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budget buying a property

Hidden costs of buying a property

Cost of buying a property go well beyond the deposit required

Many new buyers often make the miscalculation that the money they have saved up, is the amount they should budget for buying a property or putting down a deposit. There are many other costs that arise that new buyers should be aware of. Here are just a few examples.

Legal costs of buying a property

Legals fees are a must, remember you get what you pay for. Use a reputed conveyancing firm. Depending on the complexity of your deal typical costs could vary from £500 to £1000. In some cases you can get the lender to contribute to some of these costs, however beware that they do not cover this by charging else where.

Stamp Duty costs of buying a property

Considering very few property purchases are below the £125,000 threshold most people will have to pay stamp duty. This is a tax an is payable on completion, therefore must be budgeted into your calculations.

Purchase price of property Rate of SDLT
(percentage of the total purchase price)
£0 – £125,000 0%
£125,001 – £250,000 1%
£250,001 – £500,000 3%
£500,001 – £1 million 4%
Over £1 million – £2 million 5%
Over £2 million 7%

Source: https://www.gov.uk/stamp-duty-land-tax-rates

Check out this easy stamp duty calculator.

Survey costs of buying a property

Surveys can typically cost £400 to £800. This must be paid regardless if the purchase goes through, so do your own research before instructing a survey. Make sure the value stands up and the purchase is not too risky for the lender. Sometimes the lender covers the cost of the survey or adds it to the mortgage.

Valuation fees when buying a property

Mortgage lenders will charge a valuation fee, that can vary from £300 to £500. They sometimes cover the cost or give you the option to add it to the mortgage amount. Look at the fine print and get clarification.

Mortgage arrangement fees

Lenders have become smart and crafty. Often as the interest offered on a mortgage goes down, the arrangement fees go up. In reality this is a pointless fee but they do charge it. It can be over £1000 in some cases.

Moving costs & repairs

Moving costs if you are hiring help can run into over £1000 for a single day. Calculate how much you have to move and plan the move well.

When you view your property before completion check things thoroughly, the last thing you want is a boiler failing, the roof collapsing as soon as you move in.

How can PropVestment help?

budget buying a propertyWe can provide you with a walk through of purchasing a property and put you in touch with our preferred and vetted financial advisers, solicitors, and moving team. Contact us today for a no obligation chat.

Image courtesy of Stuart Miles / FreeDigitalPhotos.net
The rise of online estate agents

How important is the Estate Agent?

Is the role of the Estate Agent changing?

Over the last few years since the bursting of the property bubble in 2007 to now the role and business model of the estate agent has changed dramatically. We will discuss a few themes from the rise and reliance of the internet in property. Most prominently the rise and almost necessity of agents to list upon Rightmove and Zoopla. Are relationships with your agent still as important? The rise of volume of estate agents on every high street? Is it different if you are a buyer or a seller.

Internet-Only Agents, Rightmove & Zoopla

The rise of online estate agentsA few years ago there was a giant called Findaproperty.com, which has now disappeared after a merger with Zoopla in 2012. The giants are now Rightmove and Zoopla. Nearly every high street agent must now list on these two giants to get the exposure to potential buyers or letters.

In times gone by majority of the advertising for property was in the freely distributed local newspapers, and newspaper could get a large amount of their revenues from estate agents. Now many papers exist in only online form or only sold in selected stores. This has meant that all that revenue is diverted to these online property listing sites. Within minutes of receiving new properties agents are able to list them online and mailshot them to potentials. As a buyer this means you have quick access but also quick competition.

DID YOU KNOW: 95% property searches are done online!

There are now a rise of many online only estate agents such as such as eMoov.co.ukHousesimple.co.uk and Hatched.co.uk. Zoopla and Rightmove online allow estate agents to advertise, not private clients. Hence their is a market for online only agents. With minimal costs they can operate, some only charging £500 commission on property sales. Compared to the 2% average of traditional agents and London average house prices hitting almost £350,000. That’s a comparison of £500 vs £7000? What would you choose?

Are relationships with your estate agent important?

This question goes hand in hand with the debate of using online only estate agents or not. In years gone by your relationship with your local agents were of prime importance. Whether you were a seller or a buyer your agent could significantly improve your chances of succeeding in a transaction or even giving you first option ahead of others.

Recently working on a deal for a client we realised the importance of this relationship is still as valid as ever. You pay a price but you get that call ahead of a property being listed online. Or as a seller they personally take care of negotiations and vetting to squeeze every penny from the prospective buyer. It brings about a personal touch an art that is often lost in today’s technologically reliant world.

Spoilt for choice? But which one?

Spoilt for choice for estate agentsSince the before the bubble burst till now there have been more and more new estate agents cropping up on every high street in the country. Even when the market for buying and selling was stagnant they were opening. Mainly for the high demand for lettings and the quick 6-10% that they could make by flooding landlords with sub standard tenants and then in an few months they disappeared. Estate agency requires no qualifications to open, so there is easy entry. But do not discount them all the new boys on the market. There are some very good ones. Best advise is to go and have a conversation, you very easily can weed out the all talkers and the ones with extensive local knowledge.

The best agents we find are ones that have been in an area for a while, they get the best properties first and they also have the ready clients who are looking.

Difference for Buyers and Sellers

For buyers:
Walk around the area you are looking and register interest with the local estate agents. They will give you inside knowledge of the happenings and developments locally and can give you first option. You are not generally paying anything so it makes no difference to you.

For sellers:
You are the one paying fees so this is the big dilemma. Also it depends on your circumstances, how long you can wait to find a buyer, can you handle viewings. A good agent can vet out prospects so there is less hassle for you, especially if you are selling your residential home and do not want hoards of random people turning up to see.

Conclusion

Estate Agents are massively important for the buyer and seller, however each situation is different. On the whole good relationships enable you to get preferential and personal service that can help you beat the market.

#Budget2013 : Help to buy – impact on UK property market

Will the “Help to Buy” scheme help home buyers?

Budget 2013 Help to BuyThe Chancellor, George Osbourne has announced the budget for 2013 and beyond. Overall the budget covers all aspects or work and life in the UK, however we are concerned with property.

The head line for property has been the “Help to Buy” scheme.

There are 2 options, one for new buyers and new homes only and one for all property and buyers.

The below options breakdown are provided by Zoopla blog on the budget

Option 1: Help to buy – Equity Loan

-Is it applicable to any property?
No, just new build only

-Deposit required?
Yes, minimum of 5% deposit

-Do I have to be a first time buyer?
No, this scheme is available to all, not just first time buyers

-How does it work?
The Government will lend you up to 20% of the value of your property through an equity loan, which can be repaid at any time or on the sale of your home…so you will only need to secure up to a 75% mortgage from a bank or building society. It is interest-free for 5 years

-When does it start?
The scheme is available from 1 April 2013. It will run for 3 years and provide £3.5billion of additional investment

Option 2 – Help to buy – Mortgage Guarantee

-Is it applicable to any property?
New build and existing homes

-Will I need a deposit?
Yes, you’ll need a minimum of 5%

-Is it only open to First Time Buyers?
No, it is also open to existing homeowners

-How does it work?
You’ll need to secure a mortgage for your purchase. The Government guarantee should help encourage lenders to offer better access to low-deposit mortgages

-When does it start?
Available from January 2014, this scheme will run for 3 years

-Is there a maximum purchase price?
Maximum value £600,000

 Other points from the Budget 2013:

  • Budget 2013 help to buy21 % corporate tax rate – potentially beneficial to buy rental properties into a company rather than private names
  • Encourage to convert unused commercial space into residential

London Mayor, Boris Johnson has also secured £750 million for new build housing in the capital. This will boost affordable housing for middle income Londoners.

Official details can be found here: HM Treasury – pages 38 & 71

PropVestment’s thoughts

Overall we believe that the budget is progressive for the UK Property market, however it could have done more. However it seems that Help to Buy is more universal and will help more of the population. It is now for us to see how it filters through in reality. Many other schemes like NewBuy and FirstBuy have been less successful

 

Contact PropVestment today for a chat, we advise on all property investment queries. Lets make money from property

 

Lending holding back property investment in London

Stringent lending stopping property investment

Property Investment stopped by lending

It has been a long standing observation that one of the main reasons the UK property market is struggling is due to the lack of funding in the market place.

We have had a series of funding schemes proposed by the government and other institutions to encourage property investment. These include the likes of NewBuy, FirstBuy, and Funding For Lending.

Funding for Lending is the latest scheme to encourage lending where the banks can borrow cheaply provided they lend it out to the public, be it as mortgages or commercial lending.

FirstBuy and NewBuy is primarily restricted to new builds, which benefit constructors but represent a very small proportion of the property on the market.

Over the last few weeks at PropVestment we have been working on a deal for a young professional first time buyer. However we have it a brick wall with strict, inflexible, non-subjective lending criteria by all the major lenders.

*Due to confidentiality and to protect our exclusive property sources, details on this article will be disguised
 

The investment property

Property Investment in Elephant & CastleLOCATION – Elephant & Castle – Zone 1 – London

  • Elephant & Castle has £1.5 Billion being spent for regeneration.
  • 2 mins walk to the London Underground and Bus stations.
  • Opposite the famous “Strata Building”

 PROPERTY

 

2 Bed Duplex in Ex-council block, currently under full refurbishment.

  • Each leaseholder has spent almost £40k for new concierge, lifts, windows
  • Elephant & Castle - Property next to Strata20th floor with views of London, from the Gherkin, Canary Wharf, O2,  Shard, all the way to Crystal Palace.
  • Large Balcony. Full wall to wall windows across all rooms.
  • 118 Year Lease

Rental expectation – upto £1500 per month currently. PropVestment predicts this will hit £2000 in 5 years. Strata building demands this level for smaller compatibles.

Asking price – £220,000

Gross Yield is over 8%

If lending 75% Purchase Price, there for deposit £55,000
If mortgage at 4% repayment over 20 years £1011 installment per month
Surplus for Buyer after mortgage £5868 per annum.
10.7% return on cash invested annually

 

The First Time Buyer

  • Mid twenties
  • £50,000 savings, plus £10,000 promised contribution from family
  • £40,000 a year salary before bonus.
  • Over £2000 monthly saving after expenses
  • City working professional, currently living with parents
  • Buying either to stay in and share or rent out fully.

Why the banks won’t lend?

  •  Ex-council
  • Concrete & Steel Construction

If the councils have approved a £40 million refurbishment of the block, clearly there is no risk to the building. Considering most of the block is still council owned they would not put so much of their own money in an unsafe building.

Being Ex-council ensures that maintenance is always prompt and reasonably costed.

The banks have very little risk here because the rental will cover the mortgage repayment by 135%, the usual criteria for Buy to Lets is currently 125%.
The buyer has £2000 disposable income every month, for any major shortfall or unforseen circumstance.

PropVestment’s Thoughts

After all this and almost a model buyer, why are the banks not lending?
Banks are given cash via the Funding for Lending scheme and still are not making it available to the public.

By the banks not lending, we, as in property professionals, end up having to offer such properties to cash buyers from abroad.
Ideally we want young property owners from the UK, however due to the circumstances the only investors that can afford to pay full cash are foreigners. This means that the profits also get taken out and do not recirculate in the UK economy.

The government must do something to ensure banks lend to boost UK home grown property investment.

For any property investment advise, analysis, deals or thoughts, contact us today for a no obligation chat. Sharing thoughts and ideas is how we progress.

 

First time buyers face scarce supple due to council property

London’s housing problem for First Time Buyers

Why First Time Buyers find it hard to buy in London

  • High Prices
  • Shortage of Properties
  • Difficult lending
  • SOLUTION – Sell council properties in Zone 1 & 2

This article discusses the various issues in the London housing market, addressing high property prices, housing shortages and high rentals. Linking these factors to the reasons why first time buyers are facing an uphill struggle.

I have lived in London my whole life and professionally work in the property industry with my company PropVestment. The aim is to provide information, analysis and property related services for investors. From my experiences in this field and from living in London my whole I make some observations.

First Time Buyers Problem:

Too high prices and shortage of properties

First time buyers should be able to buy ex- councilThe first thing that caught my eye this week was an article titled “London councils breaking B&B stay limit for families” on the BBC News website. The main thing I understood from this article is that Westminster council has broken the law by not housing 134 families into housing and not B&Bs within 6 weeks. The main take on the article as reported is housing shortage.
However, why are there so many demanding housing in Westminster, arguable the most expensive borough. Surely if you are in need of accommodation you should take or be given where available and not be given location preferences.

Read more

Barclays Family Affordability Plan & Helpful Start for the First Time Buyer

A Helpful Start for the first time buyer

Barclays helping the first time buyer

Barclays has introduced a new mortgage scheme. Helpful Start is part of their Family Affordability plan. It  allows parents to help their children with mortgages in a way not seen before. A parent’s income is also taken into consideration when applying for the mortgage  without them being on the property deeds.

The scheme is available across all of the lender’s mortgage range, including its NewBuy product.
It enables parents to help their children get on or to move up the property ladder through a joint mortgage without giving a lump sum away.
If the mortgage is approved, all parties will be liable for the monthly payments. The parents will appear on the mortgage but they won’t be co-owners of the property.

Helpful Start is however  not available in Scotland and Northern Ireland.

Family Affordability Plan

When considering to lend to a first time buyer, lenders look at three criteria

  1. Affordability
  2. Credit Worthiness
  3. Loan to Value

The Family Affordability Plan and Helpful Start tackles the first criteria, which has significantly made it difficult for first time buyers to get on property ladder. It will not alter the amount the customer can borrow.

When the first time buyer is ready to manage the mortgage on their own, they can remove their parents from the mortgage by remortgaging soley in their name in traditional way.

There has been a reduction in the number of guarantor-type products in the market over the past few years, this scheme is a step in the right direction.

Ash Shah, Crystal Financial Services

PropVestment always recommends clients use a Independent Mortgage broker like Ash Shah or Crystal Financial Solutions. He comments as follows:

This is a excellent move taken by the High Street lender in a difficult market for first time buyers and those wanting to upscale. Independent Brokers like myself have a wealth of tools available to help clients, and the addition the Family Affordability Plan is a excellent addition to my Tool chest.

PropVestment Conclusion

Helpful Start and the Family Affordability Plan is what first time buyers have been calling for, the last few years have been hard for them to get on the property ladder. We welcome such a scheme and hope other lenders see the light and follow with their own schemes.

READ our first time buyer articles:

For a FREE consultation please contact us info@PropVestment.com , we can help all property investors and first time buyers

NewBuy scheme: What it means for first time buyers

Today Monday 12th March the NewBuy scheme was launched.
The NewBuy scheme assists buyers who have a deposit of at least 5 per cent to buy a new build home. This is a smaller deposit than is normally required. The scheme will allow more borrowers to secure up to a 95 per cent Loan to Value mortgage on new build residential properties from participating builders in England.

What NewBuy means for FTBs

The Government is backing the scheme to help those home buyers who have found themselves excluded from sections of the market because they don’t have a large enough deposit.
NewBuy is expected to assist up to 100,000 households in buying a new home. All mortgage lenders and house builders operating in England are welcome to join the scheme.
But like many other schemes before, will this actually have a significant impact on the property buyer and will it mean first time buyers are helped.

How NewBuy works?

Developers pay the lender 3.5% of the purchase price of a new-build property, while the government provides an additional guarantee of 5.5%, allowing mortgage providers to lend to people with a lower deposit than they would normally need as it reduces the risk.
This effectively means the lender lends a maximum of 91.5% LTV but is secured with an extra 5.5% from the Government.
The scheme should increase the availability of mortgages with a high loan-to-value (LTV) and the government says it will help up to 100,000 first-time buyers.

Do you qualify?

  • The scheme applies to buyers of new-build homes in England if the developer is taking part in the scheme.
  • The purchase price must be £500,000 or less
  • It must be a standard purchase (ie not shared equity or shared ownership),
  • It must be the buyer’s main home rather than a second property or one that will be rented out. Although aimed at helping people on to the housing ladder, the scheme is not exclusively for first-time buyers.
  • You only qualify if you have a minimum of 5% for the deposit.

Which lenders and builders have signed up to NewBuy?

Nationwide building society, NatWest and Barclays have already signed up, with others expected to follow suit, including Halifax by April and Santander by the middle of the year. Construction companies including Barratt, Bovis, Bellway, Linden Homes, Persimmon, Redrow and Taylor Wimpey have signed up.
Barclays is offering 95% LTV mortgages at 4.99% fixed for two years and 5.89% fixed for four years; Nationwide is offering 95% LTV mortgages at 5.69% fixed for three years and 5.99% fixed for five years; NatWest will offer 95% LTV mortgages at 4.29% fixed for two years and 4.99% fixed for five years.

PropVestment’s Thoughts

  • Firstly the property market is down by upto 50,000 transactions a month, thats 600,000 a year compared to the peak in the property market a few years ago. So even if the full 100,000 NewBuy properties are reached, it will not have a major impact on the market as a whole.
  • The scheme only helps buyers of new builds, these are not the most desirable properties, often built very fast, with out fine finishing. These properties are clones of each other and often lose significant value when it come to resell. The price is set by the builder, they will just inflate the original asking price so the 3.5% contribution by them is a false reality.
  • Although major lenders have signed up there is no indication of how many of these products they will allow or how tight other criteria may be. There may be a significant difference in the volume of NewBuy Mortgage approvals to actual potential properties in the scheme.
  • Finally what will be the location of these NewBuy properties, will we see small NewBuy villages full of first time buyers in indentical homes?


Overall PropVestment welcomes such schemes and it is a positive move by the Government, but like other schemes before we doubt there will be a significant impact in reality.
It will be more a headliner to make the government look like they are helping first time buyers.

For Official advice, see http://www.newbuy.org.uk/

Check out our First Time Buyers Posts on the last Government Scheme First Buy

Are you a First Time Buyer and need advice, contact us today for a FREE consultation

Taking out a mortgage – Details for the first time buyer

First Time Buyer Mortgage

In the recent years taking out a mortgage for the first time has become more of a difficulty. With the slowdown of the economy, the rules have tightened and become more stringent. The lenders too have become more particular regarding to whom they are going to lend. So, it would be better for you to buy a newly built home or a park home as these can cost you less. If a home costs you less, you may also be able to do with a small mortgage amount. So, in such a situation getting the first time buyer mortgage won’t be a tough job for you.

First time buyer: Taking out a mortgage

The things that you would require to take out first time buyer mortgage are:

*    High affordability – In order to take out a mortgage even if it is a first time buyer mortgage, it is important for you to have high affordability. This will mean that if you have high affordability, you will also be able to manage to make the timely mortgage payments. Lenders prefer people who have at least more than average or high affordability.

*   High credit score – It is important for you to have a high credit score so that you can get a mortgage with low interest rate. Without a high credit score, you may not be able to get low interest mortgages.

*     Clean credit report – In addition to high credit score, you should also have a clean credit report with no missed payments. When you apply for a mortgage, lenders pull your credit reports. If you have missed payments, lenders tend to believe that you are not a responsible borrower. Thus, your loan application may get rejected.

*     Low debt to income ratio – In order to take out a mortgage, you are also required to have a low debt to income ratio. This too is checked by your lenders to decide if you are a responsible borrower.

Other than having these, in order to obtain a mortgage, you will be required to:

  1. Check out different offers – In order to take out a mortgage, may it be for the first time or second, it is important for you to check out the different offers by various lenders. You will have to compare and then decide which the best offer is for you.
  2. Use a mortgage calculator – In order to decide on the cost of a mortgage, you can use a mortgage calculator. This can help you in determining which mortgage you can afford to take out.
  3. Get pre-approved – It is good for you to get pre-approved for a mortgage as this can help you to obtain a loan easily enough.

So, these are the things that you will be required to do in order to take out a mortgage so as to buy a home for the first time.

CLICK HERE Now, Free FTB Consultation

For fantastic mortgage brokers check out our “The Prime” for highly recommended brokers.

FirstBuy – Does it help “PropVestors” or just another government gimmick?

  • First Time Buyers

    Help for 10,000 FTBs

  • Shared equity means, shared losses
  • Help only for a few FTB and only New Builds

What is it?

1. FirstBuy will be offered on selected properties across a range of new build schemes following an assessment of offers submitted by developers.

2. Eligible purchasers who need assistance to buy will be offered an equity loan of up to 20% of the purchase price. The equity loan will be funded equally by the HCA and the developer. Potential bidders should note that it is an absolute requirement of the programme that developers must provide matchfunding equity.

3. The maximum property price expected for FirstBuy is £280,000, based on the affordability assessment for purchasers.  On an exceptional basis, depending on location, a purchase price of up to £300,000 will be considered.  We expect that most bids will be for lower priced properties which will be favoured, taking account of location.

4. Purchasers will be required to raise funding, (a mortgage plus any deposit where available) of at least 80% of the purchase price. The buyer’s mortgage loan is secured as a first charge on the property in the usual way and ranks ahead of the equity loan charge.

5. Both the developer and the HCA will take an equal second charge over the property to secure their interest. The equity loans are secured as second charges on the property and are on an equal footing between the HCA and developers.

6. The form of equity mortgage will be prescribed by the HCA (and will follow the form of equity mortgage used for HomeBuy Direct, which is familiar to lenders and solicitors, and to the market).  Both the developer and the HCA will lend on the same terms.  The use of a standardised charge will simplify the conveyancing process, make the product more attractive to lenders and help with marketing the product to individuals. Each equity loan term is 25 years but repayment is required on sale of the property. Read more