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Refinancing a buy-to-let portfolio is tougher but we can assist

26.04.2018

It is two years since the introduction of a stamp duty surcharge for landlords purchasing property, with many investors rushing to buy back in April 2016 to avoid having to pay the extra 3 per cent.

Many of these landlords will have taken out two-year deals and be coming up to remortgage only to find that lenders have tightened their criteria, with more restrictive rent to borrowing rates.

And new rules introduced at the end of September 2017 – requiring lenders to apply more detailed underwriting principles when evaluating portfolio business from landlords with four or more mortgaged properties – mean there are now fewer lenders to choose from.

It is no surprise that buy-to-let remortgaging rose by 20.5 per cent in February to 14,100, according to UK Finance, while new purchases of buy-to-let properties fell by 8.8 per cent year-on-year. As far as many potential new landlords are concerned, the gloss has come off the sector. Changes to mortgage interest tax relief are starting to filter through, making it harder to get the numbers to add up. If you add in a raft of other new legal responsibilities, and the threat of an interest rate rise as early as next month, making sure your portfolio works as hard as it possibly can, is crucial.

Refinancing is worth a look, making sure you are not paying more than you need to. While there is less choice available for portfolio landlords, we can help you find the most competitive terms – from specialist lenders if required – and make the whole process easier.

Jonathan Harris
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Jonathan Harris

Essential tips for first-time buyers

22.03.2018

Getting a mortgage can be daunting if you’ve never done it before but the good news is that there are people out there who can help so that you avoid the worst of the pitfalls. Here, Anderson Harris suggests a few key points that you may not have thought about:

  1.  Begin with a conversation with an independent mortgage broker to find out how much you can realistically borrow, before you start your property search. A ‘decision in principle’ from a lender, setting out how much it is prepared to lend you, is a useful tool and will convince agents and vendors that you are serious because you have checked out how much you can borrow beforehand.
  2. Buy for the long term. Buying and selling are expensive so considering properties that you can stay in for slightly longer could save you money. We had a client who bought a one-bed flat a year ago because she was desperate to get on the housing ladder and it was all she could afford. However, now she is pregnant and needs more space but the property hasn’t gone up in value and there are early repayment charges on the mortgage so it’s going to cost a lot for her to move.
  3. Avoid the temptation to overstretch yourself and borrow more than you can really afford. Mortgage rates are low and while lenders stress-test the loan against a higher rate to protect against rate rises, a sharp increase in the rate you’re paying when you’ve already maxed out your borrowing potential would come as a shock when it’s time to remortgage. Borrowers tend to stretch themselves to the limit but that’s not a good idea.
  4. Get to grips with the legal side – understand the limitations of a leasehold and shorter leases, and what they mean. There is a reason why those types of property tend to be cheaper.
  5. Be aware that lenders can be more reluctant to lend on certain properties, such as studio flats. flats above commercial premises, certain construction types, and ex-local authority property. Even if you really like it and you can find a mortgage to buy it, think about how easy it will be to sell on again in the future.
  6. Make sure you have enough of a credit file for banks to see evidence that you are paying your debts in full every month. You may think it’s in your favour not to have a credit card but if you have one, and pay off the balance in full every month, this will better demonstrate to a lender that you are a responsible borrower.’
Jonathan Harris
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Jonathan Harris

Are interest rates set to rise sooner rather than later?

12.02.2018

The Bank of England has warned that interest rates may have to rise more quickly, and perhaps more steeply, than markets had thought. Subsequently, the majority of City analysts now expect a rate rise in May, with some expecting interest rates to rise to 1 per cent by the end of this year.

However, despite this hawkish turn, there is no need for borrowers to panic. At the same time as making the above comments, Governor Mark Carney also suggested that a return to normal interest rate levels of around 5 per cent, may never happen. And mortgage rates are still at record low levels, which means there has never been a better time to fix your mortgage. Five-year fixed rates can be secured at around 1.7 per cent and represent better value than shorter terms deals for borrowers whose circumstances are unlikely to change in the near future. Although shorter term fixes and trackers are more competitively priced, the benefit is likely to be short lived with the need to re-finance again in a climate of rising rates.

The problem may arise for those borrowers on their lender’s standard variable rate who can’t remortgage elsewhere. With lenders such as Santander introducing lower SVRs for new borrowers there is a case for arguing the toss for being allowed to move onto a lower rate in the interests of ‘treating customers fairly’.

Whatever your situation, seeking advice is crucial.

Jonathan Harris
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Jonathan Harris

Lending options increase for self-employed borrowers

19.01.2018

The self-employed can find it harder to get a mortgage than those in employment because lenders don’t really understand their income streams or they are new to their self-employed career so don’t have much of a track record of earnings.

However, some lenders are becoming more sensitive to self-employed borrowers and their needs. Newcastle Intermediaries, which lends via mortgage brokers, this week launched an attractive two-year fixed-rate deal pegged at 2.2 per cent, on mortgages up to 60 per cent loan-to-value. There are no reservation or completion fees and a free standard valuation, further keeping initial costs down.

Another funding option for self-employed borrowers, of which we deal with a growing number, is extremely welcome, particularly as Newcastle will look at applications from those who have been trading for less than two years. Applying individual case assessments to these borrowers is a sensible move as one self-employed client is very different from another and one size does not fit all.

Jonathan Harris
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Jonathan Harris

What’s in store for mortgages in 2018?

20.12.2017

The mortgage market held up surprisingly well in 2017 with some of the cheapest fixed-rate mortgages ever seen. Even the first rise in base rate in a decade, taking it to 0.5 per cent, didn’t lead to a significant increase in mortgage pricing. First-time buyers were back with a vengeance (albeit many with some help from the Bank of Mum and Dad) as lenders offered high loan-to-value deals at tempting rates, while the Chancellor did his bit with a stamp duty exemption on properties up to £300,000.

But what lies in store for 2018? Firstly, we don’t expect another interest rate rise anytime soon, as the economic recovery remains tentative at best. On the mortgage front, lenders remain keen to lend and we expect those keenly-priced deals to be with us for a while yet.

Much depends on what happens with the Brexit negotiations and this may continue to impact people’s decisions to buy and sell their homes. Independent advice will be crucial, particularly if borrowers believe themselves to be mortgage prisoners, unable to remortgage to another deal. It may be that there is an option available so it is worth checking this out, particularly if you are on your lender’s standard variable rate, and therefore paying over the odds.

Jonathan Harris
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Jonathan Harris

Why the Budget means the future is brighter for first-time buyers

27.11.2017

In his Autumn Budget, the Chancellor of the Exchequer announced that first-time buyers would no longer have to pay stamp duty on properties costing up to £300,000 – or on the first £300,000 of properties costing up to £500,000.

Abolishing stamp duty for the vast majority of first-time buyers is a welcome move but while it will result in some savings, affordability is still the real issue for many. It might enable a first-time buyer to purchase a new sofa but will it really make the difference between being able to buy a home or not?

The reality is that most first-time buyers cannot get on the housing ladder without significant financial assistance from the Bank of Mum and Dad. Practically all of the first-time buyers we assist at Anderson Harris have had some help with the deposit from their parents. The alternative is to save for many years because the gap between incomes and property prices is simply too great. Until that issue is addressed, home ownership will remain just a dream for many people.

However, lenders are being more flexible towards those with relatively small deposits. Barclays announced last week that it will now lend at up to 95 per cent loan-to-value, which means less time needed to save for that crucial deposit. We expect other lenders to do the same in time.

If you are a first-time buyer, get in touch to find out more about the schemes and products available to you.

Jonathan Harris
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Jonathan Harris

Interest rates rise for first time in ten years

03.11.2017

The Bank of England has raised interest rates by 25 basis points to 0.5 per cent. This rate rise, which was widely expected, is the first in more than a decade.

While a rate rise after such a long period of time comes as a shock to the system, it is important to put it into perspective. This quarter-point rise still only brings rates back to where they were before the vote to Brexit and historically they are still very low. What’s more, with the economic recovery tentative at best, it is likely that any further rate rises will be slow and modest.

Older, more experienced borrowers who have seen it all before are likely to take this rate rise in their stride. But those borrowers who have never known a rate rise may be spooked. It may make them question their spending and worry as to how far these increases may go.

The trend recently among borrowers is to opt for a fixed-rate mortgage and this is unlikely to change. A rate rise will encourage more people to remortgage as there is nothing like higher monthly mortgage payments to focus the mind. There may be some borrowers who believe they are mortgage prisoners – trapped and unable to remortgage – but it is worth checking whether this is the case, particularly if you are on your lender’s standard variable rate and paying over the odds.

Jonathan Harris
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Jonathan Harris

Lending options improve for the self-employed

04.10.2017

With almost five million self-employed workers in the UK, according to the Halifax, and almost 40 per cent of employment growth coming from the self-employed or small business owners over the last decade, self-employed borrowers should be big business for lenders. However, this sector has been poorly represented and supported by banks for some time.

The good news is that the situation is changing with the availability of mortgage options for the self-employed improving in recent months. Halifax is the latest lender to act, reducing the income information required for self-employed customers from three to two years.

The main issue for lenders has been a general lack of understanding regarding the way that the self-employed take their income and minimise unnecessary personal tax. However, lenders are upping their game, recognising that the self-employed are heavily invested in their businesses and therefore represent a low risk to them.

A handful of lenders are catering well for the self-employed, such as Kensington, Coventry Building Society, Metro and Santander. The key areas where underwriting has improved centre on recognising all forms of income i.e. salary, dividend, retained profits in the business.

So whether you have just one year’s accounts, an accountant’s reference, are a lawyer or doctor buying into a practice or are becoming self-employed or becoming a member of a limited liability partnership (LLP), there should be a lender who can help. Get in touch for more information.

Jonathan Harris
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Jonathan Harris

Jay-Z and Beyonce’s $53m mortgage…

30.08.2017

It seems that even wealthy people need mortgages with news that hip-hop star Jay-Z and his singer wife Beyonce financing the purchase of their $88m Los Angeles mansion with a whopping $52.8m mortgage.

A 60 per cent loan-to-value mortgage is pretty high, taking into account the quantum of the loan. Lenders – in the UK, this would undoubtedly be a private bank – would normally limit LTVs on such a loan size to circa 40 to 50 per cent. In terms of the monthly cost, assuming a pay rate of 3 per cent, the couple would pay $132,000 per month on interest only or $250,000 on a repayment basis.

Assuming an income multiple of five times income, we can also assume that the couple have a minimum annual income of $10.56m.

It is likely that the bank would insist on having assets under management (AUM) for a loan this size so it is possible that they have also invested assets to the value of $26.4m with the lending bank. An eye-watering amount for us mere mortals but presumably a drop in the ocean for one of the richest couples in the world.

Jonathan Harris
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Jonathan Harris

First-time buyers call on Bank of Mum and Dad more than ever

17.07.2017

First-time buyers are putting down an average deposit of £32,899, according to the Halifax. But this masks significant regional differences: in London, the average first-time buyer deposit is three times that at £106,577.

It is no surprise then that the deposit is the biggest barrier to home ownership for first-time buyers as wages fail to keep pace with the growth in house prices. Subsequently, most of the first-time buyers who come to us have significant financial assistance from the Bank of Mum and Dad.

There are a couple of things to bear in mind if Mum and Dad are offering financial assistance to first-time buyers. The first is that any help with the deposit needs to be a gift rather than a loan – otherwise the lender will take it into account when assessing affordability and will mean a smaller mortgage.

Secondly, if parents are going on the deeds, there may be extra stamp duty to pay, as there is a 3 per cent surcharge on second homes – and the parents are likely to already own a property. Subsequently, we are seeing a big increase in demand for joint borrower, sole proprietor mortgages, such as the Barclays Family Affordability Plan, which allow two borrowers to combine their borrowing capacity to maximise mortgage lending but only one of the applicants is listed on the deeds. This enables the child to take advantage of the parent’s additional income to get a bigger mortgage but they retain sole ownership of the property so legitimately avoiding the extra stamp duty.

Jonathan Harris
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Jonathan Harris