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Archive for the ‘Property’ Category

Innovative thinking required to improve Home Ownership Levels

Wednesday, August 3rd, 2016

The news yesterday that home ownership has fallen to its lowest level for 30 years came as no surprise to me, having worked in the industry for nigh on 40 years and with two children, one just on the property ladder and one still saving hard.

Calling for more homes to be built is not the entire answer to the problem.  There is no point in building more and more new-homes when our children can’t afford the massive up-front deposit nor the monthly mortgage repayments.  It’s a bit like telling Rolls Royce to knock out more cars, whilst I’d quite like a Rolls or a Bentley – if I can’t afford one then it doesn’t matter how many there are on the market.

Successive governments have allowed property in the UK to be used as a lucrative investment for overseas buyers and buy to let Landlords. This has forced up prices and kept them rising at a much faster rate than salaries. The recent increase in Stamp Duty and the removal of tax relief on mortgages for buy to let landlords may slow this trend but with interest rates low and house prices and rents booming it is unlikely to make much of a difference.

The problem is that lenders have allowed mortgage products to stagnate. They haven’t kept abreast of the times, preferring to play it safe and compete with each other on interest rates alone. Currently first time buyers have to find a 10% deposit and with the average UK house price at £211,230.00 that means saving a huge deposit of £21,000 which with legal fees and stamp duty, mortgage arrangement and removal costs realistically means that a first time buyer needs to save around £25,000 to get on the property ladder.

Even if that hurdle can be overcome by diligent saving and help from the bank of Mum and Dad, first time buyers still need to be able to qualify for a mortgage and afford the monthly mortgage repayments on a £190,000 loan.

Typically, lenders will lend 3 x joint salary over a 25 – 30 year period. This means that a first time buyer needs to be earning in excess of £63,000 individually or jointly to qualify. That is far in excess of the average UK salary of £26,000, which means having to find an even bigger deposit to make up the shortfall.

Mortgage lending products are woefully out of date and the government needs to work with lenders and insurance companies to provide new products so that first time buyers can afford to buy in the first place and keep up their mortgage repayments in the second place.

We are all now expected to work until we are in our late 60’s so why can’t mortgage loans be extended over a longer period of say 40 or even 50 years? Doing this would halve the current monthly mortgage repayments.

Lenders should be encouraged to offer 100% mortgages again, these could be backed by insurance guarantee premiums and mortgage protection products that are designed to help buyers if they lose their income due to illness or redundancy. The insurance products would have to be vetted to ensure they do actually pay out when needed and were sold responsibly.

With no up-front deposit to find and with much more affordable monthly payments our children and their children would have a chance of home-ownership and a stake in their future and the future of the UK.

 

What will happen to the property market post BREXIT?

Friday, July 1st, 2016

It’s the most popular question of the week! Ever since that vote everyone wants to know, will prices go up? Will they do down? Same thing with interest rates will they go up, stay the same or go down?

The honest answer is that I don’t know. Without the aid of a Dr. Who style Tardis, or a crystal ball, frankly no one can predict exactly what is going to happen with property prices and interest rates in the next couple of years as we ease away from Europe.

I can make an educated guess, along with the thousands of other advisers, economists, bankers and media writers. My guess is that in the long term property prices will rise, they always have and I guess they always will.  There are more people in the UK than houses and people need somewhere to live. British people are aspirational and want to own their own home.

As to interest rates they may rise at some point but I believe that bankers and politicians have learned the lessons of the past and my prediction that any such rise would be gradual and not drastic.

What I can talk about is conveyancing and how to find a really good conveyancing solicitor at a really, really good price. With 40 years in the property industry under my belt, 25 of those spent working as a Property lawyer, I can claim expert knowledge in this subject.  To hear more watch us on Property.tv, SKY channel 238. An interview with Sharon Buthlay, director of CMS Ltd airs at 7.30 a.m., 11 a.m., 6 p.m. and 9 p.m.

Sharon Buthlay is the Director of Conveyancing Marketing Services Limited

www.conveyancing-cms.co.uk

Stamp Duty Land Tax Update

Wednesday, June 1st, 2016

Stamp Duty Land Tax – the new SDLT legislation is confusing buyers

Stamp Duty is a tax on property purchase, it has been around since the 1600s but the system as we know it has been around since the 1950s.  Stamp duty was replaced by Stamp Duty Land Tax in December 2003.

What was a fairly simple piece of legislation i.e. the tax was charged on purchases above a certain price level, currently £125,000 at the % rate prescribed by law. So no complex calculations and one rate for all. Easy for solicitors to calculate and for property buyers to understand.

From 1st April 2016 the new Stamp Duty Land Tax legislation created a different SDLT rate for buyers of buy to let properties or second homes. The new higher rate is 3% above the standard rates of SDLT on residential property and to make it even more complex the additional 3% applies to the portion of the purchase price that falls within that rate band. To confuse matters further the second property SDLT rate starts at £40,000 purchase price, whereas the residential SDLT rate starts at £125,000. Confused? You are not alone.

There are exemptions from the new second home SDLT rate which is adding to the general confusion of just who is actually affected by this rate.

SDLT Second Property Exemptions:-

  • Leasehold property where the original lease was for 7 years or less. Properties where long leases were granted but have less than 7 years left to run are not exempt
  • Amenity or garden land where there is no relevant dwelling on it (i.e. house/flat). Buying a building plot with a contract for property to be built (i.e. off plan purchases) would not be exempt
  • Non-residential property or mixed use property. So a property that is used as a commercial business or a mixed use property that is part commercial/part residential (think shop with flat above) are exempt
  • Property purchases under £40,005.00
  • Caravans, houseboats and mobile homes that are not fixed to the land
  • Transactions that would usually attract the higher 15% rate for purchases of higher threshold interests in dwellings by companies.
  • Charities will still be able to claim relief from SDLT on property bought for charitable purposes provided the property meets the conditions for relief.

SDLT Second Property non-exempt

  • Buyers of second or subsequent property that costs more than £40,005.00. If you are replacing your main residence and own another property you must pay the higher tax. There is an interim period where if you sell the second property (so that you only retain one property) you can claim back the overpaid tax from HMRC. The period is 36 months.
  • If you own a holiday property in the UK or abroad and buy another property in the UK you would be liable for the higher rate.
  • There are no reliefs or exemptions for property developers who buy, re-furbish and then sell the property. If you own a property and buy another the higher rate will apply.
  • There are no reliefs or exemptions for companies that buy residential properties.
  • Married couples or civil or co-habiting partners are treated as one person for the legislation. Therefore if one of the couple owns a property and the other wants to buy a property in their own name they would have to pay the higher rate tax.

There are other and more complex issues that arise as a result of divorce/separation, trusts and companies which are too lengthy to go into here.  Your solicitor will be able to interpret the new legislation and advise you.

How to pay the new SDLT

The process is the same as before i.e. there will be an SDLT form which your solicitor will send you to complete, sign and return. The only difference is that you will need to choose a new code on the SDLT return – code 4 in box 1. Your solicitor will guide you in completing the form and paying the accurate amount of SDLT

How to claim a refund of overpaid SDLT

If you sell your previous main residence within the 36 month period and wish to claim an overpayment of tax there is a form to complete.  You will find this on gov.uk. The form must be completed within 3 months of selling the property. This can be completed by you or your solicitor.

The HMRC claim to aim to process refunds within 15 working days provided they have the correct information.

 

 

 

 

 

 

 

Stamp Duty Land Tax – 2016 Upate

Wednesday, January 27th, 2016

In November 2015 the Government announced that as from 1st April 2016 higher rates of SDLT will be charged on purchases of additional residential properties that cost £40,000 or more.

It was announced that a consultation would take place to decide the nitty gritty of the policy detail including whether there would be an exemption for corporates and funds owning more than 15 residential properties.

With only 9 weeks left for anxious buyers to complete their purchases before the new Stamp Duty regulations come into force we still await the finer policy detail.

At CMS we speak to hundreds of property buyers every month and wonder whether the Government is aware of how many ordinary people this onerous 3% hike in stamp duty will hit.  Here are some of the recent scenarios we have come across that would mean ordinary people would be hit with an additional 3% property tax charge whilst large, wealthy corporations and business would be exempt:

  • Adult children purchasing a property for their parents to live in. Mum and dad are in rented social housing and need to move to be near family. No council exchange is possible so the children, who already own their own homes, take out a mortgage to buy a property for their parents to live nearby.
  • Mum and Dad buy a flat in a University town for a child about to start University. Child is not old enough, nor earning enough to warrant a mortgage.
  • Family move across country because of a job change.  They need to move quickly so decide to rent their existing home out and buy another near the new job.
  • A property owner is made redundant and decides to use their redundancy pay out to buy a couple of buy to let properties to run as part of a small business.
  • A couple, with their own home, cash in their pensions and want to use the proceeds to buy and let out a property to supplement their income.
  • A small builder has spent his life buying property, renovating it and selling it on for a profit. He already owns his own house.
  • A couple who work and live in a city centre decide to buy a small flat near the coast as a bolt hole from city life

These are all true examples of recent transactions we have been involved in. None of the people involved are greedy landlords buying up property from under the noses of hapless first time buyers.  They are ordinary families trying to do the best for their family, people who are trying to preserve their savings and income into later life, small builders who stop property from crumbling into disrepair and provide homes for the next generation.

At CMS we hope that the Government takes these examples into consideration and that appropriate exemptions are made for ordinary people as well as the big corporates.

Meanwhile, if you are buying a second property and need it to be pushed through for a fast completion at a competitive conveyancing fee please give us a call on 01638 576478

Protecting Your Buy To Let Pension Pot

Thursday, October 29th, 2015

Currently private Landlords are able to offset the amount of mortgage interest they pay at the same rate that they pay their tax. This is set to change from 2016 and many Landlords may find that their income from property is slashed.

New tax rules from 2016

From 2016 the taxation rules on tax relief for loan interest on buy to let are to change:

  • in 2017 to 2018 the deduction of loan interest from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction (currently 20%)
  • in 2018 to 2019, 50% deduction of loan interest from property income and 50% given as a basic rate tax reduction
  • in 2019 to 2020, 25% deduction of loan interest and 75% given as a basic rate tax reduction
  • from 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction

This will hit Landlords hard, particularly in areas where it is not feasible to raise rents to offset the loss of tax relief.So what can a private Landlord do to maximise tax relief and income:-

Maximise tax relief available

If you are a private Landlord and part of a couple then you are each allowed your own Capital Gains Tax allowance and personal tax allowance (currently £10,600) so make the most of this by ensuring that the property is held in joint names. If the property is currently owned in a sole name this can be easily rectified by a Transfer of Equity into joint names – get quote here.

If one of you is earning less than the other you can divide the property shares between you so that the lesser earner is deemed to received more rental income than the higher earner. This can help to avoid pushing one or both of you into the higher rate tax bracket in the first place. The higher rate tax of 40% kicks in at £42,385. The 45% rate kicks in at taxable income over £150,000.

To divide the property shares you will need to:-

  • Hold the property as tenants in common
  • Have a Declaration of Trust setting out the respective shares drawn up.

Contact us for a quote on 01638 576478 or 0845 060 33 55

National Insurance Contributions and Buy To Let

Private Buy to Let Landlords should not be paying Class 2 NICs on buy to let rental income if the property they are letting is not classed as running a business. So if you are letting out your property while working away or abroad you should not be paying Class 2 NICs.

You will be classed as running a business and subject to Class 2 NICs if:

  • being a landlord is your main job
  • you rent out more than one property
  • you’re buying new properties to rent out

You don’t pay National Insurance on your rental income if you’re not running a property business – even if you do work like arranging repairs, advertising for tenants and arranging tenancy agreements.

Allowable Expenses

To minimise taxation you are still allowed to claim back genuine expenses before tax as follows:-

  • Letting agents fees.
  • Securing a tenant i.e. Costs for advertising, letting agency fees, tenancy agreement preparation, credit checking and referencing, deposit protection and creating an inventory.
  • Buildings and contents insurance premiums.
  • Maintenance and repairs, including repairs of white goods.
  • Furniture. You may currently claim 10% of the cost of wear and tear on the furniture. This is changing so that from April 2016 you may only claim back what you have actually spent rather than claiming a notional sum. You may also claim back the actual cost of replacing furniture (but not installing it in the first place).
  • Ground rent and service charges and any communal charges i.e. gardening.
  • During periods when there is no tenant you may claim back the cost of any utility bills and council tax which you pay
  • General expenses – you may claim for stationery, travelling to and from the property and phone calls are all legitimate expenses.
  • Accountancy fees.

Now Is The Time To Buy

Tuesday, October 13th, 2015

As autumn leaves fall, now is the time that many of us put aside all thoughts of moving home or making decisions until after the festive season and the winter are over. What could be worse than trudging around estate agents and properties in the cold and wet when you could be at home in front of the fire watching the latest box set?

You may have heard the saying ‘he who hesitates is lost’ and this could well be the case for aspiring home owners over this autumn/winter period.  House prices are rising at the rate of 5.2% a year.  This means that a whopping £10,400 will be added to the price of a £200,000 home over a 12 month period.

Demand for home ownership has never been higher as incomes rise in real terms and mortgage rates continue to stay low.

The return of the 95% mortgage is now making it possible for first time buyers to achieve that all important leap onto the housing ladder.

Although the 95% mortgage may come with a higher interest rate, the temptation to save for a bigger and bigger deposit is outweighed by the fact that house prices are rising faster than incomes.  This month’s Average Price House Watch revealed that house prices are up on average by 0.2% in the past month alone. This means that if you buy with a 5% deposit, pay the higher interest rate, you can then re-mortgage to a lower rate in a couple of years when the value of your property has increased.

Lack of affordable homes for first time buyers means that competition for homes remains fierce. Today’s buyers need to be armed with their deposit, a mortgage agreement in principle and a good solicitor ready to swing into action if they are to have any chance at getting an offer accepted.

CMS have been providing first class conveyancing at a competitive price since 1995. For a conveyancing quote please visit our web-site www.conveyancing-cms.co.uk or call us on 0845 060 33 55 or 01638 576478.

How To Beat The Stress Of Buying A Property

Thursday, October 1st, 2015

Why is the property buying process so stressful? With over 40 years experience in the property industry, firstly as a Property Lawyer myself and the past 15 years as Director of Conveyancing Marketing Services, this is one of the questions I am asked more than any other.

The answer is that it doesn’t have to be stressful if you follow my tips and hints to make buying a property a walk in the park.

Know How Much You Can Afford To Spend On A Property.

My number one tip is to do your maths homework before you even look for a property.  Since the Mortgage Market Review lenders have much stricter criteria on who they will lend to and how much they will lend.  Speak to your bank, building society or a good mortgage adviser to find out how much you can borrow before you look for a property.

Get Quotes.

Get quotes for everything. Items like legal expenses, stamp duty, mortgage fees, removals and surveys all add up and you need to build them into your total property budget.

Allow Enough Time.

Don’t underestimate the time it takes to buy a property. You need to view lots of properties, negotiate an offer, arrange finance and have the legal work done.  The whole process can take 6 months or more depending on how long the property chain above you is. So allow plenty of time and never, ever give notice on rented accommodation until your solicitor tells you that you have exchanged – otherwise you risk making yourself homeless.

Make Friends With The Property Professionals.

Be polite and professional at all times with your estate agent, surveyor, mortgage advisor and solicitor.  Remember they are all busy people and have their jobs to do.  Keep in touch, but don’t overdo it.  Your solicitor, in particular, will be very busy.  To review the contract paperwork on a property can take several hours, particularly if it is new-build or leasehold. Their job is to make sure that you legally own the property and can sell it in the future with no problems.  Constant calls and e mails have the effect of slowing the whole process down.

Follow Instructions.

Read everything you are sent carefully, this includes the estate agents particulars, the mortgage offer and your solicitor’s communications. You are required by law to provide identity documents and Anti Money Laundering information to your solicitor. You must provide the correct documents that the solicitor asks you for.  You will also be asked to sign numerous documents and some of these will need to be witnessed – ensure you read the instructions as returning improperly signed documents will delay your purchase.

New- Build Properties – Should you pay an ‘up-front’ reservation fee?

Tuesday, September 8th, 2015

When buying a new-build property you will be asked to pay an up-front reservation fee to secure your reservation of the property. Once you have paid the reservation fee the property should be taken off the market and not offered to any other potential buyers.

In a thriving property market with several buyers vying for each property it can be comforting to know that you have secured the property you want. Be warned though that when buying a new-build you will be pressured from day one, to pay the reservation fee and then to move very quickly to exchange of contracts.

There are a few pitfalls to watch out for when paying an up-front reservation fee:-

    • Make sure that the reservation fee is refundable if you are unable to proceed. Some developers’ reservations forms state that the reservation fee is ‘non-refundable’.
    • Ask who is going to hold the reservation fee? Ideally it should be held by the developer’s solicitor in their client account. Should the developer then go bankrupt or fail to complete the development at least you will be able to get your money back.
    • Before reserving a new-build property, particularly if buying off-plan, ask for confirmation in writing of the estimated date of physical completion. Remember if the build is delayed due to shortage of manpower or materials your reservation fee and exchange deposit are held by the developer.
    • Before paying any reservation fee make sure that your finances are in place and that, if you need a mortgage, you can get one. Some types of property development are not favoured by mortgage lenders. These include flats above shops/offices, high rise blocks of flats and certain types of construction.
    • Ask whether the property is to be covered by a build guarantee such as NHBC – without this you will find it difficult to obtain a mortgage. Some developers offer build insurance via Zurich as an alternative to the NHBC guarantee.
    • Once your reservation fee has been paid you will be given a deadline to exchange contracts – this is usually 28 days. This means that you will need to have your mortgage and finances in place, you will need to have appointed your solicitor and all pre-contract checks and searches will need to take place within this time frame. If you fail to meet the deadline the reservation can be cancelled and the property sold elsewhere.
    • Ensure that your solicitor is notified that this is a new-build purchase and check that they have the capacity to move quickly. Note some solicitors charge a premium for new-build property because of the complexity and the time scales involved.
    • Buyers of new-build properties are protected by the Consumer Code for Home Builders 2010 which governs developers and provides mitigation service should you have a complaint against a property developer.

For a free and without obligation conveyancing quote for your new-build purchase please contact Sharon Buthlay on 01638 576478 or e mail Sharon@cms-uk.co.uk.

With Twelve Would Be Buyers Chasing Every Property For Sale How Do You Make Sure You Are First In The Queue?

Monday, August 24th, 2015

The demand for property has never been higher; agents across the country are reporting fewer properties coming onto their books. Competition between investors and wannabe home owners is leading to price spikes, gazumping and even contract races.

So how do you make sure that you are first in the queue when it comes to securing the property you want?

1. You must have your finance in place. Before you even look for a property shop around, find out how much you can afford to borrow and get a mortgage agreement in principle. Get it in writing so you can show it to estate agents.

2. Get a good solicitor in place. You need to be able to demonstrate that you can act quickly as soon as your offer is accepted.

3. Don’t make silly offers. Vendors know that prices are on the rise and will not be minded to accept low offers – in fact low offers often offend. So do your homework, check out on the property web sites how much similar properties are going for and offer a sensible price.

4. Make a friend of the estate agents. Don’t do everything on-line. You want to get to know the agent so that they will alert you to every new property that comes onto the market. Take the time to go into your local estate agents or those local to the area you want to buy in. Take your mortgage in principle and your solicitor details, even your savings statement to show you have the deposit and are able to move quickly.

5. Scour the local papers to see whether any property is being advertised privately. I bought my first house this way.

6. Be pro-active, if you see an empty property that isn’t on the market, pop a note through the door with your details and ask them to call you if the property comes up for sale.

7. Contact the probate department of local solicitors – they often have property to sell on behalf of their clients and you may get something before it comes onto the market.

8. When you view a property don’t make disparaging remarks in front of the Vendor or their estate agent. Always be polite. The home owner isn’t going to choose you over someone else if you have been rude about their home.

9. View everything that comes onto the market in your price range – you never know what you are going to fall in love with.

10. Above all don’t dither, if it’s the right property then make an offer, put it in writing and make sure the estate agent or Vendor has your contact details. Follow up your offer the next day and every day until you hear whether it’s accepted.

Interest rates – will they or wont they? Rise that is.

Tuesday, August 18th, 2015

stock-exchange-680579_1280The shock spike in inflation from 0% to 0.1% has led to speculation that a rate rise could be upon us as soon as early 2016.

Interest rates have now remained stable since March 2009 and many in the property industry are predicting a rate rise in the first quarter of 2016.

Hargreaves Landsdown senior economist Ben Brettell says: “The rise in the core (inflation) figure suggests that underlying inflationary pressures could be building in the economy, and is possibly the clearest indication yet that the Bank of England might have to raise interest rates sooner rather than later”

With many borrowers still on favourable base rate or tracker mortgages the question is whether to jump to a fixed rate now or hold on for another six months.

Some banks have already begun to withdraw their lowest-interest mortgage deals in anticipation of a rate rise, which has led to an upturn in re-mortgage applications.

However, as the lower, more attractive mortgage deals disappear, so do new buyers – nervous of all the talk of rate rises many home movers are sitting on the fence waiting to see what happens.

The general consensus is that when mortgage rates do begin to rise it will be slowly and steadily, with any temporary disruption to the property industry levelling out quickly as demand for home ownership continues at an ever increasing pace.