Things to know before becoming a landlord

Things to know before becoming a landlord

With the current condition of the UK housing market it is no surprise that many people can be tempted to think about buying their first buy-to-let property. We have put together some of the key risks and costs that becoming a landlord could entail to ensure you feel fully prepared to become a landlord.

UK housing market

It is no secret that the UK housing market has been booming the last few months with the biggest rise in house prices in 17 years, this has got many people thinking about purchasing an investment property. So, what should you know before taking the plunge and becoming a landlord?

Types of Landlords

The general definition of a landlord is a property owner who rents that property out to another party in exchange for rent payments, however the number of properties that you own and how you come to acquire the properties will change the type of landlord that you are. Below we have listed some of the key types of landlords.

Buy to let Landlords - These tend to be first or second time landlords. Buy-to-let properties are usually residential but also includes student property investments.

Professional Landlords – This involves a landlord with a property portfolio, the portfolio is run like a business and this is the landlord’s main source of income.

Accidental Landlords – An accidental landlord has fallen into the role most likely due to inheriting a property from a relative.

Limited company Landlords - If you are a business owner of a limited company there is also the option to purchase a buy-to-let through your company.

Risks of becoming a landlord

Along with any type of investment there is an element of risk involved, an investment property is no different. There are a number of factors that you need to consider before purchasing a buy-to-let.

Bad tenants

The most obvious risk to landlords is the possibility of renting to the wrong type of people. Having tenants that will not pay reliably firstly causes a lot of stress to landlords and secondly, can easily land yourself in financial difficulty if you are using the rent to cover the mortgage repayments on the property.  Tenants can cause financial problems other ways than not paying/paying rent late, causing deliberate damage to the property and/or leaving the property in a bad way when they leave. Although you will have a deposit as a safety net there is the possibility in extreme cases that it might not be enough to cover all the cleaning/repairs leaving you out of pocket.

Although troublesome tenants can be evicted, this is a lengthy and costly process that can take a number of months and thousands of pounds not to mention the sleepless nights and stress involved. To minimise these risks there are a number of things that can be done, before allowing a tenant to move in, a thorough tenant screening should be conducted. These checks should focus on the individual’s credit, criminal records and eviction history; although you can not guarantee the tenant’s future behaviour, this will allow you to form a better picture of their background.

Investing in an undesirable rental property

Deciding to purchase an investment property is one thing, choosing a property that is going to attract the right tenants is another. The last thing you want as a landlord is to end up with an empty property because no tenants are interested in moving in.

Ensuring that you choose a property that is going to appeal to potential tenants is important. Firstly, you need to understand your budget and what kind of property you are able to afford.  You also need to look at the kind of tenants you are hoping to attract and the kinds of amenities and facilities they will require. E.g. if you are hoping to attract a family, are there schools nearby? If you are wanting to attract uni students, are there good transport links to the university and town centre?

When you have found the perfect property for your ideal tenant it is important to undertake research of the local property market and understand what you should be charging as rent. Charging too much and you risk having an empty property, charge too little and you could be missing out on potential revenue making the mortgage payments more difficult to meet. Speaking to a mortgage advisor who can organise a valuation of the property can give you a very good idea of the rental income that you can expect to receive from the property.

If you are struggling to find a good location to purchase an investment property take a look at our blog – top 10 places to live in Somerset for some inspiration.

Economic downturn

Without being an expert on the UK economy, it can be very difficult to predict whether another recession is on the horizon but it is important to bear in mind when thinking about purchasing an investment property. If the health of the economy takes a dramatic downturn and unemployment starts to rise then there is the chance that your tenants could lose their jobs, if this were to happen how would the rent be paid?

This is where it would be better to have more equity in your property, this would mean that your mortgage payments will be smaller so even if you have to reduce the rent for your tenants it could still cover the mortgage. Similarly having a number of rental properties that are spread across the UK in different locations means that there is likely to be some areas that are less affected than others balancing out the risk.

Unexpected damage and maintenance

Whether that be malicious damage or accidental damage it can be costly as these types of damage can include anything from a broken window up to a fire in the property. Although malicious damage can be covered by some insurers it can be difficult to prove that the damage was caused with intent and it is likely also needed to be reported to the police which can be added stress. As the landlord it is your legal responsibility to repair any damages to your property, although some of the cost can be offset by deducting tenant deposits if the damage is costly then it is unlikely that the deposit will cover the whole amount. With this in mind it is essential that you have comprehensive insurance cover.

Costs of becoming a Landlord

Buy-to-let Mortgages

The biggest cost of becoming a landlord is inevitably purchasing the property. If you are going to be purchasing an investment property that you will not be living in then you will need a buy-to-let mortgage instead of a standard residential one. Buy-to-let mortgages tend to be more expensive than residential mortgages with regards to higher interest rates and requiring much larger deposits as these kind of mortgages are seen as higher risk to lenders. Mortgages for a buy-to-let property usually require a minimum deposit of 25% whereas for residential mortgages deposits can be as low as 5% with some lenders.  Speak with one of our experienced buy-to-let mortgage advisors to discuss how much you could borrow.

Landlord Agency fees

Depending on whether you have time to take on the daily running of your property/properties it may be required to employ an agency to manage your property. Most agencies will charge between 10-15% of the rent requiring payment on a monthly basis which will take a chunk out of your profits.

Safety certifications for your rental property

Before your first tenants can move in there will be a number of safety inspections and tests that will need to be carried out, some of these will also require annual renewals such as gas safety inspections which must be carried out by a registered engineer. It is important to keep up to date with these as you can fall into legal trouble if you are not getting the required certifications for your property.

Insurance for buy-to-lets

It is important to do your research on the kinds of insurance you will need as a landlord. Although there is no legal obligation for a landlord to take out a dedicated insurance policy, a conventional home policy will not cover you for rental elements. Despite it not being a legal requirement most lenders will not lend without adequate insurance being in place. Confused about the insurance you will need? Speak to one of our advisors who can guide you through the process.

Marketing your investment property

Another cost of becoming a landlord will be marketing the property. Unless you will be continually letting your property to individuals that you already know e.g. friends and family then you will need a budget for advertising your property in order to attract potential tenants. There are a number of ways you can choose to advertise, some more budget friendly than others. You can decide to use a letting agent, advertise on websites or in local newspapers although prices can vary. If you have a limited budget then advertising on social media can also work well.

 

Getting the right advice before becoming a landlord

Speaking to an experienced buy-to-let mortgage advisor can help you to assess your viable options. Our advisors have a wealth of experience dealing with first time landlords all the way up to professional portfolio landlords. If you are thinking about buying your first investment property or considering adding another to the collection, chat with one of our advisors on 01225 962 456.

The FCA does not regulate valuations and some forms of Buy to let mortgages.


house deposit saving

How to save for a house deposit

How to save for a house deposit

With UK house prices continually creeping up and some first time buyers now looking at having to save for nearly 8 years for a house deposit it is no wonder the concept of saving for a house deposit can be very daunting. At Windsor Hill Mortgages we have put together some of our advisor’s top tips to help you save for a deposit and get your foot on the property ladder in no time!

house deposit saving

Is it better to put down a bigger deposit on a house?

Despite 95% mortgages making a recent return which is great for individuals who may not have the time or ability to save up for longer periods of time, at Windsor Hill Mortgages we would always recommend saving up as much as you can for a house deposit. There are a number of benefits to saving a bigger deposit if you are able to.

  1. Afford higher value property

Most mortgage lenders will allow you to borrow between 4 and 4.5 times your salary, your deposit amount will be an addition onto the mortgage amount you can borrow meaning that the more deposit you have to add on top, the higher value property you can afford to buy. Some lenders even allow you to borrow 5- 5.5 times your salary if you have a big enough deposit. So essentially, you might be able to get a bigger mortgage with a bigger deposit.

  1. Cheaper monthly repayments

If you have a bigger deposit then this can mean that you will need to borrow a smaller amount for the mortgage. Borrowing a smaller loan will mean than your mortgage repayments will be lower allowing you to save money.

  1. Higher chance of your mortgage application being accepted

When applying for a mortgage, lenders will undertake affordability checks to identify whether the mortgage is affordable based on your income and outgoings. Having a bigger deposit could mean that you will need to borrow less and therefore it is more likely the mortgage will be viewed as affordable and increase the likelihood of the application being accepted. A bigger deposit will also be viewed more positively on your credit file by the lenders and therefore there will be less chance of your mortgage application failing on credit issues.

  1. Less chance of falling into negative equity

When you own more of your home outright the chances of falling into negative equity is greatly reduced. Negative equity is where you owe more on your mortgage than your property is worth. People can find themselves in negative equity if house prices fall and the value of their home decreases. Being in negative equity can make it hard to move house or switch mortgage provider.

 

Windsor Hill Mortgages Tips for saving a house deposit

Move home/house share to reduce rental costs

The most obvious and potentially most effective way to save yourself money to put towards a deposit is to reduce any rental costs you currently have. The average rent in the UK is now at a record high of £1,007 a month, this is a huge chunk of money that could be used to save for a house deposit. Moving back in with parents or family would be the most ideal way of saving money that you could then set aside each month for a house deposit. However we do understand that this is not always an option for everyone. If you are unable to move in with family then choosing to downsize or move to a house/flat share will also help you to save a sizeable amount on your rent each year.

Help to buy/Lifetime ISAs

Help to buy ISAs are savings accounts that can be very helpful for first time buyers trying to save up a mortgage deposit for their first home.  With a Help to Buy ISA you can pay £200 per calendar month into the account and add an initial contribution of up to £1,000 when you first open the account. With Help to Buy ISAs, the government will pay you a bonus towards the purchase price of the property of 25% up to £12,000 meaning you could earn an additional bonus of up to £3,000. It is important to note that the bonus is paid on completion of the property purchase so can’t be put towards the exchange deposit.  Help to Buy ISAs are no longer available to new applicants, however you can open a lifetime ISA instead which has very similar features and benefits to a Help to Buy ISA.

Purchase with a partner or friend

Having a partner or friend to purchase a property with can make it easier. Not only can you combine your deposit amounts but it also means that both incomes will be considered in the mortgage application so you could be able to borrow more. There are important factors to consider when deciding whether to purchase with a friend or partner and it is also necessary to have an exit plan should the worst happen and the property need to be sold. It is essential that both people involved are transparent about their finances and are honest about their long term intentions for the property so that there are no surprises for either party further down the line.

Open a separate savings account – best savings account interest rates

Having a savings account separate from your current account can be a good idea as you may be less likely to spend your savings unnecessarily. It can also help to set aside money for your savings account on payday as you are likely to put away more, in fact it is estimated that people who do this save on average 114% more a month than people who do not.

The bank of England’s base rate is at a record low, and although this is good news for borrowers, for savers it is less than ideal. Currently many savings accounts offer rates as low as 0.01% however there are still banks offering rates up to 0.5%. See below our top 3 easy access savings accounts to consider – rates were correct at time of blog publish.

  1. Cynergy Bank: 0.5%
  2. Charter Savings Bank: 0.5%
  3. Nationwide: 0.45%

The higher the interest rate the more money the bank will pay you for keeping your funds in the account. It is important to look at all criteria of savings accounts to find the most suitable for you including details other than interest rates.

Gift deposits

Although a gifted deposit from family members is not available to everyone, they can significantly speed up the process of saving for a housing deposit depending on the amount. They can be used for the whole deposit or just a part of it. Lenders do prefer the gifts to come from immediate family members such as parents or grandparents and having a gifted deposit from friends or long-distance family can slow down the process.  Lenders will also request proof that the money is a gift and not in fact a loan that needs to be repaid or that a stake in the property is not expected from the gift giver.

Download a budgeting app

There are a number of free budgeting apps available to download to your smart phone, these apps can be a great help when trying to manage your finances and keep control of your spending.  Many of the apps allow you to view all of your accounts in one place and also groups your spending so you can really see how much you are spending and on what. We recommend sticking to FCA approved apps.

Regularly check your bank statements

It can be easy to forget or even avoid checking your bank statements but keeping an eye on your out goings each month is a key first step in the home buying process. Although checking your account regularly is good for security reasons it is also important to see where your money is going. Do you have old subscriptions coming out each month for a service that you no longer use or want? Since the pandemic the average person living in Britain spends an average of £55 a month on subscriptions, this adds up to nearly £700 a year so keeping on top of these expenditures can save you a lot in the long run.

 

How can we help?

There are a number of things that you can do to help cut back on your expenditures allowing you to set aside a little bit more each month, remember little amounts can soon add up (that goes for saving and spending!). Our advisors will quickly be able to identify if there are any areas of your finances that should be reviewed to potentially save yourself money.

 

 

If you would like some extra help to figure out your finances and see how much you can afford to borrow speak to one of our friendly advisors on 01225 962456.


What will the FCA price walking ban mean for me?

What is the FCA price walking ban?

The FCA has announced plans to ban price walking within the home and motor insurance markets, but what does this mean for customers in the future and how can you avoid these problems?

What is the FCA?

The FCA, also know as the Financial Conduct Authority regulates the operations of around 60,000 financial institutions within the UK. The FCA aims to protect consumers by monitoring the behaviour of firms ensuring that they are operating fairly and transparently. The FCA also actively search to identify those institutions who are not following the regulations to deter and prevent further poor conduct. This in turn helps to keep the industry stable and promotes healthy competition between financial service providers.

What is price walking?

Price walking can also be referred to as a loyalty penalty or dual pricing. This is when new insurance customers receive more competitive premiums compared to customers that are renewing their cover who instead receive an increase year on year.

What does the FCA price walking ban mean?

The ban on price walking that the FCA has confirmed will mean that some insurance providers will have to rethink their pricing strategies. Insurance providers will no longer be able to charge existing customers who wish to renew a price higher than a new customer would pay to open a policy with them.

FCA have estimated that across the insurance industry, £1.2bn was made from price walking in 2018 alone. The watchdog has predicted that the ban on price walking could potentially save customers up to £4.2bn over the 10 years following the ban's implementation. The aim is to stop insurance firms luring in new customers with unsustainable rates and then dramatically increasing the premiums year on year afterwards.

The ban will begin on 1st January 2022 with a transitional period to allow firms some extra time to get their new processes and pricing structures in place with 17th of January 2022 to be the exact deadline. Firms will however have to backdate benefits to customers to the beginning of the month.

Future effects on the insurance industry

Prices

Once the price walking ban comes into play it is certain that new customers will notice prices rising across the market. This is due to the fact that insurance firms will have to begin closing the gap between the introductory offers and the renewal premiums that existing customers have to pay. The increase is likely to be seen more prominently within the home insurance industry and less so in the motor insurance side. Currently customers renewing their home insurance can expect to see premiums 9.4% higher in year 2 than those of new customers whereas in motor insurance the increase in year 2 is only 1.8% higher. Customers renewing their home insurance for the fifth year will pay on average 47% more than the new business counterparts and therefore there is a large pricing difference to rebalance.

Shopping around

Despite the fact new customers will not be receiving the usual discounted rates it is likely that majority of people will still be inclined to shop around each year. A study undertaken by Consumer Intelligence suggests that majority of people shop around each year and will continue to do so despite the new ban. Only 2% of the people of participants said that they never shop around and have no plans to start.

There is hopes that the FCA price walking ban will also help to stop more vulnerable people being exploited by the price increases who do not have access or the ability to shop around and switch insurance provider very year.

Brand Importance

Although price is not usually the standalone reason that an individual will choose a specific provider, companies will have to take a look at restrategising and identifying their other USPs to maximise marketing efforts on. Reputation, value and trust are likely to be characteristics that potential customers will focus more on as there will no longer be the excessively low starting prices to draw them in.

Industry Reputation

Consumers do not tend to have the most positive perception of the insurance industry. With the recent pandemic not helping the reputation of the industry, providers have been ruthlessly criticised for their poor service and unsatisfactory coverage reducing consumer trust further.

The FCA ban will hopefully work to improve the reputation of the industry as providers work towards more ethical practices where long-standing customers feel less penalised for their loyalty.

How Windsor Hill Mortgages can help

At Windsor Hill Mortgages, the software we use when finding you general insurance deals means that you are annually renewed onto the best rate for your policy so that you never have to worry about paying more than you need to.

Windsor Hill Mortgages

Speak to one of our advisors for a no obligation chat about what we could offer you, call us on 01225 962456.

For motor insurance we act as introducers only.


Top 10 places to live in Somerset

Where to live in Somerset?

Deciding where to live can be one of the biggest and most difficult decisions in the home buying process. Do you choose to live close to family and friends? But what about close to your work? Or how about you pick somewhere completely different and start a fresh?

When you can pick anywhere in the world, where do you choose?

Well, here at Windsor Hill Mortgages although we help clients all over the UK our office is based in the lovely South West county of Somerset so it is no surprise that we think Somerset is a great area to consider. If you are struggling for inspiration, we have picked a few of our top favourite towns and villages within Somerset to give you some ideas.

Where is Somerset?

To begin, where actually is Somerset? Well, the county of Somerset is based within the South West region of the UK and is bordered by Bristol, Wiltshire, Dorset and Devon. Somerset is a rural county, known for its glorious countryside and rolling hills including the Mendip Hills, Quantock Hills and Exmoor National Park.

Where is Somerset?
Where is Somerset?

Frome

Having recently been crowned The Sunday Time’s best place to live in the Southwest 2021 it is no surprise that the quirky town of Frome has made it to one of our favourite places in Somerset. Based in the eastern part of the county with great transport links to both Bath and Bristol, Frome is also in a great location for commuters who are looking for house prices slightly cheaper than the two cities.

Aside from Frome’s charming history and beautiful architecture there is also a thriving community of independent and specialist shops lining the cobbled streets throughout the town. There are regular markets hosted in the town centre including the renowned Frome Independent Market that attracts thousands of visitors from all over the UK. This market showcases a collection of the best food, drink, produce, plants, designers, collectables, street entertainment and many more.

Schools: Hayesdown First School, Selwood Academy, Frome College

 

Catherine Hill, Frome town centre

Bruton

The quaint village of Bruton located on the A359 between Frome and Yeovil and has been identified as one of the most in-demand countryside living destinations in England. Although nestled in beautiful Somerset countryside the village is brimming with independent shops including delicious cafes and restaurants providing the perfect balance between urban and rural.

Located in Bruton countryside is the stunning and very well-known country estate, The Newt. This magnificent estate boasts acres of woodlands, gardens with so much to see and do including Cyder tasting and Beeswax lip balm workshops.  As well as garden eateries and farm shops the estate is also home to a breath-taking hotel for anyone who might fancy a Somerset staycation.

Schools: Westbourne School, King’s Bruton, Bruton Primary School, Bruton School for Girls

 

Wells

Wells’ claim to fame is that it is the smallest city in England. Home to a humble 12,000 inhabitants Wells is classed as a city due to the famous 13th century Cathedral encompassed within the city’s centre. As well as the stunning Cathedral, Wells is also home to many other historic gems including the moated Bishop’s Palace, St Cuthbert’s Church and local museum.

Within Wells there is a busy city centre and just a stone’s throw away from the city are the famous attractions of Cheddar Gorge, Wookey Hole, Glastonbury Abbey and Stourhead among others. Street is a short car drive away where you will find a large shopping outlet village, Clarks Village which is home to over 90 designers and high street brands.

Schools: Stoberry Park School, Wells Cathedral School, The Blue School

 

Wells Cathedral

 

Keynsham

The rural market town of Keynsham is a town located between Bath and Bristol, being a mere 8 minute train journey from Bristol Temple Meads it is the perfect location for commuters working within Bristol city centre. Apart from the great transport links, Keynsham also has a lot to offer with a monthly market showcasing the high-quality produce local businesses have to offer. There is also a large memorial park extending 26 acres which in the summer months is a hub for Keynsham Music Festival which is one of the South West’s top music festivals.

However if you prefer to be away from the hustle and bustle, Keynsham is also close to the River Avon and the Avon Valley Woodlands. Along the canal are a number of cosy pubs that you can stop off at for a quick bite to eat or enjoy a refreshing drink in the sunshine. If you fancy a longer walk in nature, Avon Valley Woods is over 139 hectares of stunning wildflowers and a wide variety of tree species all brimming with wildlife.

Schools: Wellsway School, St Kenya Primary School, Castle Primary School

 

Bath

Unsurprisingly Bath is one of the most sought-after areas to live not only in Somerset but within the whole of the UK, with attractions to suit all ages it’s not difficult to see why the city of 100,000 residents can have in excess of 5 million visitors a year.  In Bath the obvious attraction to visit is the Roman Baths, but aside from the beautiful history Bath is full of fun, modern and contemporary activities to enjoy. The list of places to eat in Bath is endless ranging from Michelin starred restaurants, craft beer ale cafes to some well-known budget friendly pub chains, there is a wide selection for everyone to enjoy.

For sport loving fans there is a huge rugby community within the city with regular games at The Recreation Ground. Throughout the year there are plenty of other events on including festivals, carnivals and of the course the popular Christmas Market.

Schools: Oldfield School, King Edward’s School, Royal High School, Prior Park College

 

Bath city centre

Chew Magna

The quaint village of Chew Magna is based in East Somerset, although small in size with only around 1,200 residents the village is home to two schools, three churches, four pubs and a number of shops. Chew Magna is draped in history with many listed buildings within the village that was once a fundamental part of the wool trade in the Medieval times. Chew Magna is located on the B3130 road only 10 miles from Bristol and Bath so it is in a prime location for individuals who work within these cities.

Venture to the South of the village to Chew Stoke and you will encounter Chew Valley Lake. A reservoir stretching 1,200 acres, the landmark is a hub for wildlife and has been classified as a Site of Special Scientific Interest, with a wealth of wildlife being drawn to the site throughout the year there is never a bad time to visit. Nearby nature reserves such as Burledge Hill and Folly Farm are also less than 4 miles away. Similarly, less than 2 miles away is Stanton Drew Circles and Cove located in the village of Stanton Drew. The Stanton Drew Circles are the third largest complex of standing stones in England and are estimated to have been laid 4,500 years ago.

Schools: Chew Magna Primary, Chew Stoke Church School

 

Minehead

If seaside living takes your fancy you may want to consider the coastal town of Minehead, located between the wild landscape of Exmoor National Park and beautiful beaches you can get the best of both worlds. A textbook seaside town with a lovely promenade and busy harbour, Minehead attracts visitors from all over the country. There are a whole host of activities to take part in including; sailing, windsurfing, rugby, cricket, golf as well as the UK’s longest walking trail that stretches all the way to Poole.

Despite the peaceful surroundings of this Somerset seaside town Minehead is very easily accessible via A39 and A396. For those commuters Minehead is in easy travelling distance of some neighbouring cities including Bristol and Exeter which also gives access to some great nightlife for visitors.

Schools: St Michael’s C of E First School, Minehead First School, Minehead Middle School

 

Dunster, Minehead

 

Bishop Sutton

Bishop Sutton is a village located on the northern facing slopes of the Mendip Hills within the affluent area of Chew Valley within Somerset, lying East of Chew Valley Lake. Similarly to other villages we have mentioned, Bishop Sutton also has great transport links to Bristol and Bath for those who enjoy working or socialising within a city whilst also enjoying country living.

Bishop Sutton is surrounded by a wealth of attractions and landmarks meaning that you would never be short of things to do. As mentioned previously Bishop Sutton is located very close to Chew Valley Lake meaning easy access to the reservoir to observe the incredible wildlife. Nature reserves such as Folly Farm are also within easy reach of the village.

Schools: Bishop Sutton Primary School, Bishop Sutton Pre-School

 

Cheddar

The picturesque village of Cheddar lies just a mile away from Cheddar Gorge and is a flourishing community with busy tourism, farming and quarrying sector providing a wealth of jobs for residents and locals. Unsurprisingly there is a lot to do in and around Cheddar. Firstly the spectacular Cheddar Gorge which draws thousands of visitors to the area every year, there are miles of foot paths to follow and you can even join a guided tour of the Gorge. Not too far away from the Gorge is Cheddar Reservoir, a 2 mile stretch around the 1350 million gallon lake it can be a nice gentle afternoon stroll.

Around the village is lots of shops and cafes where you can purchase the famous cheese and local cider. Cheddar is also home to an adventure golf course and soft play arena to keep children entertained, for more adventurous individuals there are also caving and climbing tours of the Gorge.

Schools: Cheddar First School, Fairlands Middle School, The Kings of Wessex Academy, Sidcot School

 

Cheddar Gorge

Langford

A pretty village nestled in the heart of North Somerset situated on the edge of the Mendip Hills, Lower Langdon is encompassed in miles of beautiful hilly paths to explore. Lower Langdon has a pub at the centre of the village which acts as a hub for the community, there are also a small number of other amenities including a memorial hall and a hotel. Lower Langdon is also home to two lovely churches, St Mary’s and Langford Evangelical Church which run a number of Christian Orientated children’s clubs.

Schools: Churchill C.E.V.C, Churchill Academy & Sixth Form

 

 

Somerset Countryside

Finance for building your own dream home - Grand Designs Edition

Self Build Funding

Ever thought about building your own dream home? Or developing a property to sell on? Chances are that you will have seen Channel 4’s series Grand Designs.

Grand Designs follows ambitious individuals along their self-build journey from the very start all the way to completion of their dream home.

Windsor Hill Mortgages have aided with development finance for projects similar to those appearing on Grand Designs. Our advisors can help you with getting development finance and bridging loans including self-build mortgages.

For development finance we act as introducers only.

Why is it important to make sure that you get the right financial advice from qualified advisors?

Grand Designs – Lighthouse Project

In 2009, Edward Short and his family appeared on Grand Designs with their ambitious plan to build a white art-deco lighthouse on the side of a cliff in Devon’s seaside village of Croyde. Over a decade on from the start date of the project, the property is still unfinished despite initial plans aiming for the build to be complete within 18 months.

Throughout the build, financial problems delayed the progress of the project again and again, with construction having to completely stop around 3 times due to the funds drying up. The lengthy time that the project took has put many strains on the family and not just financially. The project’s lengthy construction time has also caused problems with members of the wider community with many other residents in the area complaining of the ‘eyesore’ left on the side of the cliff.

Grand Designs revisited the property back in 2019 to catch up with Edward Short and to get an update on how the property had been progressing. However, when presenter Kevin McCloud arrived at the site he was sadden to see that the building remained significantly unfinished and even referred to it as “the bare bones of a house and more like a desolate carcass”.

Despite the project being the dream home that the family had always hoped for, due to the lengthy timescales and financial problems faced with its construction even when the building is finally completed it will have to be sold.

Croyde Bay, Devon

Windsor Hill Mortgages Development Finance

At Windsor Hill Mortgages we have contacts with some of the most reliable lenders and we have a case by case approach so the service is always personalised to you and the project that you have in mind. This means that we can introduce you to the best development finance providers for your project and reduce the risk of setbacks.

How can we help you?

  • Do you own a plot of land and are thinking about getting planning permission?
  • Have you got a plot of land with planning permission and are thinking about building on it?
  • Have you seen an area of land for sale and think it could be a good development opportunity?
  • Do you have a disused or derelict property you would like to rebuild?
  • Do you have a disused or derelict property you would like to save and renovate?

If you have a development finance project in the pipeline and would like to discuss through your options with an experienced advisor visit our contact form or call us on 01225 962 456.

The FCA does not regulate Development Finance and some forms of Bridging Loans.


UK housing market is "on fire" - May 2021

Is now a good time to buy a house?

Bank of England's chief economist warns that the UK housing market is “on fire”.

House prices in the UK jumped another 9.5% in the year up to May, with large banks such as Halifax reporting the average selling price of properties within the UK rising by £22,000 year on year in May as the stamp duty deadline approaches.

Why are prices still increasing?

UK house prices could continue to rise after the end of June even with the gradual phasing out of the stamp duty holiday. This is likely due to the increase in savings that Britons have built up over the lockdown which inevitably cut down their travel and socialising expenses. Due to this people are having bigger deposits which can be used to fund larger properties which have the more desirable larger gardens and home offices- another shift in buying preferences caused by the pandemic.

Is there a house price crash coming?

Some experts predict that house prices and mortgage application numbers will decrease after the final stamp duty deadline at the end of September. This could mean that from October onwards we could see a fall in house prices.

However, it has been argued that the stamp duty holiday will not have encouraged individuals to move house who were not already considering the decision in the first place. It is possible that the housing boom could continue as lockdown spurred a preference towards larger properties with more outside space and home offices.

In addition, the reintroduction of 95% mortgages and the new Government Help to Buy scheme has encouraged first time buyers to get on to the property ladder helping to boost the demand. To find out more read our 95% mortgages blog.

Similarly, the housing price increase has reflected in the places that people are preferring to purchase in since the start of the pandemic. As discussed, people are looking for different features in properties now, features that are more available and affordable outside of cities such as London.  This can be seen from housing price increases by location, for example Greater London has seen an annual increase of 3.1% whereas more rural areas such as the South West has seen an annual increase of 8.6%.

Is it a good time to buy?

Some people think that holding off for a housing price crash could result in being able to grab a bargain however there is no guarantee that housing prices will fall.

There is the possibility that holding off for a decrease in housing prices would give you the opportunity to purchase a higher value property than before which could then increase in value again. If this were to happen you could resell the property for a profit or remortgage to raise funds for a new project such as renovations or a deposit for another property. It is important to remember however that there is no guarantee that houses prices will decrease anytime soon, let alone inflate back to current rates in the future.

The overall trend is that house prices have risen faster than salaries have increased meaning that the housing market is becoming increasingly unaffordable which long term is not likely to be sustainable. According to the Office for National Statistics, over the last 20 years house prices have increased by an average of 5% each year, wages on the other hand have risen less than 3% a year creating a clear imbalance. This could mean that waiting for a price drop could end up being more expensive in the long run.

On the other hand interest rates are currently at a record low, which means that borrowing is cheaper than before. However, as they are so low there is the high chance at some point in the not too distant future they will likely increase again. Therefore, it is important to factor in the possibility that these could increase resulting in higher mortgage repayments in the future.

How can our advisors help?

As discussed, there are many factors to consider when decided whether to buy a house now or wait to see if prices will decrease in the future.

If you are considering buying your first property, moving house or purchasing a buy to let speak with one of our advisors today to assess your options.


UK house prices increase at the fastest rate since 2004

UK house prices increase at the fastest rate since 2004

UK house prices in April rose at the fastest rate in 17 years. According to Nationwide annual house price growth went from 5.7% in March to 7.1% in April. This sees house prices jump 2.1% month-on-month, resulting in the biggest monthly increase since 2004.

Why have house prices increased so much?

Just as we saw a slowdown in house price increases in March with the anticipation of the stamp duty holiday ending, the announcement of an extension has inevitably prompted a reacceleration. The stamp duty holiday extension has encouraged buyers to take advantage of the potential to save up to £15,000 and could have therefore contributed to this housing price increase.

Although the stamp duty holiday extension is mostly being blamed for the increase, research suggests that other factors may also be having an impact. Nationwide’s research suggested that at the end of April, three quarters of homeowners surveyed that were either moving or considering moving home would have still done so without the stamp duty holiday extension.

Nationwide’s Chief Economist, Robert Gardner explains that although the stamp duty holiday is having some effect on the timing of housing transactions, for most people it is not the main motivating factor.

The low costs of borrowing and changing housing preferences during the pandemic are also likely to be contributing factors to this trend.  The market is also being boosted by the re-introduction of 95% mortgages encouraging first time buyers onto the property ladder.

What does this mean for the future?

The future outlook for the market is quite uncertain at the moment. There is the chance that unemployment could rise sharply towards the end of the year which could mean a slowing in activity. However the shift in housing preferences could also mean that the activity within the market continues.

This change in housing preferences has seen people reconsidering urban locations such as London and take a look at moving to more rural areas where property prices tend to be cheaper and property sizes are bigger. The shift has come as the pandemic has likely caused a change to priorities when purchasing a property with outside space and generous property size being more important now than location within a city, especially with the sudden increase in people working from home they no longer have to worry about a daily commute as much.

How much is my property worth?

Although it is useful to have an understanding on the current market trends for the UK it is important to know what is happening within your local area before you plan to buy or sell a property. House prices can vary street by street so it is important to research thoroughly and ensure you utilise reliable sources. Some useful sources include:

Property websites: Websites such as Rightmove or Zoopla have features that can provide you with an estimate of your house value based on the sales history and other local property sale prices.

Land registry data: It is possible to find out the sold prices for other properties in your local area and when these properties were sold. This can give a good indication to the prices that properties are actually selling for and not what the asking prices are.

Please note these sources should only be used as a guide. To find out the most accurate value estimate of your property it is best to contact estate agents who will be able to undertake a valuation of your property.

 

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


What is conveyancing?

What is conveyancing?

Conveyancing is the term given to the legal transfer of home ownership to the buyer, from the seller. The process begins when the offer on a house is accepted and it ends when the buyer receives the keys to their new home. In addition, conveyancers manage the transfer of funds during the purchase of a property, see featured image the transfer of funds and how conveyancers fit within this chain.

Homeowners who are remortgaging a property will also need a conveyancer if they are switching lender to manage the legalities of removing the original lender’s interest from the property to the new lender. Conveyancers are also involved with the transfer of funds between the new lender and the old lender to clear the previous debts.

 

Who does conveyancing?

Key professionals that carry out conveyancing are, solicitors, property lawyers or licenced conveyancers but many conveyancers are solicitors who have chosen to specialise in conveyancing only. Homeowners are legally allowed to undertake the conveyancing process without specialist support however the process can be very complicated and time consuming if you do not have the knowledge or experience. Some lenders will request professional conveyancing services are carried out in order to protect their investment. This is because there will be a greater risk of the process falling through without trained professionals conducting the conveyancing.

 

What does a conveyancer do?

Conveyers carry out a range of different administrative and legal duties to enable the process to progress smoothly. These include:

  • Matching requirements with timescales
  • Organising appropriate searches for the property – See more below in ‘What searches do conveyancers do?’
  • Working with sellers’ solicitors to progress the transaction
  • Making enquiries on the buyer’s behalf to sort out queries
  • Checking mortgage offers and dealing with special conditions
  • Reporting back providing key information and important updates
  • Arranging dates for exchange of contracts and completion
  • Submitting a tax return and transferring funds for any stamp duty

 

What searches do conveyancers do?

A key part of the conveyancing process involves a set of legal property searches that are carried out to identify any issues that you should be aware of. Some searches will be recommended by the solicitor and others will be required by the mortgage lender.

 

Local authority searches- these provide detailed information about the property and surrounding areas for example, if there a plan for a new busy road right next to the property.

Environmental search – highlights potential issues including; flooding risk, landslips, subsidence, radon exposure and contaminated land from landfills/waste sites.

Water authority searches – identifies who the water supplier is and requiring confirmation that the sewers, drains and piping are maintained by the supplier. Also finds out whether there are any public drains on the property that could pose problems with regards to future extensions or building work.

Chancel repair search – if the location of a property is within the parishes of a church it is important to identify whether you are liable for contribution towards the cost of the repairs to the church.

Optional and Location specific searches – occasionally extra searches are required or recommended based on the location or type of property which can raise concerns with the buyers. Examples include mining searches, additional local authority details e.g. public paths, common land, noise abatement zones.

 

Delays with conveyancing

As there is a lot of administrative and legal work that goes into conveyancing which means that there is the chance of it holding up the whole buying process. Similarly, conveyancing can be delayed by external factors including:

  • Missing documents
  • Long chain of buyers involving lots of properties and circumstances
  • Adverse search results meaning further investigations are required
  • Buyers pulling out of the process

 

How can you reduce the chances of delays?

Although sometimes there are delays that are due to reasons out of your control it is important to remember there are steps that you can take that may help the process progress more efficiently.

  • Provide relevant ID evidence promptly
  • Provide relevant evidence of funds promptly
  • Sign and return documents in accordance with requests promptly
  • Provide prompt payment for searches when requested

 

Finding the right conveyancer

Here at Windsor Hill Mortgages we work regularly with a number of qualified and experienced conveyancers, therefore we are able to recommend professionals that you can be assured will be proactive with getting the process completed smoothly. Speak to one of our advisors on 01225 962 456 to discuss your conveyancing options.

The FCA does not regulate conveyancing and solicitors.


What is a 95% mortgage?

What is a 95% mortgage?  

Since the pandemic wiped low deposit deals clear from the mortgage market it has made saving for a deposit seemingly even more impossible.  Due to uncertainty that came along with COVID-19 lenders began to see these options as high-risk, hence why majority of them were withdrawn. The average cost of a property in the UK is around £230,000, making saving up for even a 10% deposit a daunting task for many.

To help combat this, Chancellor Rishi Sunak announced during the March 2021 Budget a new mortgage guarantee scheme that will allow house hunters to borrow up to 95% of the purchase price of the property that they want to buy. This means that the buyer will only have to cover the remaining 5% in deposit form, opening up the possibility of owning a home to a wider number of people.

Am I eligible for a 95% mortgage?

Although these new lower deposit mortgages may be especially helpful with getting first-time buyers onto the property ladder, you do not have to be buying your first home to make the most of the scheme. As long as you are looking to purchase a house with a value of up to £600,000 that you intend to live in yourself there is the chance that you are eligible regardless of whether it is a new build property or not.

It is important to understand that having a 5% deposit amount does not guarantee you being accepted by a lender for the mortgage. Buyers will still be subject to affordability and credit checks.

The scheme is intended to run from April 2021 – December 2022.

What are the advantages?

The main advantage to a 5% deposit is that potential buyers do not need tens of thousands of pounds sitting around in their bank account to get on the property ladder. As buyers are not having to save up for larger deposits it lowers the risk of housing prices rising at a quicker rate than people can save.

What are the disadvantages?

Interest Rates

The larger the percentage being borrowed of a house’s value usually results in higher interest rates. This means 95% mortgages normally come with higher interest rates than lower percentage mortgages so it can mean that saving up a larger deposit may be a better option. However, it is important to identify whether you can save funds quicker than house prices are rising.

Difficulty Remortgaging

Starting with a low percentage of equity in your home means that it can take time for your loan-to-value (LTV) to reduce. This means that it can take you a while to qualify for the more competitive remortgage rates.

Negative Equity

Holding just 5% of the value of your home means that there is a high risk of ending up in negative equity if property prices go down. Negative equity is where you owe more on the mortgage than the house is worth. As you begin paying off your mortgage the likelihood of this slowly decreases, similarly putting down a larger deposit will also reduce the risk.

Lower Maximum Loan Amounts

There is a cap on how much you can borrow with a 95% mortgage for some lenders. Occasionally there can be maximum loan amount regardless of your income or credit rating which can limit the type of property you will be able to afford.

Higher Lending Charges

Having a high LTV means there is a chance you will have to pay a higher lending charge (HLC).  The lender will take out insurance on your loan known as a mortgage indemnity guarantee using the HLC. This is a contingency to protect the lender in case the house is repossessed and sold at a loss.

What alternatives are there?

Help to Buy loans

For buying new builds there are the other option of Help to Buy equity loans. This involves putting down a deposit of a minimum of 5%, the government then loans you a further percentage of the property cost (ranging between 15% - 40% depending on the property location). Therefore you only need to take out a mortgage for the remaining value. You do not pay interest on the equity loan until after 5 years, after this point you will be paying interest until the loan is repaid.

Shared Ownership

This involves buying a 25% - 75% share in a property under shared ownership and then paying rent on the remaining proportion of the property. It is only necessary to take out a mortgage for the share of the property that you own meaning you might be able to borrow at a lower LTV and qualify for better rates.

Guarantor Mortgages

Some lenders offer guarantor mortgages which means a close family member provides their home or savings as security against the loan. In certain cases, it may be possible to borrow 100% of the property value based on the guarantor’s offering. With this option however it is important to consider the impact and potential strain on relationships.

Contact Us

Looking to find out more about the 95% mortgages available to you? Get in touch with one of our advisors by calling 01225 962456


Our Lions 2021 Dream Team

We have picked our Lions South Africa Tour 2021 Team!

Here at Windsor Hill Mortgages our team are big supporters of rugby, with the South Africa 2021 Lions Tour due to start in early July we would like to introduce our men’s dream team. Tell us what you think, do you agree? Have you got a better team in mind? Let us know on our Facebook!

One of our key insurers that we use for clients’ protection insurance has announced a new partnership with The British and Irish Lions. Royal London will be a Global Partner of the Castle Lager Series 2021. The announcement comes as Royal London also becomes the Principal Partner of the Women’s Lions Programme enabling them to fund research into the possibility of a Lions Women’s team.

The world of sport has been impacted greatly by COVID-19 and Royal London are dedicated to supporting The Lions commitment to deliver the Castle Lager Lions Series 2021.