.  It doesn’t change no matter what happens.  Those on variable rates could, in theory, see themselves being paid to borrow.  In practice, however, they may find that there is a clause in their contract which says that their rate will never drop below a certain amount no matter what happens.

Obviously, borrowers are free to remortgage (assuming they meet the relevant eligibility criteria) but it’s hard to see UK lenders falling over themselves to issue mortgages which effectively cost them money.  That’s before you get into the issue of assessing affordability and thinking about how borrowers would cope when life returned to normal.

Is a traditional repayment mortgage right for you?

For many people, a traditional repayment mortgage is exactly the right way to go.  You pay off the capital and interest over the life of the mortgage and at the end of the term, you own your house outright.

There is, however, a difference between many people and everyone.  For some people, interest-only mortgages are the most sensible option, even in the residential market.  For others, offset mortgages could offer welcome flexibility in uncertain times.

Even buyers who do want a traditional repayment mortgage may prefer one with more modern options, such as the ability to take payment holidays or to drawdown equity (both within agreed limits).

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

Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration

 

 

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