With less than two months for investors and second homeowners to complete their property purchase before higher stamp duty rates are introduced, there may be a temptation to panic. The Chancellor announced in December’s Autumn Statement that anyone buying a home that is not their main residence will pay an extra 3 percentage points in stamp duty from 1 April.
However, it is still possible to secure a property and mortgage before that deadline as long as you bear the following tips from Anderson Harris in mind:
Avoid a chain.
You might be on a tight deadline but that is unlikely to be true of everyone in a chain. If you are stuck in a chain, bridging finance (see below) may enable you to minimise the potential negative impact.
Be realistic about mortgage rates.
If you are opting for a regular mortgage, and making an application towards the end of February, you will need a lender who can perform quickly. This may not necessarily mean getting a market-leading rate.
Consider bridging finance.
Bridging is recognised as a much quicker way of completing a transaction with lenders geared up for rapid delivery and response. You pay a premium on the rate but as with standard residential mortgages, these are much cheaper than in the past, with rates available from 0.69 per cent a month. Many people regard bridging finance with suspicion but it is becoming a mainstream product for those with a clear and viable strategy for repaying the debt. The usefulness of bridging is underrated as it enables second homebuyers to potentially reclaim the 3 per cent extra stamp duty provided they sell their existing home within 18 months.
Take legal timescales into consideration.
Even if you get that mortgage offer towards the end of March, the solicitor still has to request the monies from the bank, draw the mortgage down and complete by 1 April. Choosing a good lawyer who can meet the tight timeframe is essential.
Don’t pay over the odds.
There have been reports of vendors taking advantage of desperate buyers by pushing up asking prices. Some agents believe prices could soften after 1 April once the pressure is off so if you pay over the odds, you may find that the ‘value’ of your property drops off. Make sure you do your due diligence, go into it with your eyes open and consider owning the property for a few years at least.
Seek independent advice.
Who knows which lenders have service issues and are taking ages to process mortgage applications? Where do you go for bridging and is it the right option for you? Anderson Harris are independent mortgage brokers who will be able to identify the best lender for the job and ensure that your application is processed in a timely fashion.
Please contact us for more information.