by admin | Aug 26, 2021 | Mortgage News
Life may not be easy for first-time buyers. You do, however, potentially benefit from several government schemes. That said, it’s vital to understand what these mean in practice. They have potential drawbacks as well as advantages. With that in mind, here is a quick rundown of the main options.
The Lifetime ISA
The Lifetime ISA is essentially a government-boosted savings scheme. You can save up to £4K each (tax) year and get a 25% bonus added. In other words, you can get up to an extra £1K per year.
Lifetime ISAs can only be used either for the purchase of a first home or to finance retirement. If you withdraw funds for any other reason, there is a 25% penalty applied to the whole sum. This means that you are effectively charged to withdraw the money you put in.
For example, you pay in £4K and get the £1K bonus. You then need to withdraw your money. The 25% penalty is £1250 so you lose £250 of your own money. This may be amended in future. For the time being, however, it is a consideration you should keep in mind.
The Mortgage-Guarantee scheme
This is often known as the 95%-Mortgage scheme and is essentially a reboot of the old Help-to-Buy scheme. It works along the same lines. If buyers can put down a 5% discount, the government will guarantee up to 15% of the remaining mortgage. This means that the effective loan-to-vehicle rate is 80% rather than 95%.
Keep in mind, however, that this guarantee is for the lenders rather than the borrowers. In other words, if you default, they will be protected to the extent of the guarantee. You will still have to deal with the standard consequences of default.
The Help-to-Buy Equity-Loan scheme V2
This is essentially the same as the original Help-to-Buy Equity Loan scheme. The two main differences are that it is only open to first-time buyers and that it has regional price caps. In short, if you can put together a 5% deposit, you can borrow up to 20% of the purchase price of your home from the government. You need to get a standard mortgage for the reminder.
There are, however, three key points to remember. Firstly, the Help-to-Buy Equity-Loan scheme V2 is only available on new-builds. Secondly, the government will own an equivalent stake in your home. This means that any increase in your home’s value will result in you paying more to buy out the government’s stake in it.
Thirdly, if you can’t repay the loan within 5 years, you will have to pay interest on it. Currently, any repayment has to be at least 10% of the home’s market value at that point. If you can’t afford that, then you will have to keep paying interest on the full amount until you can (or you sell).
The First-Homes scheme
The First-Homes scheme currently only applies in England. It offers first-time buyers a discount of 30%-50% on new-build properties. The standard discount is 30% but local authorities have the option to increase this to a maximum of 50% as long as they can justify the decision. The discount must be passed on to any future buyers.
There is a price cap of £250K outside London and £420K inside London. There is also an earnings cap on candidates of £80KPA outside London and £90KPA inside London. Local authorities have the option to prioritize certain groups of first-time buyers for the first three months of property marketing. After this, they must allow any qualifying application.
The main potential disadvantage of the First-Homes scheme is that it may be very hard for regular first-time buyers to qualify for it. For example, local authorities may use it to encourage key workers to stay in higher-cost areas.
For advice, please get in touch.
by admin | Aug 6, 2021 | Mortgage News
The saga of mortgage prisoners has been rumbling along since 2014 (when the recommendations of the Mortgage Market Review were implemented). Understandably, it has rather taken a backseat to both COVID19 and Brexit. It now appears to be back on the agenda with the industry, the FCA and the houses of parliament.
News from the mortgage front
Back in April, the plight of mortgage prisoners was highlighted, again, due to a brief skirmish between the government and the house of Lords. When the Financial Services Bill was presented to the Lords, they backed an amendment calling on the government to cap the Standard Variable Rate (SVR) lenders could charge mortgage prisoners.
This amendment was, however, rejected by parliament, leaving mortgage prisoners stuck with the status quo. In July, however, both the Treasury and the FCA made public statements indicating that the matter was still very much in their sights. In fact, the FCA is due to submit a review to parliament in November.
What will the review contain?
Obviously, the exact contents of the review will only become public when it is complete. It is, however, safe to assume that it will include an estimate of the size of the problem. The FCA previously estimated that there were around a quarter of a million mortgage prisoners (in July 2020). It now acknowledges that the number may be greater.
The FCA has also indicated that it will look at the effectiveness of the steps already taken to release mortgage prisoners. Presumably, this will provide some level of insight as to what is and is not working at the moment. It may therefore inform any changes the government may choose to make.
What changes could the government make?
Realistically, the government only has two options. The first is to change the affordability criteria, at least for mortgage prisoners. The other is to take steps to make it easier for mortgage prisoners to satisfy standard affordability criteria. Both options raise clear questions and potential issues.
The first option raises the question of who will be responsible if a former mortgage prisoner defaults on a mortgage they would never have given under current rules. If this risk is placed on the lender, then lenders might choose to play it safe and decline the application. This would therefore effectively send mortgage prisoners right back to square one.
The government could get around this by offering some kind of guarantee to lenders. There is certainly precedent for them doing so. The government already offers support to first-time buyers and certain other buyer groups. They could extend this to mortgage prisoners.
The issue here is that subsidising one group of buyers effectively gives them an advantage over other groups of buyers. This does not necessarily go down well with those other buyers, especially not if they are paying for the subsidy through their taxes.
What options are likely?
The government has to deal with the financial consequences of COVID19 and Brexit along with wider issues such as social care and major projects such as HS2. It, therefore, seems safe to assume that it will wish to avoid taking on any more financial commitments than it can help.
This would suggest that the path forward may be to restructure affordability rules albeit with heavy caveats. For example, the government may allow lenders to relax affordability rules if a borrower is already making repayments of the same amount or more. Obviously, the borrower would need to demonstrate a consistent track record of making those repayments.
Another option might be to insist that borrowers have some form of insurance to cover their repayments at least for a certain period. This requirement could potentially be waived for borrowers who have a minimum level of equity in their homes.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
by admin | Jul 30, 2021 | Mortgage News
If you want to sell a home quickly, you need to figure out what potential buyers are likely to want and then show how your home can deliver it. If you’re using a full-service estate agent, they’ll probably help a lot with this. It can, however, still be helpful to know the right approach. With that in mind, here is a quick guide on how to sell a home quickly.
Do your research on your local market
You need to find out what the current generation of buyers in your area is likely to want. This could be a mixture of national trends and localised trends. The property press will generally cover national trends. They may also cover broader local markets such as major cities. For local trends, keep your eye on your local news.
Work to create a great home listing
In modern home sales, it can be best to think of home listings as a succession of teaser, trailer and sales pitch. Your teaser is the thumbnail on the search results in property portals. Your trailer is the main listing on the sales portal.
Pre-COVID19 the main sales pitch generally came in the form of a physical viewing. The lockdown, however, encouraged sellers (and their agents) to create an intermediary step. Essentially, this means providing even more information digitally. With lockdown easing, it remains to be seen if this will continue. There is, however, a lot to be said for it.
In simple terms, the more you can pre-qualify buyers, the fewer real-world viewings you are likely to need to organise before you find a buyer. This can make life a lot easier for everyone, including you. You don’t need any technical skills to create a basic website and/or YouTube channel. You don’t need to spend any money either, a free website package will be fine.
How to create a great home listing
A great home listing basically works as a sales funnel. As such, it provides exactly the right type of information at each step. It also goes into the right level of detail.
Your thumbnail
Arguably, the most important feature by far is the price. There are two reasons for this. Firstly, buyers can search;/filter on price/price range. You, therefore, want to make sure that your home will be picked up in the right searches. Secondly, there is a reason for the expression “priced to sell”. Homes are major purchases and, quite bluntly, price does matter a lot.
The next most important feature is the thumbnail picture. This should generally be an exterior view of your home (even if you live in a block of flats). It needs to present your home as its “best self”. In other words, it needs to be realistic but as attractive as possible.
Your portal listing
The photos on your portal listing are your chance to highlight your home’s main selling points. They are hugely important so it can be helpful to have a professional take them. As a minimum, use a proper camera and read up on how to photograph real estate to sell.
Put your home into “show” condition before the photos are taken. Remember that space and storage tend to be major concerns for modern buyers so make sure that you declutter thoroughly. Also remove anything remotely controversial (think sports, religion and politics). Then consider whether to rearrange your belongings to make your home look more appealing.
Use the text space to give a rundown of relevant practical details. If you wish, offer a link to a YouTube video and/or a website with more information about your home.
Additional information
If you opt to show more information then use the opportunity to sell the location and lifestyle as well as the property itself. You may want to link to other sources but try to keep the key information on your own page so viewers have as much as possible in one place.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
by admin | Jul 23, 2021 | Mortgage News
There are basically only three ways to get a mortgage if you have poor credit. The first is to leverage someone else’s credit rating. The second is to put down a bumper deposit. The third is to repair the damage to your credit. You may need to use a combination of these strategies and/or apply to a specialist lender.
Leveraging someone else’s credit rating
Possibly the most obvious example of this is using a guarantor. Another option could be to apply for a mortgage jointly with someone who has better credit than you. Both options require a high degree of trust between both parties.
With all the trust in the world, it’s still advisable to make sure your agreement is properly documented. Putting everything in writing eliminates the potential for conflict about what was and was not agreed.
It can also be helpful if you need to demonstrate that the agreement was fair to everyone. For example, perhaps you agreed that the guarantor would be given a stake in the property if the guarantee was invoked.
See if you can use a government scheme
This is most likely if you are a first-time buyer. The Help-to-Buy Mortgage Guarantee scheme is, however, open to onward movers. This is essentially a variation of leveraging someone else’s credit rating. In this case, however, it’s the government’s. There are qualifying criteria for the scheme but there is no harm in taking a look and seeing if you could be accepted.
Putting down a bumper deposit
The less you need to borrow relative to the value of your home, the less risk there is to the lender. Even if you have an excellent credit record, a large deposit will protect the lender against the risk of your home’s value falling and leaving you in negative equity (if only temporarily).
If you have a poor credit record, then an extra-large deposit may help to reassure lenders. This will protect them not just against changes in the housing market but also against the prospect of you defaulting. Keep in mind, however, that lenders may have rules about gifted deposits. If this could affect you, be sure to do thorough research before you apply.
Repairing the damage to your credit
Time is the great healer and that applies to credit scores too. If you have active black marks on your credit record, then these will fade to nothing over time. Admittedly, it may take several years for them to fade away completely. You can, however, use this time to do everything you can to push the needle in the right direction.
Keep in mind that your finances will be scrutinized as part of any mortgage application, even if you have an outstanding credit record. Being able to show lenders either that you have mended your ways or that you are back on your feet (post-COVID19) will be essential to getting approval.
Remember, lenders are obligated to ensure that you really can afford the mortgage you want. If they fail in this duty, then they can get into trouble with the regulator. The more you can demonstrate solid financial management, the more you can reassure them that you are both capable and responsible.
Applying to a specialist lender
The high street (or its digital equivalent) may be the obvious place to go to look for a mortgage but it’s far from the only one. If you’re in a round peg/square hole situation, you may be far better going to a specialist lender.
Of course, the challenge here is finding a specialist lender. You may find it much easier to look for a mortgage broker and let them guide you through the maze. It’s literally their job to know the mortgage market inside out and, hence, know where you’re most likely to be accepted.
If you need mortgage advice, please don’t hesitate to get in touch.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
by admin | Jul 16, 2021 | Investment, Mortgage News
With the Stamp Duty Holiday winding to a close, it’ll soon be time for the housing market to go back to standing on its own two feet. It’s always managed this pretty well in the past. Can it keep ploughing ahead now?
The drivers behind house-price growth
Since July 2020, the UK has seen extraordinary house-price growth. Given the timing, it seems reasonable to assume that the SDLT holiday was a factor in this. The key question, however, is whether or not it was the only factor. If it was, then, at a minimum, house-price growth should stop. If it wasn’t, then house-price growth should continue albeit possibly at a slower rate.
Why were people moving?
Anyone who’s ever moved home knows just how much hassle it involves. What’s more, even with the SDLT holiday, it’s generally an expensive undertaking. The SDLT holiday, for example, did not cut the costs of mortgage applications, valuations and conveyancing. Similarly, it did not cut the costs of physically moving from A to B.
It, therefore, seems fair to assume that the SDLT holiday simply prompted people to get on and do something they were planning on doing anyway. This raises the question of why they were doing it.
Upsizing and downsizing
If you need more space than you have and can’t extend then moving is really your only option. If you have more space than you need, then moving can be an attractive option. Less space generally means less cleaning and maintenance. It can also mean less cost.
Of course, if you’re really short on space or really have too much of it, you will effectively be forced to move. If, however, you’re just about managing, then you may need an incentive to go through the hassle of moving home. The SDLT holiday might have been the boost you needed to get moving.
If this is the case then it’s questionable whether house prices can continue to rise over the near future. Quite simply, if the majority of people who needed or wanted to move have done so recently, who is going to be buying new houses? Of course, it’s to be expected that there will be some activity, for example from first-time buyers, but will it be enough to sustain growth?
Changing location
The need to change location might be forced on you or it might be through choice. In fact, it might even be a bit of both. This might have been the case for a lot of people in COVID19. Remote-working became the new normal. Remote-/hybrid-working is looking increasingly likely to be the new frontier of knowledge work. That has serious implications for the housing market.
Although some employers have spoken out against remote working, many others are interested in it. They may not be prepared to go 100% remote (although some companies are). They may, however, be perfectly happy to switch to a hybrid model. This allows employers to reduce the cost of office space while still maintaining a base for meetings and collaborative work.
It also allows employees to move further away from their work location if they wish. In fact, it may strongly motivate them to do so to get the space for proper home offices. If this is the case then demand may continue after the SDLT holiday ends. Some employees may have been waiting to see what their employer’s long-term policy would be before committing.
Investing
People buying second (or subsequent) homes still had to pay the surcharge but they qualified for the main SDLT holiday. If this was one of the drivers behind the price rises then it’s questionable whether or not price growth will continue.
Investors need to make their numbers add up. It’s hard to see how they can make suitable returns buying houses at high prices without the benefit of the SDLT holiday to offset them.
Please contact us for mortgage advice.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
by admin | Jul 9, 2021 | Mortgage News, Video Advice
Can you get a first-time buyer deal if your partner has had a mortgage before?
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