The aim of the Act is to reduce the costs that tenants face at the outset, and throughout, a tenancy and is part of a wider package of measures aimed at rebalancing the relationship between tenants and landlords to deliver a fairer, good quality and more affordable private rented sector.

Tenants will be able to see, at a glance, what a given property will cost them in the advertised rent with no hidden costs. The party that contracts the service – the landlord – will be responsible for paying for the service, which will help to ensure that the fees charged reflect the real economic value of the services provided and sharpen letting agents’ incentive to compete for landlords’ business.

Landlords and their agents will be unable to charge anything not exempted, that the tenant is required to pay as a condition ‘of the grant, renewal, continuance, variation, assignment, novation or termination of’ an assured shorthand tenant, or license agreement. This includes payments to third parties, either for service rendered throughout the tenancy or for specific performance of a job and third-party loans. Rules around deposits and how they are dealt with will also be significantly tightened.

There will be a ban on setting rent at a higher level for the first portion of the tenancy and then dropping it down, afterwards. This is to prevent landlords or agents trying to offset the ban on fees by artificially increasing the rent for the initial period to make up the costs. A higher rent than you would normally charge for the property, that is consistent throughout the tenancy will however be fine.

Holding deposits - the commitment fee tenant pay when renting a property – will be limited to a maximum of 1 week’s rent and subject to statutory legislation on the repayment of this should the tenancy not proceed.

Damages to property caused by the tenants’ breach of tenancy, such as cleaning cost for the property at the end of the tenancy will still be deductible from the deposit; as well as other default fees, you’ll still be able to charge if the tenant loses their keys or is late paying the rent. A landlord can also still charge for changes to the tenancy requested by the tenant or early termination of tenancy.

Examples of banned fees are:

* Credit checks

* Referencing

* Inventories

* Charging for a guarantor form

* Cleaning services

* Professional cleaning

* Having the property de-flea as a condition of allowing pets in the property

* Admin Charges

* Requirements to have specific insurance providers

* Gardening services

What does this all mean for you the Landlord?

Some of the tenant fees goes towards important things like reference and credit checks, to ensure good quality tenants are the ones you hand keys over to and other bits of it to things like inventory checks, which creates an audit trail of the building’s condition, before and after the tenant moves in/out. Thus these aren’t costs that can be forgone. 57% of Landlords surveyed in research by the Residential Landlord association indicated a willingness to raise their rents to cover increased charges.

It is important to work with an agent that can minimize the impact of these changes on your earnings and makes sure your portfolio isn’t left exposed.

For a non-obligatory conversation on this topic and other Landlord – Tenant matters, get in touch with us today

email: citymgt@dfint.com

Tel: +44 (0) 20 7713 0909

Hoarding is considered a significant problem if:

• The amount of clutter interferes with everyday living – for example, the person is unable to make use their kitchen or bathroom.
• Damaging to the property
• Blocks or interferes with windows and ventilation.
• Cannot access rooms or emergency exits.
• The clutter is causing significant distress or negatively affecting the quality of life of the person or neighbours.
• Storing combustible items
• Keeping goods that attract black moulds, rodent and roaches.

Hoarding is a relatively common problem in the U.K, with about 1.2 million hoarders (many people keep things they don’t need), but only a small number of people will meet the clinical criteria for having a Hoarding Disorder.

Hoarding Disorder is most commonly defined by obsessional fears of losing important items that a person believes will be needed in the future, but accumulation of these items leads to clutter that can cover living and work spaces, making them unusable.

What to do:

• Proceed with caution: The mental capacity of the tenant will decide what step to take.
• Document the situation: Take note of the condition of the property using notes, pictures and videos.
• Notice: Notify the tenant of the need to remedy the situation.
• Offer Help: Try to work with the tenant to clear and clean up. Work with tenant’s next of kin or family members if necessary.
• In extreme cases: Contact Environmental Health Services.
• If there is a mental issue involved such as OCD or depression, you may contact social services.
• Get legal help
• Eviction: Serve the appropriate notice to get possession.

Many people with Hoarders disorder realise they have a problem but are reluctant to seek help because they feel extremely ashamed, humiliated or guilty about it. Hoarders have often been through a traumatic event and the situation should be handled with the sensitivity it requires. A good way to prevent such problems from occurring is to conduct periodic visits to properties before the situation gets out of hand.

For a non-obligatory conversation on this topic and other Landlord – Tenant matters, get in touch with us.

Dealing with Hoarder Tenants

VIRGIN MONEY LONDON MARATHON – A TRULY SPECIAL CITY HOSTS A TRULY SPECIAL RACE.

I’ve now run nine marathons and the London marathon was undoubtedly head and shoulders above the others in terms of organization, city atmosphere and crowd support. I will come back to crowd support in a bit. The London marathon also holds a very special place in my running journey as I ran a sub 4hr marathon (albeit barely) for the first time taking 15minutes and 49 seconds off my previous best in the process. I finished in 3hrs, 59 minutes and 44 seconds – woohoo!!!

My marathon medal case includes Amsterdam, Vienna, Lagos, New York, Singapore, Ile-Ife, Berlin, and London.

Running a marathon takes some investment – training time, diet discipline and a significant financial outlay for international races not to mention frequently changing running shoes and getting up at crazy hours of the morning to get the miles in. So, you really have to want it and be a little crazy to commit to running the 26.2 miles of a marathon distance. It doesn’t help that most races have a maximum finish time after which your participation is not recorded and you don’t receive a finisher’s medal. Finally, if not properly managed, marathon training can also place a real strain on personal relationships as running can very easily appear to be the most important thing to a runner during training season.

I ran the 38^th edition of the London marathon on April 22, 2018, in support of Amref Health Africa – a charity that supports and promotes maternal health in Africa. It gave me the opportunity to raise funds for a cause I could relate to and served as an additional motivation and driving force during my run. It was my second-time fundraising for Amref Health Africa after doing so in 2016 at the New York Marathon. I am really impressed at the work of the folks at Amref (not to mention the mid-run cheering) and encourage those that are so inspired to support their efforts by visiting www.amref.org. You can also give using this link: https://uk.virginmoneygiving.com/AkintundeOgunmodede

I headed to London from Lagos with eight other members of my running club – Road Warriors (www.rwrglobal.org). The very fine men and women of this club transformed my running within 3 years (the longest distance I had ever run as of January 2015 was 13km and you don’t want to know how long it took me). The discipline, support, camaraderie and subtle competition within this bunch of folks is truly amazing. Road Warriors (Lagos) is a running club and a professional network with a strong social bond.

Before I forget why I put pen to paper – The London Marathon. Amazing!!! amazing, amazing, amazing. Did I mention amazing? That’s how awesome the crowd support was. The runners literally went through over 26 miles of non-stop cheering, screams, high fives, positive chants, deejay and choir performances and dance routines. Forget Red Bull giving you wings; good quality spectator support simply makes a runner fly. I thought the crowd support in New York was great until the race on Sunday. NY doesn’t even come close. Kudos and a big Thank You to the people of the City of London, the race day staff and volunteers and the marathon organizers. Their efforts make all the difference to the over forty thousand runners that grace the streets every year. The commitment of the city to the event was demonstrated by the fact that race was flagged off by none other than Queen of England herself and the medal presentation to the winners was done by Prince Harry (my favorite Royal ).

The London marathon is one of the six prestigious so-called “Marathon Majors” along with Berlin, Boston, Chicago, New York and Tokyo. It is set over a largely flat course around the River Thames, beginning at Greenwich and finishes in The Mall alongside St James’s Park. The 2018 London City Marathon saw Mo Farah set a new British Marathon record of 2:06:21 (impressive) and the almighty Eliud Kipchoge won the race (his third win) in 2:04:17 – 1 minute and 20 seconds shy of the world record set by Dennis Kimetto in September 2014 (Berlin).

I will remember April 22, 2018, for a long time. That race will hold a special place for me and though I have a tradition of not running the same marathon twice, if I were to break that, it could only be for London. If you’re planning to run only one marathon in your lifetime, you have to make it London.

My Race Details

Start   

Finish

Akintunde Ogunmodede

April 2018

Many more are desirous of owning property as a second home or for investment, but what taxes apply in the U.K at the death of the owner?

Inheritance tax (IHT) Is a tax on the estate of someone who has died, including all property, possessions, and money.

When it was first introduced in the 1800s, it was intended to affect only the very wealthy but the rapid rise of home values in England has brought more families into the net in recent decades.

How much is inheritance tax?

Your estate won’t be liable if:

 *  The value of the estate is below the IHT threshold of £325,000

 *  You leave everything to your spouse or civil partner

 *  You leave everything to an exempt beneficiary e.g. Charity

Presently, inheritance tax is paid on the portion of a person’s estate worth more than £325,000 when they die. The rate is 40% on anything above that threshold, reducible to 36% if a minimum of 10% of the estate is left to charity.

So if your estate is worth £525,000, the IHT threshold is £325,000, the tax will be charged on 40% of £200,000 (£525,000 – £325,000). The tax would be £80,000.

Since April 5, 2017, a new tax-free main residence band has been introduced, also known as the Residence nil rate band (RNRB) but is only valid on the main residence. It is being phased in gradually starting at £100,000, which means a current total allowance for individuals of £425,000 (Original £325,000 band + new £100,000 increment) and for couples of £850,000 (£425,000 each). This additional allowance is only valid if the property is passing on to your children, step-children or grandchildren.

Between 2017 and 2020 the RNRB rises by £25,000 yearly, meaning that by 2020, the total additional allowance on pre-2017 levels would be £175,000, so a tax-free nil band rate of £500,000 for individuals and £1,000,000 for couples. On property values above the relevant band (£500,000 or £1,000,000), inheritance tax is charged as normal at 40%.

Who pays inheritance tax:

 *  If there is a will the executor arranges to make the payment

 *  If there is no will, the administrator arranges payment

Payment of the Inheritance tax is due six months after the passing of the donor, with interest charged by HMRC on payments made outside of this time window. Assets considered as part of your estate are cash in the bank, Investments, Property or business, Vehicles and payouts from life insurance policies and is valued after taking out your debts and liabilities.

Advice: Dealing with the death of a loved can be immensely painful without the added hassle of IHT, plan ahead to ease the burden.

Leasehold properties, unlike freehold properties, have a lease term usually up to 999 years (virtual freehold). When buying a property, it’s imperative to understand, with a solicitor’s guidance, the lease term before committing funds to the property.

Statistics indicate that there have been more first-time homeowners in the last 20 years than ever before. Sadly, most new homeowners are often unaware of value loss inherent in a low lease that can accompany their purchase.

Prior to the year 2000, most flats were purchased with an unexpired lease of between 90 and 99 years, with the property boom and aggressive new build development leases were mostly drawn at 125 Years.

Most accidental landlords, buy to let owners and indeed homeowners have focused more on the capital appreciation and increased rental yields due to low interest rates and higher rents, losing sight of the capital cost that might be required to extend their lease.

Why is it important?  

1. Banks and mortgage lenders are mostly uncomfortable with short leases and are particularly interested in the number of unexpired years when a loan is granted. For example, a property with a 63 Year lease being mortgaged over 25 Years would have 43 Years left in year 20 of the mortgage and might have an adverse effect on the value of the property due to the unexpired term. Some banks would only lend on a property that would have a minimum of 65 years at the end of the loan term.

2. The cost of extending a lease becomes higher. An example is a client we are presently negotiating for. The flat was bought in 2001 at £140,000 with an unexpired lease of 54 years, he negotiated with the freeholder to be granted an additional 90 Years at £10,000 which was agreed but not concluded due to disagreement on the legal cost. 14 Years later, he initiated negotiations again with the freeholder, with the property now having 40 Years unexpired lease and presently valued at £400,000. The cost of extending the lease was quoted at £78,000, as expected the leaseholder was astonished and opted to instruct his own valuation which pretty much confirmed the same figure.

The value of the lease is usually tied to the area where the property is situated, which can again be loosely correlated to the value of the property. We’ve renewed a lease in central London for as much as £750,000, so you could very well see a substantial variation in the cost of extending leases with the same term, £750,000 in central London and as low as £10,000 in the suburb of London.

When the unexpired term is less than 85 years, start looking seriously into negotiating a lease extension. If you bought a property in 2008 with one of the characteristic 99-year leases of the time, for instance, you are getting into borderline low lease territory. It makes financial sense to start looking at an extension if the unexpired term of your lease is less than 95 years, as the marriage value becomes payable to the Freeholder below 80 Years.

As a leaseholder, you may initiate a discussion with your Freeholder after living in the property for over 2 Years by serving a section 42 notice. If agreed, you will usually get an additional 90 Years extension to the unexpired term and ground rent reduced to peppercorn or Zero.

An informal agreement can also be reached with the freeholder, which is usually faster and may save cost. However, in the event of a disagreement, there is always recourse to the Leasehold Valuation Tribunal arbitration.

What next?

Check the unexpired term of your lease.

Appoint a good Solicitor or an experienced property consultant to advise or act on your behalf, who would require:

•   Address of the property

•   Lease Length

•   Ground rent payable

•   Approximate value

•   Freeholder’s details

Good news is that your mortgage lender would consider equity release to fund the cost of extending the lease as it enhances the value of the asset.

Remember that with every passing day your lease decreases, the cost of extending probably increases, so start the process today.

Rented properties are often a convenient way for criminals to hide their drug production from public gaze. As a letting agent or a private landlord, you have a legal and ethical responsibility to help protect and preserve the community. Failure to do this attracts severe penalties.

Under the Misuse of Drugs Act 1971 a landlord or property manager can receive a maximum of 14 years in prison and/or a fine if they allow the production of controlled drugs to take place in rented accommodation. Under this legislation there is also the potential for a premises to be seized, forfeited or demolished.

At best for landlords, the cost implication can be huge as it takes time for premises to be cleared and made safe for future tenants. This results in a loss of earnings.

As part of our management offering therefore, we pay regular visits to the properties under our care to ensure tenants are using the property suitably and that our landlords suffer no asset depreciation due to reckless use.

We had a peculiar case recently. We had regularly tried to schedule a visit, but the tenants repeatedly said they were either unavailable or out of town. These excuses continued up till summer when an inquisitive staff noticed a flash of light piercing out of a window during a bright sunny day.

Our fears were confirmed when we decided to get into the property and realised the locks had been changed and electricity had been illegally wired from the mains.

The whole house had been fitted to be a modern day Cannabis factory with direct connections made to the electric mains outside the building, the chimney sealed up to create a constant internal temperature with kevlar flooring. All the radiators had been taken out, the windows blacked out and foils around the walls to reflect heat inwards. Even the bathroom wasn’t left out of the fun; the showerhead had been converted to a sprinkler, which we assume was for watering the plants. At this point it was clear that they had started winding up operations, probably due to our persistent requests to inspect the property, but all the hallmarks of a cannabis factory remained.

Now, what was truly befuddling about this was that they made the perfect tenants. The rents were always paid on time, no maintenance issues were logged and they kept a low profile.

Thankfully, this was spotted before it got out of hand and the deceptive characters gone in search of the next hydroponics factory.

Conversion of properties to use as cannabis factories has become increasingly popular, there was the popular case of a high street agent who had taken advantage of his services to be involved in a cannabis growing operation and a restaurant on Finchley road that wind down its operations but miscreants took advantage of the empty premises and found new purpose as a cannabis factory (see link)

The scourge has been on the increase as most criminal gangs are switching from harder drugs due to more lenient jail sentences associated with cannabis. It’s estimated that around half a million people are involved in growing from suburban houses converted to hidden cannabis factories. A number that makes sense when you factor in that the average grower can make about £40,000 per year from just 9 plants.

The metropolitan Police says that as of 2013, 656 cannabis factories were being found per month and that gangs are converting from large production warehouses to dozens of smaller growing centers that can be set up in hours, in lofts and garages. They increasingly rent apartments and abandon them after short periods of time.

Landlord and property practitioners should take note that the practice is prevalent in flats/apartments as well as houses, find below some tell tale signs:

·     An unusual amount of activity when the tenants first move in

·     Paranoid behaviour by your tenants

·     Excessive fortification of the property (inside and outside)

·     Silver ducting tape hanging out of windows

·     Blacked out windows

·     Low-level hanging equipment

·     Humidity: condensation on windows, peeling wallpaper, mildewed walls

·     A pungent smell

·     Excessive use of deodorisers and air freshener

·     Sudden fluctuations in electricity bills

·     Electrical wiring tampered with

·     No report of repairs and maintenance issues

·     Powerful lights on day and night

·     Birds gathering on the roof in cold weather for warmth.

·     The following items around the property (inside and outside):

·     Plants, lights and reflective materials

·     Bulbs, soil, fertilizer

·     Flasks, beakers, rubber tubing

·     Bubble bags

·     Scales

·     Self-seal bags

·     Gas cylinders

How to avoid falling victim

Steps you can take to weed out tenants who may be involved in this kind of activity:

·     Carry out in-depth tenant checks:

·     Insist on photographic identification (check it hasn’t been altered)

·     Take references from previous landlords and employers

·     Check tenants current address

·     Look out for utility bills in different names

·     Be wary of tenants who take particular interest in the electricity supply

·     Be wary of tenants who want to move in very quickly

·     Carry out regular inspections of the property

·     Be aware of your surrounding

·     Take mobile numbers for all tenant

Finally, your instinct or gut feeling might just save you a lot of trouble, damage to the property can be a headache, reduce yields on your investment and waste much of your time.

Thankfully our recent experience recounted below is now over as of last week the 10th of November 2016.

We came into the unwanted terrain of dealing with a Japanese knotweed property quite unexpectedly. We were instructed by a client to deal with a property located in a prime gated development in North London on their behalf, all the initial due diligence had been carried out and we were well on our way to completing the deal when in the course of conversations it slipped from the management company that there was an issue with Japanese knotweed in the communal garden, the valuation report conducted earlier had not picked up this scourge.

These plants classified by the Environment Agency as the UK’s “most aggressive and destructive plant”, can grow beneath concrete and tarmac, causing damage to buildings, roads, driveways, and drains was introduced to Europe by German botanist Phillipp von Siebold in the 1800s were initially seen to be harmless judging by their characteristics in their original habitat in the Volcanic areas of Japan. However unhindered by such difficult climes, they grow unhindered in Britain.

The plants which evidence shows were still purposefully planted up till the late ’60s and early ’70s to fill in the gaps between train lines and homes cheaply and to form a barrier between both, went for quite some time with their potential threats unnoticed. They start growing in spring reaching 1.5m in May and 3m in June. They can grow up to 20 cm per day through concrete and tarmac with roots that go 3m deep damaging foundations.

These plants are notoriously difficult to deal with, as any fragments left behind can restart the entire growth process again. Indeed a couple chose to knock down and rebuild their home rather than try and treat the knotweed problem which saw the plant growing through their floors.

In this instance all parties needed to be notified, the bank was now reluctant to move forward and the buyer was having second thoughts. Immediate and urgent plans had to be set in place to deal with this problem, to ease the uncertainty both as to the properties long term viability and to the progression of the deal.

Despite assurances from the management Company that a contractor had been engaged to commence the treatment, control and eradicate the plant, progress was only made when the contractor assured guarantees will be issued after the treatment.

The buyer agreed to proceed only after obtaining a significant price reduction, a course of action that would have otherwise terminated the deal had there been no upper chain involved.

Despite the best efforts of all parties and the fact that the situation was effectively handled, the process was lengthened by an additional ten weeks.

One sobering lesson from this episode was the fact that an otherwise valuable asset could significantly diminish in value overnight for the most unobvious reasons.

Some takeaways from this are firstly if there is an episode of Japanese knotweed involved in a potential sale, flee the scene and don’t look back for any reason.

Homeowners should drop their laissez-faire approach and should be conscious of their surrounding as the plant in a neighbors house could still adversely impact on yours.

Lenders are scared to lend on homes with the issue as it is notoriously hard to deal with. Cutting it down doesn’t get rid of it either and it is hard to notice in winter.

Sadegh Shahsavari, a seasoned property expert sums it up like this. “The worst thing a survey can bring up isn’t asbestos or subsidence, it’s Japanese Knotweed. It’s more akin to cancer whilst the others are like a broken leg, easily fixable”. He goes on to say that No buyer wants to touch it and no lender wants to lend on it, with the immediate mentality being to run in the other direction.

The reason being that it doesn’t reduce the price, it makes it un-saleable.

However, if you’re not a property professional, don’t think you’re clever buying it at a discount. Albeit there are those out there who say they can treat it, its best left to the highest levels of expertise.

Mark Cohen, an experienced Surveyor with Cordell Marks says “contact a professional experienced in the handling of Japanese Knotweed as it requires skilled hands to deal with it, Even the droppings from already cut Japanese knotweed can lead to a resurgence and if any droppings get on a neighbors property, it is classed as an offense and you might be liable to pay damages”.

Obi Chianumba RICS Valuer of Newman Webb says “Treatment would get rid of it mostly but regular visits are conducted by the agency dealing with it over a two to three year period to ensure the problem is well and truly dealt with”.

HOW TO SPOT KNOTWEED ON YOUR POTENTIAL PROPERTY

Spring: Purple shoots emerge from the ground, eventually forming thick canes.

Summer: The canes develop purple flecks. By late summer they sprout spiky clusters of off-white flowers.

Winter: The flowers die off leaving dead, hollow brown bamboo-like canes standing often as tall as three meters.

Japanese Knotweed is becoming more prevalent in Britain and is treatable, but its a nightmare you want to stay well clear from.

The Help to Buy scheme was first announced by George Osborne in March 2013 and is known to be the biggest government intervention in the housing market since the 1980s. The scheme was created to help first-time buyers (with relatively low deposits) onto the property ladder by facilitating the purchase of newly built properties. Subsequently, by making the purchase of new-builds more affordable and desirable, the demand for newly built properties would also increase and therefore the supply side of the housing market would be further stimulated i.e.: more new builds must be built to meet this increase in demand (helping the economy, housing sector, employment, etc…)

What is the Help to Buy Scheme?

Part 1 (Help to Buy Equity Loan) – Extended to 2020

-       Available to all first-time buyers and homeowners (no maximum income requirement)

-       Scheme restricted to newly built properties only (worth up to £600,000)

-       Must be used to purchase your only residence (cannot be used if you have any other investment properties)

-       The buyer would only need to raise 5% of the purchase price of a property*

-       The government will provide a further 20% loan (buyers buying in London can acquire 40% loans)

-       Buyer’s deposit now becomes 25% of the property value

-       More attractive mortgage rates become available

-       The buyer would have much lower monthly mortgage repayments

*In the UK (after the 2008 recession) without the Help to Buy scheme, buyers generally require 15% – 20% deposit to purchase a new build property

Example:

A buyer purchasing a newly built apartment for £300,000 would commonly require around £60,000 deposit to secure a mortgage – meaning they will be borrowing £240,000.

With the Help to Buy scheme, the buyer purchasing the same property would require just £15,000 (£45,000 less) – the government will add 20% to this deposit (£60,000) – meaning the combined purchaser deposit is now £75,000 – so the buyer is now only borrowing £225,000.

-       For the first 5 years, the government’s 20% loan is interest-free

-       In year 6, the purchaser will be charged 1.75% interest which will climb at a rate of 1% of that figure plus any increase in inflation every year thereafter

-       Purchasers can choose to repay the equity loan at any time, without penalty

-       They can pay back either 10% or 20% of the total amount so long as the loan is worth at least 10% of the value of the property

-       If the loan is not repaid back whilst the buyer is still living in the property, when the property is sold, the government will reclaim its 20% stake from the current home value (regardless of the house price increase/decrease)

If the property being purchased is situated in London – the buyer can apply for an equity loan of up to 40% and not just 20% – the facts outlined above remain the same.

 Part 2 (Help to Buy Mortgage Guarantee) – Expires 31st December 2016 (will not be renewed)

-       Available to all first-time buyers and homeowners (no maximum income requirement)

-       Unlike the Help to Buy Equity Scheme (Part 1), this scheme is not restricted to newly built properties only – i.e.: The Mortgage Guarantee element applies to both new builds & existing homes

-       The maximum purchase price of £600,000 remains the same

-       Buyers will only be required to raise 5% of the property value (as before)

-       The government will then provide a guarantee to the mortgage lender for up to a further 15% (government acting as a guarantor for the mortgage)

-       This gives banks and building societies the peace of mind to lend larger mortgages & hopefully, at lower rates than would otherwise be attached to such high loan-to-value mortgages

 The Mortgage Guarantee scheme is a ‘behind-the-scenes’ arrangement between the lender and the government. While the purchaser will have to sign a declaration, it will not make any difference that their 95% mortgage falls under the Mortgage Guarantee scheme.

 Our Thoughts?

 It is no secret that the success behind the Help to Buy scheme is mainly down to the equity loan aspect (Part 1) and not necessarily the mortgage guarantee element (Part 2), and therefore the government’s recent decision to no longer extend the mortgage guarantee schemes comes as no shock to us. The best rates and products were always offered to those with a higher deposit (25% in the case of the equity loan scheme), whilst the mortgage guarantee scheme failed to offer any headlining deals or products.

 The Banks also believe that ‘given the decreasing usage of the scheme over time, the Financial Policy Committee judges that the closure of the scheme would be unlikely, in current market conditions, to affect significantly the provision of finance to prospective mortgagors, including high loan-to-value borrowers’.

  The truth of the matter is that 95% mortgages were always available and will continue to be available. Lenders are now in a much better position (compared to 2008) to continue to offer 90% and 95% mortgages, even without the government acting as a guarantor. Santander, for instance, exited the mortgage guarantee scheme very early on (prior to any government announcements) but maintains a strong presence in the 95% loan to value market. Furthermore, lenders such as Nationwide have never been part of the mortgage guarantee scheme (did not sign up in October 2013) but nevertheless continue to offer 95% loan-to-value mortgages. Most recently, the lender has just introduced two new 2-year 95% tracker rate (3.59%) products. The list continues, with the Yorkshire Building Society, offering products at 95 percent LTV for some time without relying on the government guarantee. TSB and Tesco Bank have also launched into 95 percent LTV without using the guarantee (the list goes on).

 In short, with the Bank of England cutting interest rates to an all-time low of just 0.25%, and lenders subsequently passing this on – we believe now is the best time to secure a mortgage.

Rates on 2 year, fixed-rate mortgages, for example, are already at an all-time low, due to tough competition amongst lenders to attract new customers.

 Figures show that the property market has remained strong (to date) and although Brexit negotiations (triggered March 2017) will undoubtedly unsettle the market as a whole next year to some extent, we believe making the right decisions now is what is crucial.

 The views expressed in this article is a reaction to the announcement that government is scrapping the ‘help to buy mortgage guarantee scheme’ and reflect our opinions and that of several market experts we have spoken to.

If you wish to discuss any of the points raised or to speak about new and off plan homes, feel free to contact us directly.

N.B. Your property may be repossessed if you do not keep up repayments on your mortgage.

Below is the detailed explanation of valuation.

Capital Gains Tax

          From 6th April 2015 overseas residents will be exposed to Capital Gains Tax on the relevant amount of profit on disposal of their residential investment properties.

          The amount of capital gain relating to the period prior to 5th April 2015 is not taxable, only the element corresponding to the subsequent period.

FACTS

• Capital Gains Tax will apply to all overseas investors including offshore structures

• Capital Gains Tax will only apply to gains made after 6th April 2015

• The tax rate ranges from 18-28% of the gain made after 6th April 2015

• Capital Gains Tax is payable within 30 days of sale of the property

• The gain can be calculated by apportionment of time or by way of a valuation as at 6th April 2015

• There is no set requirement for a particular type of valuation to be carried out although any valuation can be challenged by HMRC

OUR ADVICE

• Whether you are selling now or in the future we recommend having a valuation carried out at the earliest opportunity whilst market evidence is fresh, although a valuation can also be completed retrospectively when you decide to sell

• Capital Gains Tax can also be mitigated on investments that have exchanged and not yet completed including off plan purchases

• We would advise having a valuation carried out by a suitably qualified RICS professional as evidence of the value of your investment at 6th April 2015 as this would be expected to hold more weight with HMRC than an estate agency market appraisal

• We recommend speaking to your tax advisor regarding how best to mitigate your Capital Gains Tax liability and we can put you in touch with an advisor if required

Tenant fees vary, but typically they include an applicant fee, a second or third fee for more than one tenant. Some may charge a ‘couples fee’. If you have to have a guarantor that will incur another fee. 

Other fees include referencing, contribution to the agreement and/or inventory, tenancy renewal fee. 

If you have been accepted for a property you will have to pay 4-6 weeks rent in advance of moving in as a deposit and also pay the first month’s rent in advance.

Examples of good agents who are upfront about their fees include: Belvoir Lincoln; Savills; Your Move;Reeds Rains.  

Are you paying more dead money in rent than through a mortgage? 

Typically if you are renting a property and you pay £500 per month, your annual rent is £500 x 12 = £6,000. If the value of the property you live in is around £120,000 and you only have a 5% deposit and would pay for a 95% mortgage at a 5% rate, then you would be paying as much ‘dead money’ in mortgage interest as you would be to the landlord. 

Easy calculation is if your rent is 5% or less than the value of the property you rent, then the dead money to landlords and to the mortgage company in interest is the same. 

Calculating whether buying is cheaper than renting

In the main if prices are falling or are static, then it may well be cheaper to rent than buy. The costs for each are as follows, this assumes things like utility bills, council tax, service charges etc would be the same, so highlights the different costs:-  

Renting – one off tenant/reference fee, monthly your rent, annually your contents insurance and renewals. 
Buying – one off fees for buying and the deposit, monthly your mortgage, annually maintenance and buildings & contents insurance. Annually you may add in the increased or take away the fall in the property’s value. 

Working out how on earth you can save £1000s towards a deposit
It will probably seem a daunting task to save £5000 – £15.000 for a deposit but it is possible. 

Calculating the costs of buying a property 
It can be very scary working out how much it will cost to buy a property and then when you have to pay the money to the lender, and legal company. 

The biggest cost is likely to be your deposit which you pay at the time of exchange, so if you send a cheque to the legal company to exchange you will need to send it 5 working days BEFORE exchange.

Deposits are normally 5% or 10% at the time of exchange, then the balance eg 20 or 15% if you are depositing 25% is paid when you complete. 

The second biggest cost is normally stamp duty - this is paid when you complete the purchase:-

The rates changed in December 2014. 0% up to £125,000; from £125,001 to £250,000 it’s 2% on the amount OVER £125,0000 up to £250,000; 5% on increments over£250,000 to £925,000; 10% for the amount paid from £925k to £1.5 million and anything over this amount you pay 12% on. Have a read about Stamp Duty changes and visit HMRC.

Lenders and brokers do charge for mortgages and these costs can add up. However they should only really charge you when you have decided it’s the mortgage YOU want. 

Charges can be fixed and may be a few hundred pounds through to several thousand. They can also be charged as a percentage of the money you borrow, such as 1-3%. Make sure you know any fees you will be charged BEFORE you confirm you will go ahead with the mortgage.

When you exchange on a property you will need to have organised your buildings insurance, which will typically be a few hundred pounds. Read our Insurance Checklists to help organise the right cover for you.

Survey fees will range from £250 + VAT for a condition report to £400 + VAT for a Homebuyer Report to over £1,000 for a comprehensive building survey. 

Legals will range from around £300 + VAT to over £1,000 + VAT for properties over £500,000. Extras you have to pay include legals for leasehold, shared ownership etc these are usually £100 +VAT.

Removal costs will be around £300 + VAT for a small move, through to £2,000  +VAT for moving a big house some distance. A great, cost effective service to always have is packing – it saves huge amounts of hassle!

Calculating the costs of selling a property

The key fees are the estate agent’s fees which will be 1% to 2% of the value of your home. So if it sells for £200,000 x 1.5% = £3,000. BUT bear in mind thanks to the government, this will increase by 20% VAT so you pay the agent £3,600 but they only get £3,000. 

On-line agents will advertise your property, but not much else, typically on-line agents are around £500.

Finance fees may be charged if you are penalised for paying off your mortgage – it’s called a mortgage redemption fee. This could be £300 through to several thousand pounds.

Your legals will be around £300 + VAT upwards. 

Removals fees

range from £300 + VAT to over £2,000 + VAT (see above on buying)

Buy to let calculations  
There are lots of ways of calculating buy to let numbers. Here’s some ‘rules of thumb’ 

Gross Yield is calculated by taking the price paid for the property and dividing this by the income received. 

So if you paid £100,000 for a property and the annual rent is £5,500, your gross yield is £5,000/£100,000 = 5.5% 

Rule of thumb #1

If a property has a 5.5% yield; your mortgage rate is 5% and you borrowed 75% mortgage, then your net income before tax will be zero. 

Rule of thumb #2
If a property has a yield of 6% or less, usually you secure good capital growth over 10-15 years, but don’t secure much income. 

If a property has a yield of 7% or more, usually the income you receive is good, but capital growth is poor.

Brought to you by Kate Faulkner