First time buyers are more likely to be rejected for a mortgage than they were a year ago!

 A recent study by Aldermore Bank showed that first time buyers are more likely to be rejected for a mortgage than they were a year ago. Unfortunately, more than two in five said that they had been rejected more than once. This compares with fewer than one in five before the pandemic.

In the survey, the top reason for mortgage applications being rejected was due to having a poor credit history (41%) and over a quarter of prospective first-time buyers said that they were worried about their credit history with over a third currently seeking to improve their credit score. 

In our experience, an often-repeated mistake is for first time buyers with any kind of complexity and/or poor credit to seek to obtain a mortgage via their bank first and this will more often than not result in a rejected application. This can lead to despair, desperation and sometimes shame and embarrassment, but brokers like ourselves are experienced in helping such customers.

Regrettably, the survey also highlighted that more significant credit issues are becoming more prevalent too with nearly a quarter (23%) having an account handled by collection agencies, one in nine (14%) having taken out a payday loan, 12% having a County Court Judgement (CCJs) and 9% having a bankruptcy in their past.  These findings are being echoed in our day-to-day dealings with customers and it’s clear that the pandemic has impacted the finances of many, but that need not mean that they cannot obtain a mortgage.

By enlightening customers to the many options available, no matter what your circumstances, mortgage brokers can remove the supposed stigma and shame of having poor credit and help make your home ownership dreams a reality.

Specialist lenders can also offer Help to Buy

In the eyes of many industry commentators and members of the opposition, the Help to Buy scheme sits somewhere between being the Governments greatest achievement within the housing market, and a potential reason why many house builders and the new build sector could crumble like a house of cards in the future.

I’m focusing on the more dramatic end of the opinion spectrum here and with the end of the scheme inching ever closer, I expect it to generate even more views and headlines before it is gradually phased out.

The latest figures from the Ministry of Housing, Communities and Local Government showed that:

•     - Over the period since the launch of the Help to Buy: Equity Loan scheme (1 April 2013 to 31 December 2018), 210,964 properties were bought with an equity loan.

•     - The total value of these equity loans was £11.71 billion, with the value of the properties sold under the scheme totalling £54.48 billion.

•     - Most of the home purchases in the Help to Buy: Equity Loan scheme were made by first-time buyers, accounting for 171,053 (81 per cent) of total purchases.

•     - The mean purchase price of a property bought under the scheme was £258,223, with buyers using a mean equity loan of £55,498.

These figures highlight how invaluable this initiative has been for many home buyers since its introduction, and how the take-up is unlikely to slow-down anytime soon.

Help to Buy has benefitted from an increased profile in recent times and this has helped more FTBs recognise its attributes – which is a good thing - although it’s prudent to point out that it should not be considered an all in-compassing solution. And, on the flip side, despite this rise in lending prominence there are still pockets within the market where it can prove valuable for a certain type of borrower which often goes overlooked.

I believe this type of product is seen by most borrowers, as being one which sits squarely in the domain of mainstream or high-street lenders. Meaning the role of specialist lenders can often go ignored, which is a shame. There are specialist lenders who can provide Help to Buy solutions for borrowers with an adverse credit history, IVA’s or even bankruptcy issues, and this is an important part of the scheme which we tend to hear very little noise around (T&Cs obviously apply!).

The specialists might not be applicable for everyone, and still form a small proportion of the overall lending figures, but they should be playing a bigger role in supporting more credit impaired borrowers get a foot on the property ladder for the first time or even back onto it after falling off.

Equity Release is not right for everyone. What are the other options?

It seems to be that you can’t turn on the TV without seeing an advert for Equity Release.  

This is one area of the market that continues to gain momentum.  It gets a huge amount of airtime and column inches, yet its estimated to be just a £4bn part of a £260bn+ mortgage market and not necessarily right for everyone. 

Equity Release, put simply, is a scheme through which the asset rich can release funds from the equity in their property. This scheme normally applies to applicants approaching the twilight of their life although it is not uncommon for the newly retired to participate. Equity Release is highly regulated to ensure no high pressure selling and we always encourage offspring involvement.  After all, the equity is likely to form a major part of their inheritance and they should always have the opportunity of finding alternative methods of funding their parent’s lifestyle first.  Some providers also allow the interest to roll up, so there are no monthly payments, and some allow the capital raised to be used as future income.

What you don’t see in the adverts and on TV for Equity Release, are the alternatives.  When coming to the end of the mortgage term with your lender, it’s rare to be offered any additional products to stay with them as you are ending the mortgage contract (normally 25 years or more).  They also fail to advise you to seek further advice about re-mortgaging to another provider.  Despite ages possibly having achieved ‘later life’ status, there are options available and although this might cease on the high street, as their maximum ages tend to be between 70 and 75, there are a huge number of lenders who will still lend. 

Why should a customer not have a mortgage due to being in advance of normal retirement age?  We know people are working well in to their 70’s now and some are deferring pensions until needed.  So, for the right customer, with the right income and right loan to value of the property, a normal mortgage is still achievable.  These lenders will be building societies, or similar, dotted around the country but having been established for decades, even centuries!  They think outside the box, manually assess and will take a reasoned decision, rather than a computer based ‘tick box’ response.  They will also consider interest only options, assuming there is a suitable repayment strategy in place.

Terms and conditions always apply, and specialist advice should be sought as this can be a very complex matter and can affect future equity and income. 

Be aware of the technology around your mortgage application

There’s been a lot of talk recently about new technology, especially regarding the new ‘open banking’ opportunities and how your private transactions will come under scrutiny by lenders decision making computers, after you’ve given permission of course!

The idea is that the lender can review your incomes, outgoings and all other financial items just from delving in to your account, via open banking.  ‘Big Brother’ indeed.  The aim is to speed up the financial transaction and allow institutions to access your data at the touch of a button, as well as providing more competition and innovation to financial services.

The downside is that whatever is in your bank statements, lenders must take it into account when deciding whether to lend to you, or not.  There’s no hiding and now no apparent limit on time to be reviewed.  Currently lenders tend to look at just the last 3 months bank statements, but with open banking data at their fingertips, this could be unlimited moving forward.

Not all lenders have signed up to this as yet, but it’s only a matter of time.  Therefore, be mortgage ready.  If you accounts are all over the place, tidy them up!

With this in mind and so many recent rate and criteria changes, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred by financial institutions and more.  Don’t give them any excuses not to lend to you!  The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result.  Try and ensure there’s no missed or late payments as these will also decrease your credit score.  In short, your credit search/score are the basis on which most lenders will initially decide whether to lend to you or not.  The best rates will almost definitely go to those with the best credit scores.  

Finally, many customers forget to disclose an old student loan, or a 0% interest car HP agreement, or even the monthly payment out to a pension.   The lender sees all debts and any monthly payments must be taken into account when it comes to affordability.

So, plan ahead.  Work out your budgets, what your monthly payments are and everything that you need to disclose, before you go and see your local and independent mortgage adviser.  It’s time well spent and will stop any unnecessary delays, or possible declines, later on.

Tesco Bank and Which? Mortgage Advisers gone. Yet others launch new products.

Market conditions continue to cause huge uncertainty and as such, we’ve seen some lenders pull out of the market until more stable conditions return and others completely stop lending.  The most recent being Tesco Bank.  They announced that hey have ceased all new mortgage lending and are actively looking to sell their existing mortgage portfolio, to concentrate on serving a broader range of customers in more specific areas outside of mortgages. 

Whilst this is a slight negative for the mortgage market, as their lending book amounted to over £3.7bn, others continue looking for ways in which to help attract new business.

We’ve seen some great new product additions and just in the last few days, our friends at Masthaven Bank have launched some fantastic products aimed at the Buy to Let sector.

This includes the launch of a new ‘Specialist Property’ product to cater for a wider variety of property types including:

- Multiple unit freehold

- Larger Houses of Multiple Occupation (7-10 rooms) on single or multiple Assured Shorthold Tenancy (AST) agreement

- Flats on floors 10-20

- Retirement accommodation

- Modular Housing

They’ve also launched a new ‘Specialist Landlord/Tenant’ product to cater for a wider variety of landlord and tenant types including Holiday lets, Airbnb lets, DWP/Asylum tenants and Houses of Multiple Occupation/Student accommodation (6 or fewer rooms on a single or multiple AST).  Great news. 

Further assistance for the Buy to Let sector was also launched recently by another lender who now allows for ‘Top Slicing’.  Basically, rental income is used to calculate the loan amount. If there is an excess, this may be used to assist other properties where the rental income falls short. Or if the rental income is not quite enough to reach the loan required, the customers income may be taken into account to ‘top up’.

Finally, Help to Buy (HTB) schemes have also been given a boost.  We have a lender who offers free standard valuations on all HTB products available in England and Wales.  They will also consider schemes with 5% Builders incentives and allow the mortgage offer to be valid for 6 months with extensions possible.

Obviously with all the above, terms and conditions apply and it’s down to the lenders standard underwriting and affordability checks.  But these are signs that despite the uncertainty, there are active and proactive lenders looking to help all types of customers.

Buy, Sell, Renovate, Rent? So many opportunities.

There have been a number of remortgage applications recently for those looking to raise funds to purchase other properties or to make improvements to their current homes.  Just around the local area, I have seen an amazing amount of building work and renovations / extensions being carried out.  Many home owners appear to be improving their current residence rather than taking the big leap of selling and moving up (or down) the ladder.  This appears consistent with the general view that there is a shortage of properties up for sale.

Other consumers might be making the next step but are then renting out their current property on a Buy to Let basis rather than selling it.  Nice if you are in that lucky position!  The rental market is certainly buoyant and showing no signs of slowing down over the coming months. So a Buy to Let might provide you with a modest return for your investment and may be the start of building a little portfolio nest egg for later on life. We have noticed that this is a growing desire for many who fear that their pension arrangements may not be sufficient, and that rental income may be a suitable supplement.  Many new lenders have also launched into this sector over recent months and re-mortgaging away from your current lender should not be looked upon negatively. 

Many lenders will cover the cost of surveying your property, as well as covering the legal fees in transferring your mortgage from one lender to another.  But most of all, you should think of number one as this could save you money against your current provider. This can only be a good thing.

Finally, once you have more than four properties, the regulators/lenders class you as a ‘portfolio landlord’. Although each lender’s requirements are different, in the main, this entails a more in-depth investigation and underwrite of your situation.  Common requirements are now a Business Plan, a Cashflow and forecast, Assets and Liabilities statements and full details on the whole portfolio including current mortgage, value, rent achieved, etc.  Be aware if you are in a rush as this underwrite can take a little longer than a standard mortgage process.  

Cryptocurrency still not widely accepted in the mortgage world.

There’s been a lot of hype around the rise of ‘Cryptocurrency’.  Specifically, relating to Bitcoin and other similar electronic currencies.  Currently they are not regulated and their price can fluctuate immensely day by day.  However, there have been a number of success stories and thus providing funds which could possibly be used as a deposit for a property.  Normally, lenders will want to see a build up of savings, or proof of where the funds have come from, inheritance etc.  With no formal category for this type of return, and no formal guidance from the regulators, some lenders may class it as gambling and not allow it as a form of deposit.  Some of the major high street names have already confirmed they will not accept deposits derived from cryptocurrency. With technology thriving as it is and some cryptocurrencies now worth billions worldwide, this could be deemed quite an ignorant view.  I suspect, as they become more widely known and used, only time will move this forward.

In the meantime, and especially in the current climates, you should do your homework and speak to a ‘whole of market’ mortgage adviser.  They might have an avenue for such a transaction.

However, if the person you are speaking to is not offering ‘whole of market’ advice, i.e. they just review a panel of selected lenders, you may not be getting the best product for your needs and/or requirements.  For some of the larger brokers, lenders may even put one of their own underwriters in-house, so that your application can be processed within their offices.  This helps with speed, instructing valuations and dealing with queries quickly.   And remember, you can place your mortgage with whoever you like. You are under no obligation to anyone, despite what some may say! If you don’t like their stance, or they’re ‘forcing’ you to use a specific adviser, walk away….

Finally, we are delighted that Impact Specialist Finance has been nominated for Best Product Innovation; Best Use of Technology; Bridging Distributor of the Year, Best Buy to Let Broker and Specialist Finance Business of the Year at the 2019 Specialist Finance Introducer Awards.  Brought to you by Mortgage Introducer, the SFI Awards celebrate all that is great in the specialist mortgage sector.

To help us, we need YOUR vote please!  You can nominate at https://sfiawards.co.uk/voting/.  Thank you in advance!

United Trust Bank launch a market friendly mortgage offering. But be quick!

Let’s not beat around the bush, it’s tough out there!  We have seen numerous local and national retail outlets and banks recently confirm they are to reduce their store or branch numbers as the ‘online versus shop front’ takes further casualties.  

In addition, the finance sector is also finding it tough.  Despite already losing some lenders with funding issues, other lenders are delayed with processing mortgage cases.  One we know is at least two full weeks behind and then a further week to produce the mortgage offer!  Certainly something to check before you proceed with a lender, especially if you’re in a rush to buy that ‘dream home’.

On the plus side, it is encouraging lenders to become more innovative and think about more differentiating ways to attract new business. 

Our friends at United Trust Bank have launched a very limited distribution remortgage range that allows each application to be assessed on its merits and does not aspire to the ‘one-size-fits’ all mentality.  This includes:

-        No requirement for a minimum credit score.

-        No restriction on property construction types

-        No loan to value restrictions on any flats

-        No borrower legal representation required

-        No penalties on five-year fixed rate products.

-        Free valuation up to a property value of £250k.

Obviously, terms and conditions apply, but this shows that lenders are thinking about unique angles to assist clients, especially with regards to remortgages and speeding up the process.

With this in mind, I feel the need to reiterate that whatever is spent on credit cards has to repaid!  If you are looking to review your mortgage in the next few months and have loaded the credit card balance up during the Easter holiday period, remember that lenders will use the balance and offset against your income, before working out what you can borrow. That includes interest free credit cards, loans, Car HP/PCP agreements and student loans. They are all taken in to account.

Finally, we have also seen a vast increase in customers looking to consolidate debt and add these amounts to their current mortgage. This can sometimes cause issues. If you consolidate unsecured finance into your mortgage, whilst your monthly payments may be lower, you may be paying more for your debt over a longer term.  Always seek professional advice, read the small print and don’t rush in to things. 

The word to sum up these last three months is 'uncertainty'

With the first quarter of 2019 now over, we can safely say that the word to sum up these three months is uncertainty. Already we’ve seen three lenders stop lending or pull all of their products due to ‘costs of funding’ and ‘uncertain times ahead’.  This is all a bit ‘de ja vu’ compared to back in 2007/8 before the big ‘crash’.  However, this time we’re not on the verge of a global recession (hopefully) and once we know what lies ahead for Brexit, things should return to some normality, whatever that may be. 

Lenders usually want to start the new financial year with a flurry and so as expected we have seen a number of lenders launch limited edition products. These are short term offers and therefore if you are looking to secure your ‘uncertainty’ for the next three to five years, there are some great deals to be had currently.

It always surprises me how few people actually know what rate they are on, the type of mortgage, i.e., fixed rate, tracker rate, etc, and whether they are paying interest only, or capital repayment. Unsurprisingly, almost everyone knows what it costs per month to the nearest penny!  They will haggle for a £10 discount on a new washing machine or sky TV, whilst letting ‘sleeping dogs lay’ when it comes to the mortgage!

It’s very easy when the promotional rate period comes to an end to keep your mortgage with the same lender, ‘brush it under the carpet’, and deal with it ‘tomorrow’.  But we all know tomorrow never comes.  A review of what’s on offer from other lenders, especially if you’re currently on a Standard Variable Rate, or equivalent is wise. These types of rates tend to be a lot higher than what’s available in the market place.

Many lenders are offering superb remortgage opportunities with minimal costs to change, including free standard valuations and some with legal costs.  Rates are competitively low and mortgage product choice is at its highest for some time.

If there’s ever a time to review all options and give yourself a piece of certainty, now might be a good time, as after Brexit, who knows where we will be..

Confusion regarding Buy to Lets and how lenders look at affordability.

Last weekend, we exhibited at the Property Investor and Homebuyers show at the London ExCel.  It was a great opportunity to talk to professional landlords, as well as those looking to take their first steps onto the Buy to Let sector ladder. 

With many changes and increases in taxation on profits being recently introduced along with licence requirements for houses of multiple occupation, minimum size requirements on rooms, etc, the Buy to Let sector has taken quite a beating!  Yet with interest rates so low and demand for rented properties increasing, and no clearly defined solution to help first time buyers, I can't see these changes killing off the sector just yet!

In fact, the exhibition showed how many people were genuinely interested in looking at renting out property as a long-term investment and project.  Including a number of first time buyers looking to buy a property to rent, rather than to live in. 

However, there’s a lot of confusion still regarding Buy to Lets and how lenders look at affordability.

So, to try and clarify - Since the Prudential Regulation Authority stress test rules came in to effect in 2017, lenders have to work out affordability based on the rental income achievable from the property and stress the product term over a five year period, often at 145% of a nominal rate of 5.5%.

Lenders interpret the rules differently and differentiate between a Buy to Let in a personal name compared to a property brought in a limited company name.

  

However, if the lender offers a fixed rate over a five year period, the actual pay rate can often be used, instead of the nominal rate of 5.5%.

Therefore, by way of example - A standard buy to let in a personal name, achieving a rent of £950 per month, with the calculations of 145% of 5.5%, would equate to a loan of £142,947

If we used the same example, but in a limited company name, and on a five-year fixed rate, the changes in loan achievable become very apparent: 

125% of 3.49% (Limited Co & 5 year fixed) - a rent of £950 pm = £261,318

Please note that these are examples only and every case is looked at and underwritten on its own merits

With all of the recent tax changes on Buy to Lets, you should now seek professional mortgage advice, along with in-depth tax advice from an accountant who understands property, limited companies and all the new rules surrounding landlords and, where applicable, portfolio landlords.

Self Employed? Not a problem..

A large myth suggests that because you are self employed, you will find it harder to get a mortgage. 

Maybe that was so a few years ago, but not today. 

Yes, the financial crash took its toll on the self employed and quite rightly killed off the ‘self certification’ type deals (no proof of income).  But today lenders are quite happy to lend to those who are self employed and have a good track record.  The majority of lenders require two years accounts and will tend to average your last two years figures.  However, there are also some lenders who will look to assist you even if you are in your first year.  Some will also consider just last year’s figures, even if you have been self employed for longer.

Generally, the longer you’ve been self employed and the more years accounts you have, the larger number of lenders you will have who are willing to assist.

Some lenders do not require to see your full accounts, but will require an accountants certificate to be completed.  This differs lender to lender. Some will require a full set of accounts and/or an accountants certificate! Some will require this and/or SA302s, tax year overviews and more.  All can be requested via HMRC. 

They may also require to review business bank statements to review day to day cashflows and possible projections for future income, including potential contracts, etc.

This can also change depending on the make up of your self employment, whether a sole trader, partnership, Ltd company director and so on.

Deposit requirements can range lender to lender, but the bigger deposit you have, the greater the number of deals will be available to you.

Finally, plan ahead.  Six months ahead of your mortgage requirements, make sure you have your house in order.  Check your bank statements are in good order, check you have the right accounts and relevant paperwork from your accountant.  Don’t have too many credit searches in a short amount of time as this could affect your credit score.  Ensure you are on the electoral role and have decent breathing space on card limits and loans.  All of this should put you in a good position before the lender even looks at their ability to lend to you! 

What is mortgage affordability?

One of the most frequent questions to start a mortgage interview tends to be around ‘How much can I borrow?’.   Only a few years ago, that could easily have been up to 8 x income with the minimal of fuss.  Oh, how things have changed, and rightly so!  Those were times with little control and the lengthy recession bore testament!

Today it is so much more intense!  For example, a lender will require to know your monthly budget spend figures, right down to every direct debit on your bank statements, including council tax, insurances, mobile phones, lottery payments and gym membership!  From these monthly outgoings, the lender will look at affordability and decide from there what mortgage amount might be available to you.  However, on the other side, not only can it be restrictive depending on your monthly outgoings, but it can also be very generous depending on what little outgoings you have!   The lender has a duty to make sure you can afford your mortgage today, as well as when rates rise and specifically to it being considered affordable over a 5 year period.

But this also means that what was once an affordable mortgage may suddenly become unaffordable due to the perception the lender has on consumer spending habits, both historically and projected for the future.  

We have seen the phasing out of income multiples and the introduction of affordability models.   So, no more straight forward 4 or 5 x income discussions.  The amount you can borrow will depend on your monthly net income against expenditure and living costs.  However, this also works positively for the right loan to value, right affordability and right customer, as lenders are willing to offer a little bit more. 

With the increase in requirements, the time taken in research prior to recommendation for a suitable mortgage product has also increased, as have the lenders own underwriting procedures.  So, beware if you are in a rush!    

Coming to the end of your mortgage deal? What next?

Some lenders are distributing letters to those coming to the end of their product term offering them new rates, but indicating a deadline in which to switch.  We had one customer recently who was four months out from their current rate changing from a fixed rate to the lenders Standard Variable Rate.  They were offered some great new rates to stay with the lender, but had an effective deadline of just two weeks in which to accept, even though their product wasn’t changing for four months!  This is not acceptable, no one should be pressured to accept a deal and we have passed this example on to the industry trade body to review and take on.  However, some customers might accept this and go with the deal. This might be understandable but what if rates were to decrease in the next three months? There would be every good reason to be annoyed!  Always read the small print, do not panic and seek expert advice.

With this in mind, do you look at your financial budgets frequently?  A report from a well-known credit referencing agency has suggested that over 78% of mortgage people surveyed are not currently budgeting for a rate rise.  We all know rates will rise at some point, probably a while after Brexit, but nobody knows when exactly this will happen!  Many of those questioned did not know how much a rate rise would cost them on a monthly basis, despite many respondents believing rates would rise over the next twelve months!  A 1% rise on a £100,000 mortgage can increase the monthly payment by as much as £83.  As we go in to some months of uncertainty, and especially with regards to the cost of funding within the mortgage market, do make sure you are ready for all eventualities.

Whether you require the security of fixing your payments for an amount of time, or whether you are a bit of a risk taker and might look at a short to a medium term tracker, right now, there are some potentially great products in the market.

However, always shop around.  The initial rate may look good, but there might be hidden fees, large lender fees and early exit fees too!  There may be better options available to you elsewhere.

Not all mortgage options and information is easily accessible

There’s a world of information and product availability in the mortgage sector.  But not all of it is as easily accessible to the consumer as it should be.

Did you know you can borrow 100% of the security property value?  Yes, you might need Mum & Dads help, or another guarantor who may put their property up as collateral or require their income to be used in the mortgage affordability calculation. But it can be done.

Did you know you can borrow up to 85% loan to value on a buy to let?  There are now a number of lenders in this space looking to assist those with maximising their mortgage on an investment property.

Did you know we now have lenders in the market with no maximum age limit?   Many people think that Equity Release (or interest roll up with no monthly payments) is the only way forward over a certain age.  Not so!  Lenders will take on board your circumstances, income, assets and liabilities and look to provide a normal mortgage, and possibly interest only, for the right scenario.  Terms and conditions obviously apply.

And there are so many more opportunities, if you know where to look for them.

We have had many mortgage customers approach us who have become frustrated in recent times due to local banks or building societies who are unable to see mortgage customers for a matter of weeks.  That could mean you lose your dream home in this ’difficult to come by’ property market as agents won’t wait.  Or the agent may insist that you see their ‘internal mortgage adviser’ who may only have access to a handful of lenders.  Therefore, you may not be offered all the wider market products available to you. 

This is where independent and whole of market brokerages come into their own.  They will be able to offer you access to a wide selection of lenders, including the high street names, and you only need to have one conversation with the same person.  In addition, they should have access to lenders who will manually assess your needs rather than a ‘computer says no’ type scenario, if required.  If I can also ‘plug’ a little, we also have access to a number of limited access lenders and exclusive products not readily available to the wider mortgage market!  Shop around, seek all your options and make sure your mortgage has the right ‘impact’...  

More changes for Buy to Let - take professional advice

Have you looked at your mortgage requirements recently?  Do you own investment properties?  Do you know about the upcoming changes to EPCs?  Are you prepared for the changes to mortgage interest tax relief?

The Buy to Let sector has been through some interesting times and it always seems to be this area that is targeted when it comes to tax and regulatory changes.  That is why I always stipulate that any property investor should have a good set of experienced property professionals around them when it comes to advice and recommendations.

For the tax year 2019/2020, landlords will only be able to offset 25% of their mortgage interest for tax purposes.  In 2020/2021, all of a landlord’s gross rental income will be taxable and they will instead be given a reduction in their tax liability equivalent to 20% of their mortgage interest.

This has led to an increase in landlords transferring their portfolios in to a limited company structure with all future purchases being bought in the limited company name.  This should be carefully considered, and professional tax advice taken.

In addition, minimum energy efficiency standards (MEES) were introduced in April 2018.  The standards affected all new lets and tenancy renewals in the private rented sector to have a minimum energy performance rating of E.  From April 2020, this will also cover existing tenancies.   Landlords will be unable to rent properties until any works are done and the minimum rating is achieved.   It will be illegal to rent out a failing property and landlords can be fined up to £4,000 (unless the property is a listed building or holiday accommodation rented out for less than 4 months a year or let under a licence to occupy).

On the upside, the availability of Buy to Let mortgages is at it’s highest for some time with loans available up to 85% of the property value and five year fixed rate deals, with only three year redemption penalties recently being launched.  Terms and conditions obviously apply.

Taking in to account all of the above, it is more important than ever, to seek specialist Buy to Let mortgage advice along with the relevant tax advice from a property tax adviser.  This really is an area you can’t afford to get wrong as it could be very costly to rectify later on. 

Over 65? No problem!

Just because you’re over 65, it doesn’t mean you can’t have a mortgage!  But sometimes it can be harder to get a mortgage that is right and affordable, due to age restrictive terms, once you reach a certain milestone with the high street lenders.

Often, retired people have managed their finances successfully over the years and enter retirement mortgage free.  At the same time, many, whilst having no mortgage, also suffer from reduced income.  Others may wish to continue their mortgage past normal lender retirement age, whilst they may still be working.  There are schemes where equity can be turned into a mortgage (not necessarily equity release) and where off-spring may be able to assist with the repayments in order to secure and protect their inheritance whilst also ensuring a comfortable retirement for their parents.  This is not right for everyone, but it is certainly worth talking to a qualified adviser to review all possibilities.

According to some lender reports, there are an estimated 600,000 people due to come to maturity on their interest only mortgage by 2020, aged over 60.  Many will probably have no way of repaying their interest only mortgage.  Some will have endowments that didn’t meet expectations, or maybe the house has not increased in price as much as hoped.  Stricter mortgage rules and lending criteria has made it harder for those over 65 wanting to re-mortgage.  However, despite the high street being almost a closed entity, there are plenty of other options (not that your current lender is likely to advise them - they just want their money back!).

The lender has the right to request repayment of their loan at end of the mortgage term.  If the customer has no way of repaying this and has just continued to pay the interest over the last twenty-five years or so, they face the possibility of having their home repossessed or being forced to move out.  On the high street, the end of the loan term will normally hit those aged between 65 to 70.  This is not new news but does highlight that many people are still burying their head in the sand and hoping this will go away or the lender may be lenient.

There are a number of lenders that recognise that 'normal retirement' age is no longer set in stone and people continue to work long in to later life. These are not high street names and as such, rates may be slightly higher than the big super tanker, large volume producing household names that we are used to.  But at least they will consider helping out and could keep you in your family home!

Which type of property valuation is right for you?

On every property, the lender will require to know that they are lending money on a suitable property.  This will entail a valuation and normally a surveyor will vist the subject property.  This is a fairly basic valuation and is for the lender, paid for by the borrower, and it should not be relied upon as a guarantee that the property is sound and fit for purpose.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes.  They have no obligation to tell you what is in the report or give you a copy! 

In some cases, they will not actually visit.  This is because they can often access detailed information electronically, normally called an Automated Valuation Model (AVM), where a mathematical system calculates the property’s value based on a number of comparable properties and other in-depth calculations.  

Therefore, you should always consider the benefit of an independent survey on the property you are purchasing to ensure that any and all defects are noted before signing contracts. There are two main types of survey available, aside from the standard lender mortgage valuation.

Homebuyer Report - a standard format set out by the Royal Institution of Chartered Surveyors (RICS). This will not focus on every aspect of the property as a building survey will (below), but will advise on urgent matters needing attention. It may advise if items (a leaky roof for example) might have an adverse effect on the value of the property, or if further investigations are required.

A Building Survey – an in-depth survey for all properties: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required, and provide extensive information on major or minor defects.

Both will comment on whether the agreed asking price is reasonable, whether it reflects the condition of the property and should give you peace of mind whilst making the biggest purchase of your life!

Finally, I’m always looking for content ideas.  So, if you have any burning questions or items you would like to see, please don’t be shy to ask!  You can email me at dale@impactsf.co.uk or call me on the number above.

Brexit, uncertainty, opportunity!

Wow, February already!  Time flies.  It also brings us another month closer to Brexit.  Uncertainty remains and nobody knows what lies around the corner.  However, we’ve been through this before.  Remember the millennium bug that was going to be the ultimate in chaos, computers wouldn’t work and the world would be a worse place, etc etc?  But it didn’t and it wasn’t!  Life will continue the following day after Brexit and we can move forward, whatever the outcome.  The future might just be slightly different from beforehand, but we adjust.  That includes our financial sectors.  It had a huge downturn and readjustment back in 2007 and we lost a large number of lenders.  But, over the last 24 months a number of those same funders have reinvested in new lending platforms and opportunities have arisen again.

With uncertainty brings change!  Several lenders have recently changed rates or criteria in the market to assist customers.  

VIDA Homeloans has increased its Buy to Let loan to values from 80% to 85% for loans up to £250k for properties outside of the M25.  This now means there are three lenders in the market that only need a 15% deposit for a buy to let.

They have also increased their Residential loan to value offerings from 85% to 90% with a max loan of £400k.  A number of their rates have also dropped by up to 0.5%.  Great move from this specialist lender.

In the mainstream sector, we’ve seen changes from Virgin, Platform, TSB, Barclays, Coventry and Saffron Building Society.  Some rates up, some rates down.

Complex scenarios are on the increase.  We had one recently where the clients had built a number of properties but could not sell them for the desired price, siting Brexit as a major factor in this.  Having financed the build with development funding, this can be quite expensive if you run over the agreed timescales.  In addition, this company was running at a loss for this project, as all the building costs had been put through the accounts without the counterbalance of the properties selling to recoup funds.   Not a case many lenders would look at!  However, a lender was found who was willing to assist due to the fact that the clients had previously completed many projects like this, had a number of shareholders, and, as they were converting the properties in to Buy to Lets, this would be a long-term venture.

This is the benefit of using an independent adviser rather than anyone limited to a small selection of mortgage lenders and a restricted panel.

Mortgage prisoner? There's light at the end of the tunnel...for some.

Around 140,000 people with mortgages are currently classed as ‘mortgage prisoners’.  This means that they could be with a lender who is no longer active, or a lender who has ‘bought’ a number of clients from other lenders but who does not offer additional mortgage products once the customers current incentive rate period comes to an end.   So, effectively, the client will sit with the lender on their standard variable rate, normally a lot higher than incentive rates, and because of various reasons, they may not be able to move to another lender.  This could be due to their loan to value (amount borrowed against the value of the property), or maybe that particular lender at the time had attractive, exclusive income multiple calculations, which are no longer offered or new and stricter criteria no longer enables them to change lender. 

Many of the mortgage industry have campaigned for some time to try and assist these customers.  It seems the regulator has taken note and issued a consultation paper.  I stress, this is only at consultation stage, but it shows that this is now a concern and the regulator is seeking a way forward.  One part of the consultation entails a ‘relative’ test, rather than ‘absolute’ test.  This would check to see if the new mortgage costs would be cheaper than the current costs.  As such, the client may be able to transfer to another lender with minimal checks, underwriting and fees (normally this would be classed as a product transfer if the client was staying with the same lender and changing to a better deal).  This also assumes the new lender has made a commercial decision to see if this works for them in taking on these customers.

I can only see this truly working if all lenders in the market are ‘encouraged’ by the regulator to make this work.  Not all customers will be able to be assisted but it is a step in the right direction and that can only be good news for those who are currently paying way over what they should be.

Finally, we’re looking for staff to join our fantastic team in Horsham.  Ideally, we’re looking for mortgage brokers who have been in the market for at least a year and have a proven track record in customer service and recommending mortgage and protection products.  If this is of interest, or you know someone who is looking, please get in touch.