The benefits of using a mortgage broker

These blogs and the information contained in them is no longer current and therefore much of the information/figures quoted may be out of date and shouldn’t therefore be used as an indication of the current situation. If you require any further clarification please contact Derngate on the number above.

Finding the right mortgage can be a real challenge. With literally hundreds of mortgage products for buyers to choose from would you know where to start?

We all have a bank or building society that we are loyal to – one whom we have trusted with our money and our savings. However, that doesn’t mean they can offer you the best mortgage rate and terms. In order to find the right product you will need to search the whole of the market, and that’s where a mortgage broker comes in.

By using a mortgage broker you could have access to many more lenders than if you research the market yourself. You will receive unbiased advice on which mortgage is right for you, and will be able to choose from a wider range of lenders rather than being restricted to the limited range of one or two lenders.

A mortgage broker is on the side of the borrower, not the lender, and will give unbiased and impartial advice on what is the best deal based entirely on the individual circumstances of their clients.

A broker will take the time to find out about your individual circumstances, such as your income, savings and lifestyle, and will find out what you need to borrow and for how long. They will also find out what you have to put down on a property. They will use this knowledge to talk you through the deals available to you, and will explain the ins and outs of each mortgage product.

A mortgage broker will have in-depth knowledge of the background criteria that a lender has. This means that they can use this knowledge when advising you and processing your application. They will have knowledge of whether you will be successful in your application, so you won’t waste time or valuable points on your credit score as your application will be only submitted if you have a good chance of being successful.

A mortgage broker makes it their business to build up great relationships with lenders, to be aware of rate changes, administration fees and new deals that come onto the market on a daily basis. Because of these relationships, a mortgage broker may pass a lot of business to a particular lender and are then able to use their contacts and influence to chase things if there are any unforeseen hold ups. This in invaluable when you are in the process of buying a home.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

We do not charge for the initial consultation but there may be an administration fee payable when an application is submitted, this fee is usually £195 and we are also paid commission from the lender. Alternatively you could receive the commission from the lender and pay us a fee of an estimated £995.00.

April 20, 2016adminBlog

One in four adults still live with their parents

These blogs and the information contained in them is no longer current and therefore much of the information/figures quoted may be out of date and shouldn’t therefore be used as an indication of the current situation. If you require any further clarification please contact Derngate on the number above.

Official figures from the Office for National Statistics show that there are now more adults living with their parents than at any time on record. Over £3.3 million people aged 20 to 34 are living with their parents, compared to just over £2.6 million in 1996.

At present, 20% of all 25 to 29 year olds are living with their parents, and 10% of those aged between 30 and 34 have failed to fly the nest.

The number of young adults living with their parents has hit a 20-year high as millions struggle to buy their own homes. The figures from the ONS reveal that young men were more likely to live with their parents. One in three men aged between 20-to-34 were in this category, compared to one in five women. Women are more likely to be in a relationship with older partners, the ONS figures suggested, so more women aged 20 to 34 are likely to be living in a couple compared to men.

The rise in the number of adults still living at home is due to a combination of higher deposits, stricter lending criteria and longer higher education courses. It is now much more common for people leaving home to rent rather than buy. In fact, in 2015 just over 91% of householders aged 20 to 24 were renting compared to 30 per cent of those aged 20 to 24 becoming homeowners in 1996.

Those who attend university are graduating with a larger amount of debt than ever before and they are struggling to get onto the housing ladder because of it. By contrast, relaxed pension rules have made it easier for parents to withdraw large windfall sums, so even when people do buy their own home they are often relying on the bank of mum and dad.

For those who aren’t so lucky, finding a large deposit is a huge hurdle in buying a property. First-time deposits have increased from around 10 per cent of the purchase price in 1996 to 22% today. High rents have preventing people from saving for a deposit so the answer is often to live with their parents and save for a first-time deposit.

Another factor is stagnant wages alongside strong property prices. Between 1971 and 1999 the amount paid for a house by first-time buyers with a mortgage was around three times their annual income. In recent years this ratio rapidly increased, driven by soaring house prices, reaching a peak of more than 4.5 times annual incomes in 2004 and remaining stable since then.

Two years ago, the average property price was 11 times gross annual pay for those aged 22 to 29 year olds, and the average house price for first-time buyers was nine times average annual pay for 22 to 29 year olds. Therefore the house prices haven’t increased in line with the rise in salaries.

Compared to twenty years ago, young people are getting married later, and this is driving up the age at which they leave home.

If you are still living at home and are concerned that you won’t be able to afford a property, talk to us at Derngate Wealth today. We can help you to budget and plan for the future.

March 31, 2016adminBlog

The decline of offset mortgages

These blogs and the information contained in them is no longer current and therefore much of the information/figures quoted may be out of date and shouldn’t therefore be used as an indication of the current situation. If you require any further clarification please contact Derngate on the number above.

If you would like to use your savings to offset the balance of your mortgage, an offset mortgage could be the right product for you. An offset mortgage allows you to reduce the size of your mortgage and reduce your monthly payments, as your lender will take into account any savings you also hold with them.

However, despite the benefits of an offset mortgage latest research by Moneyfacts has shown that the number of offset products has hit a five-year low.

At present there are just over 230 offset mortgage products available. This is the lowest figure since 2010 when there were only 210 available. Last year there were 370 available, so in just one year there has been a dramatic fall. There are many people hoping to find a good offset mortgage, and hoping for lots of choice in terms of the products available, so these people will most likely be disappointed.

Part of the reason for this decline is the poor performance of the savings market in the last few years. But there is some good news as the mortgage rates on offer are presently at record low levels. So even though there are less products on the market, they are available at the lowest ever rates.

The number of offset mortgage products available could fall even further over the next year as the savings market still hasn’t bounced back. This is a shame as the idea of being able to reduce the interest paid on a mortgage whilst having access to a savings pot is very appealing to many people.

The new personal savings allowance is coming into effect in April and this could make offset mortgages redundant for many people, especially if they opted for this product due to tax efficiency. Under the new rules, savers can earn £1,000 tax-free; and so may find that their savings are better being kept elsewhere.

Given that mortgage rates are currently low, there are lots of competitive deals to choose from. At present, the lowest 2-year fixed rate mortgage is just 1.15% and so in the long run, it might not be worth paying the premium for an offset mortgage.

Offset mortgages will steadily diminish, and mortgages will steadily become more rigid so we are heading for a very different market.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

We do not charge for the initial consultation but there may be an administration fee payable when an application is submitted, this fee is usually £195 and we are also paid commission from the lender. Alternatively you could receive the commission from the lender and pay us a fee of an estimated £995.00.

If you would like to discuss offset mortgages with the experts, talk to Derngate Wealth today.

March 15, 2016adminBlog

Is it tax efficient to set up a company through which to own property?

These blogs and the information contained in them is no longer current and therefore much of the information/figures quoted may be out of date and shouldn’t therefore be used as an indication of the current situation. If you require any further clarification please contact Derngate on the number above.

Due to the tax changes set to hit buy-to-let investors in 2017, thousands of landlords are considering setting up a company through which to own property, but is this a good idea?

These tax changes mean that buy-to-let investors with just one or two properties will see a fall in profits but a rise in their tax bill.

Buying or owning a property through a company is only useful for higher and additional-rate taxpayers, as the changes to tax relief likely to only affect them. It could be useful for basic rate taxpayers who when the new rules come in will have combined rental and other income over the £40,000 threshold for higher-rate tax.

The changes will be phased in, and will mean that landlords will pay tax on the entire rental income they receive rather than being able to deduct the cost of mortgage interest. This means higher rate and additional rate taxpayers will pay much more tax, and it could even mean that some landlords no longer make a profit. It is also worth noting that the 3% extra stamp duty levied on people buying second properties from April will also apply to people buying through a company.

However, landlords have discovered a loophole, which means that if they are structured under a company they are exempt from these changes and will pay corporation tax on any profit made.

However, this is a complicated solution and something not to be rushed into. Setting up a company to save money on your tax bill will only work for some investors, and there could be implications later on which landlords must be aware of before they proceed.

Landlords will need to set up a special purpose vehicle through which they will buy the property and this will require expert advice to ensure that all the paperwork is correct and in order.

If you have already bought a property and want to transfer it into a company, this will have its own tax implications. The property has to be sold at market value, and it has capital gains tax implications as well as potential stamp duty costs. If the property has increased in value since it was bought, capital gains tax may be payable on the sale, but you could exempt from this if the property is a business as opposed to an investment.
There are many factors that will determine if it’s a business or an investment, such as how much work the landlord does on the property day-to-day and how much direct management of the property is required.

There are specialist lenders that provide companies with buy-to-let mortgages and it’s actually easier to get a mortgage with a special purpose vehicle, which only holds properties, than a trading company, which can carry out other business. It is much easier to underwrite so the mortgages tend to be cheaper.

There are other implications of setting up a company through which to buy or own property, such as needing to complete annual returns and accounts.

If you would like to find out more and discuss if this is the right option for you, as a landlord, talk to Derngate Wealth today.

Some buy to let mortgages are not regulated by the Financial Conduct Authority.

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

We do not charge for the initial consultation but there may be an administration fee payable when an application is submitted, this fee is usually £195 and we are also paid commission from the lender. Alternatively you could receive the commission from the lender and pay us a fee of an estimated £995.00.

Help to Buy ISA Scheme Announced

These blogs and the information contained in them is no longer current and therefore much of the information/figures quoted may be out of date and shouldn’t therefore be used as an indication of the current situation. If you require any further clarification please contact Derngate on the number above.

Next month on December 1st, the Help to Buy ISA will be launched which will allow ISA buyers to claim a bonus.

The Help to Buy ISA scheme was first announced by Chancellor George Osborne back in March this year, with the aim of providing people with a major tax break if they are saving for a deposit for a property. Many people including industry and economic experts have welcomed the new Help to Buy ISA, although many still believe that it isn’t a solution to the ongoing housing crisis.

Many banks and building societies are on-board with the scheme and are committed to offering Help to Buy ISAs. Their rates will be set by them and differ just as with normal cash ISAs, so you will earn interest like a normal cash ISA as well as getting the bonus at the end. Those offering the ISA include Barclays, Lloyds Banking Group, Nationwide, NatWest, Santander and Virgin Money but as yet no rates have been set.

So how does it work? Here’s our quick guide to the Help to Buy ISA scheme:

  1. Pay money into a Help to Buy ISA account.
  2. Once you are ready to purchase a home, you can close your account and receive a closing letter from your ISA manager.
  3. This closing letter is passed to your conveyancing solicitor.
  4. The solicitor will then apply online for the government bonus.
  5. The solicitor receives the bones, and this is added to your existing funds to complete the purchase. It doesn’t need to be your sole deposit money; you can combine it with other savings for a deposit.

The bonus will only be available on homes worth up to £250,000, or £450,000 in London. Unlike some other government schemes, you’re not restricted to buying a new build, any property works and you can use it with any mortgage product available

How much will you receive?

The Help to Buy ISA scheme will give first-time buyers saving for a deposit the opportunity to put away £200 a month (you can save £1,200 in the first month) in a dedicated ISA that the government will top up by 25%, up to a maximum of £3,000.

As a first time buyer, you can also open an account with a one-off lump sum of up to £1,000. This is in addition to the monthly maximum.

If you are buying a home with a partner or friend, you can combine your personal bonus, which could add up to £6,000 towards a deposit for your first home. Help to Buy ISAs are for individuals, not couples, so you can open one even if your partner you’re buying a home with isn’t a first-time buyer. And if you’re buying with another first-time buyer, you can both have a Help to Buy ISA.

Although you’re only allowed to get one Help to Buy account, you can transfer it between different providers to chase the best interest rates.

Therefore it’s important to monitor the interest rate you’re getting and, if it drops, find a new Help to Buy ISA provider paying a better rate.

The government has realized that it’s still difficult for individuals and couples to get their foot on the housing ladder, and this scheme will help people to save for a deposit for a home much quicker. However, it doesn’t solve the problem of affordability especially in inflated areas such as London and Brighton. There are still many people on social housing waiting lists, in temporary accommodation or even homeless all as a result of the undersupply of affordable housing.

However, at least something is being done to help those who can afford to buy a home, save a little faster.