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The musings of the Acumen Mortgages Team - Property, Mortgages & Life

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Welcome to the Acumen Mortgages blog!

The team at Acumen Mortgages share their thoughts on the mortgage market, whats new in the world of property, case studies on different client scenarios & anything else that takes their fancy!


Credit Where Credit is Due

Grant Billington, Thursday 31th August 2017

Almost everything about our daily lives affects our credit ratings in one way or another. Whether it's spending a bit too much at the Supermarket, meaning that you go over your overdraft facility, buying that new sofa on 0% finance, or forgetting to set up a direct debit to cover the minimum payment on your credit card. All of these, and an almost unlimited number of others, have a bearing on your credit score. While 50 years ago your relationship with the Bank Manager was the most important barometer of whether you'd be able to get a mortgage or not, today it's the almost mythical credit score which has the biggest impact on your ability to get a mortgage.

As changeable as an English summer, and as cruel a mistress as the sea, your credit rating can either be your best friend or your worst enemy. Getting a handle on what a mortgage lender are going to see when they look at your credit file is one of the best ways to spend 15 minutes or so that you could do. As Sir Francis Bacon once said, "Knowledge is Power". Lenders will use the information on your Credit Report as part of their decision of whether to give you a mortgage or not, so how good you've been with your money over the last 6 years can have a massive bearing on whether you're going to be able to buy that dream home or not.

There are 3 different credit ratings agencies, all of which may show you (and a lender) slightly different information about how good you've been with money in the past - Experian & Equifax are the 2 most common, while the other is CallCredit. There are also a number of providers who will allow you access to the different versions of your credit report for free:

Whichever Credit File you check, you're watching out for the same things - Late & Missed Payments, Defaults, County Court Judgements (CCJ's), Open/Closed Accounts & Financial Associates. Some of those items are (hopefully) obvious issues, but the last 2 maybe aren't quite so clear.

As far as Open/Closed Accounts go, it's a good idea to go over the list of both Open & Closed credit accounts that are listed, to check that there aren't any old accounts that are still open that shouldn't be. As far as Financial Associates go, you might be surprised to know that the credit scoring for ex-partners & housemates, that you may have had joint accounts with, may be having an impact on your score.

Hopefully when you download your credit file you'll see a glowing report with no issues, but to find it more give us a call on 01258 269375 or email me on grant.billington@acumenmortgages.co.uk.

Thanks,

Grant

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The Property Market by the Numbers & Surviving the Summer Holidays

Charlotte Marley, Thursday 24th August 2017

So the summer holidays are almost over, and with a couple of weeks to go, parents all over the UK are starting to look to life after the kids go back. For many, having the little darlings at home makes home feel a bit smaller than it does for the rest of the year (Aside from when the family is over for Christmas Dinner!), which is why we normally see a jump in the number of people looking to move house as August gives way to September.

The current average age for Brits to take the plunge and climb onto the housing ladder is 30 years old, but it's that second move that seems to see the whole thing stall. On average, it takes people 12 years to manage to clamber from the first to the second rung of the property ladder, which is a lot of summer holidays & Christmas dinner's to get through! The challenge for most people is to balance the increase in property prices with the increased checks & restrictions on mortgages. With Mortgage Lenders increasingly restricted on the level of borrowing that they can offer customers, I'm seeing more & more clients coming to me trying to get the level of mortgage borrowing that they need to allow them to buy that "dream home", sometimes even after they have been turned away by one of the high street banks.

The solution to this is to make sure that you do your research before you fall in love with that lovely detached house with the view over the park & the double garage in the catchment area for that school. People naturally research properties before they go and commit to buying them - What is the area like? How are the schools? How close is the supermarket, and what are the transport links like? But what they don't do is find out one of the most important pieces of the puzzle; Can we afford it? Surely its vital to find out whether you can get the mortgage that you need before you go out viewing a property - Yes, you might not be able to afford the property that you had your eye on from Rightmove, but you might also be selling yourself short on your budget!

The best way to solve this is to get an Agreement in Principle sorted out, with the most appropriate lender for your circumstances. This is effectively the furthest that you can go in the mortgage process without having a property for the Lender to get a survey done on. They carry out a credit check, and make sure that your income is sufficient to meet the mortgage payments. The next fly in the ointment? Knowing which lender to approach. Given that there are over 200 lenders in the UK, its a bit of minefield. Some people try looking through the "Best Buy" tables in the paper; Not a bad place to start, but not every lender is happy to lend to every client - They're all different. Back to the drawing board then.

Fear not. You can make the most of the next 2 weeks of the Summer Holidays by getting in touch with me or one of the other specialists at Acumen Mortgages. Either give me a call on 0330 2232518 or email me on charlotte.marley@acumenmortgages.co.uk & we'll get the ball rolling. We'll do the donkey work, and leave you free to enjoy a donkey ride at the beach before its time to go back to the school run!

Thanks,

Charlotte

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"Fixing the broker property market" - What the Governments White Paper means for you

Andy Dawkins, Wednesday 8th February 2017

The Government announced their White Paper yesterday on their plans about "Fixing our broken housing market".  It's hard to argue that the market is a hard place for first time buyers at the moment.  With property prices having risen in the U.K by around 6.7% in 2016 (According to the Land Registry), and an average property price of just shy of £218,000, the statistics show that times are tough for those trying to get onto the first rung of the property ladder.

Sajid Javid, the Communities Secretary, announced a raft of initiatives to 'fix' the property market, and make it easier for hose trying to buy their first home - But what does this mean for you?

The announcement is broadly focussed on a few key areas:

  • Housebuilding - Diversifying the Market
  • Homeownership
  • Affordable Housing

Housebuilding - Diversifying the Market

If we're going to fix the broken property market, we need to see a re-balancing of supply and demand. Currently, demand outstrips supply - More people want to buy than there are properties for them to buy. As such, the price rises as people offer more than the next person to get that property.

The Government have stated that we need to see at least 250,000 new homes built each year to keep pace with demand and councils and developers need to "get real" to the scale of the challenge. Mr Javid's announcements include pushing developers to build rather than sit on land that they own, including reducing the amount of time that they can take before they break ground after planning permission is granted. Expect to see more lenders joining the market for custom-build/self-build homes - At the moment its a relatively select group who will fund such projects, but with the Government looking for mortgage providers to show more support for Custom Build, we will see that number increase no doubt. We may also the return of the pre-fab - a property built in sections that arrive on the back of a lorry & put together almost like a children’s toy.

Homeownership

The Government have announced plans to take a long hard look at Leasehold - a legal type of property ownership that your normally see on flats where you own the property but someone else owns the land that it is built on, and you pay them for the privilege - and will be consulting on a range of measures to improve consumer choice & fairness in leasehold. The White Paper also confirms that the Government plan to extend the Help to Buy ISA scheme, following it up with a new scheme called the “Lifetime ISA”; Details are vague at the moment, but expect to hear more as time goes on.

The great news is that they have also pledged more money for the Help to Buy: Equity Loan scheme, extending it to 2021. This scheme is one exclusively for New-Build properties, where buyers can get a low cost 20% Equity Loan from the Government to top up their deposit, meaning that they can buy a bigger/better property than they might have otherwise been able to. For Housing Association tenants, expect to see a similar version of the Right to Buy scheme already available for Council tenants, where sitting tenants get offered the chance to buy their property from the Council/Housing Association for what can be a significant discount.

Affordable Housing

This is arguably the most important area of the White Paper; The biggest weakness of the housing market is that it is becoming increasingly difficult for First Time Buyers to afford to get on the ladder. Properties are too expensive compared to the mortgages that they can afford, creating a log-jam in the market.

Mr Javid announced a Starter Homes initiative, targeted exclusively at First Time Buyers earning less that £80,000 per year (Or £90,000 in London) aged between 23 & 40 years of age. Starter Homes will be sold at least 20% below market price, with a set maximum price of £250,000 (Or £450,000 in London). Under the new proposals, starter home buyers will need a mortgage, "to stop cash buyers", and some or all of the discount will have to be repaid if the property is resold within 15 years, "to reduce the risk of speculation". A proposal that 20% of all larger developments had to be starter homes is to be dropped and replaced with a "clear expectation" that at least 10% of developments will be "affordable home ownership units". There are also plans that the Starter Homes initiative will be part of a wider range of affordable housing schemes, improving choices for buyers.

There is of course a lot more to the White Paper than I have covered off, including initiatives & plans around Renting & Planning, but I wanted to pull together what I thought were the key bits. As they say, “The Proof is in the Pudding”, but as more details become available we’ll hopefully see that these schemes will help in making the property market fairer, and owning a property a more achievable dream for more people. That said, we’re still helping more & more First Time Buyers getting their way up onto the property ladder, and we helped a record number of first time buyers last year. If you would like to discuss any of your mortgage needs, the schemes available, or if you have a question about the White Paper, please give me a call on 01258 269375 or email me on andy.dawkins@acumenmortgages.co.uk.

Until next time,

Andy

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You can't have your cake & eat it

Charlotte Marley, Monday 6th February 2017

I was chatting to one of my self employed clients over the weekend about the fact that you can't have your cake and eat it.

Let me explain. My customer, who I have been looking after for eight years now, runs a small yet successful company, buying and selling used cars. Like most businesses in the UK, he has had good times and tough at times, yet the business has continued to grow, and goes from strength to strength. Thankfully, I was seeing him at just the point where he's starting conversations with his accountants to draw up his end of year figures. His initial conversations with the accountant were filled with talk of offsetting everything possible, and keeping the tax liability as low as it can be. No mention whatsoever of how this might affect his ability to borrow, either as a business or an individual. As I explained to my customer over a cup of coffee, what is good from a tax point of view is awful from a mortgage respective. For most mortgage lenders, the amount that you can borrow is based on the amount of net profit that the Accounts show.If his books had been put together showing minimal net profit, and as a result a minimal tax bill, we would find ourselves in the station of struggling to find a mortgage lender that would help. Fortunately, I got in at the right time - disaster averted. But this led me to think about the complexities of my employed clients, and how, for the most part at least, mortgage lenders adopt a real "one size fits all" approach.

Most lenders will take an average of the last two or three years worth of income, missing out on those clients who have made a real change within their business which has seen their profitability shoot up. Most won't look at retained profit that has been left in the business because it isn't needed elsewhere. Most underwriters can't even read a set of accounts properly! I completely understand the need for prudence, but not at the expense of common sense & reason. With the additional regulation that has come in the way of the credit crunch, mortgage lenders have been increasingly forced to the safe ground, which naturally enough isn't somewhere that many self-employed clients sit.

The result of this conservative, and some would say blanket approach is that some self-employed people really struggling to get the mortgage that they need. The great news is however that there are options available. One mainstream lender will work with the most recent years worth of company figures, allowing us to take advantage of growth. Others will work using only one years worth of accounts, meaning that clients who have taken the step of moving from employed work into the self employed space don't miss out on the home of their dreams. Others will work using money that has been left in the business.

But for all of this, it really is a minefield out there. As another client told me, who was referred to me by a long-standing customer, he had wasted four hours of his precious time in seeing his bank, only to be told that he "didn't fit their lending policy", so they couldn't help at all. This in spite of the fact that the same bank had looked after his business accounts for the last five years, and could see every transaction that he made. Instead, please allow me to give any self employed person who reads this one simple bit of advice. If you are looking at your mortgage, whether it is to move house or buy your first property, whether it is to find a new deal or pick up a buy to let property, please make life easy on yourself. Go and see a mortgage broker. Don't wait until you've been let down by your bank. Don't wait until your accountant has finalised your books & got your tax bill to one that you can cover with the change down the back of your sofa. See a broker first. At least then you are in possession of all of the facts. Oh & one last suggest - Remember; You can't have your cake & eat it.

Thanks,

Charlotte

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Buy to Let is Dead. Or is it?

Andy Dawkins, Monday 30th January 2017

Somehow we're already a month into 2017, and the mortgage market has been through a number of big changes. 2016 saw lots of changes in the Buy to Let market. We had the introduction of the 3% Stamp Duty Surcharge, payable on the purchase of Second Properties & Buy to Lets, changes to the way that landlords can offset the expenses from their property portfolio against tax, and the Prudential Regulatory Authorities "Underwriting Standards in Buy to Let", which changed the way that mortgage lenders deal with Buy to Let applications.

So many changes over such a (comparatively) short period of time can't help but knock confidence in the Buy to Let market. Landlords are uncertain what the changes are, whether they apply to them, and how they will affect their portfolio & their income. We're seeing more & more property investors asking us to explain whats happened. The mass media haven't made it much easier in whipping up a frenzy, exclaiming that "Buy to Let is Dead!" I've got to be honest and say that while the changes have of course had, and will continue to have, an impact on people buying investment property, and the performance of their portfolio's, at Acumen Mortgages we are still seeing lots of clients both buying new Buy to Let properties, and also Remortgaging their existing portfolios to ensure that they are getting the best return on their investment. We've even had clients come to us, clutching a newspaper article, telling us that they wanted to move all of their properties into a Limited Company, just because they had read that it was a good idea on the money pages. By the time we had finished getting to know their circumstances, and explaining the Advantages & Disadvantages of moving their existing investment properties into a Limited Company, they had changed their minds about what to do. That's not to say that buying via a Limited Company as a way of managing your tax liability is a bad idea. Far from it - It can be a brilliant solution, but only for the right circumstances.

While many of us feared that all of the changes would kill off what has been a really buoyant marketplace, they have instead proved that necessity breeds creation. With mainstream lenders innovating with the way that they calculate rental coverage, and specialist lenders coming out with products to fit the more complex end of the market, the time has never been better for landlords, both those to whom Buy to Let is no new thing to those just dipping their toe in the water, to find the best way to maximise the potential of their property portfolio. There are a myriad of options available, and I pity the investor that tries to work out the right solution on their own. At Acumen Mortgages, our team of mortgage experts are here to guide you through the mortgage maze to find the right solution for you!

Need help in maximising your property portfolio? Or are you dreaming of your first step to becoming a property magnate? Call us now on 01258 269375 or email us at info@acumenmortgages.co.uk.

Until next time,

Andy

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Going Once, Twice, Sold!

Charlotte Marley, Saturday 21st January 2017

Buying property at Auction is the latest 'thing'. Having watched a couple of episodes of "Homes Under the Hammer", finding a bargain in your local property auction seems not only a fantastic idea, but also a walk in the park. But what a lot of people haven't considered is how they are going to fund such a cunning plan.

Buying at Auction can be a really fantastic way to find your next project, or to pick up a first home at a knock-down price, but it also comes with a number of additional considerations that you wouldn't normally have to think about with a standard property purchase:

  • The Legal Implications - Not only do you exchange once the gavel falls (Or in reality that day), the successful bidder also has to have their deposit (Usually a minimum of 10% of the price) available to put down at the same time. This, commonly coupled with a 28 Completion Deadline, means that anyone bidding had better be sure that they know what they're committing to!

  • Before the Auction - Before the day of the auction, potential bidders are obviously advised to view the property that they are looking at, along with also arranging for a survey or valuation. If you're looking to fund the purchase with a mortgage or similar, a Valuation might be included as part of the product, but it might also be worth investing in a full survey, just to check out what you're getting yourself into. Buyer's also need to work out how much their maximum bid is going to be on the day of the auction - Both to make sure that they don't spend too much, but also because this could be influenced by any finance that they need to apply for.

  • Funding - The way to fund an auction purchase is going to be heavily influenced by the buyers situation and especially by the property itself. One of the key questions to check would be "Is it mortgageable?". If the property is in need of serious renovation work, it might be that you're not able to secure a conventional mortgage on the property. One option is specialist Auction Finance, which is unsurprisingly specifically designed with the whole auction scenario in mind. Another way to solve this problem is to raise a mortgage on another property that you own. Each way of funding your property purchase comes with its own positives & negatives - There isn't a 'right' answer. Instead, it depends on your circumstances, and also on the property that you've got your eye on.

  • It's all back to front! - Don't forget that you have to go through the whole application process, plus get the property surveyed, before the auction even takes place, let alone before you've agreed to buy the property! As such, you need to work out how much you are willing to spend, not only on the property but also in up-front costs to make sure that you know what you're getting into.

As you can see, buying at Auction isn't as easy as TV programmes such as Homes Under the Hammer make it seem. Don't get me wrong - They can be a brilliant way to pick up a bargain, but you need to make sure that you've done your homework. To discuss your options around funding an Auction purchase, give us a call on 01258 269375 or email me on charlotte.marley@acumenmortgages.co.uk

Thanks,

Charlotte

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