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Don’t worry this is not a blog about Engelbert Humperdink!, I just wanted to share some thoughts with you on the subject of equity release, as we have found in recent months that the number of client’s enquiring about equity release plans has increased quite significantly.

Equity release plans are a way for homeowners over the age of 55 to release some money on the basis that the loan is secured against their property and is only repayable upon sale of the property or in the event of death or leaving the property to go into permanent long term care.

equity release pic

The main type of equity release plan available is known as a lifetime mortgage. With a lifetime mortgage, you borrow a proportion of your home’s value. Interest is charged on the amount at a fixed rate which is compounded or ‘rolled up’ over the period of the loan, but nothing usually has to be paid back until you die or sell your home.   Lifetime mortgages allow you to retain full ownership of your property and offer a flexible way of releasing money in later life without the worry of meeting regular monthly repayments.  Most lifetime mortgages offer a no negative equity guarantee which means that the amount repayable under the plan will never be more than the amount the property is sold for.

Lifetime mortgages are not right for everybody.  The fact that a compounded interest rate is applied means that it is likely that by the time the loan is repayable the costs of doing so are three or four times higher than the original loan amount.  This will of course mean that the value of your estate could be substantially reduced which might not be your plan! Entering into a lifetime mortgage could also have implications on your eligibility to receive certain welfare benefits and could also affect your tax position.

Whilst it is possible to shop around and compare the different equity release plans available yourself, we would strongly advise you to consult an independent financial advisor to gather information on the various products available and to find the right plan to suit your needs.  Make sure that you enquire about all the fees that are involved with any products offered to you as you do not want to be caught off guard!

Once you have found the equity release plan that suits your needs and you are happy to proceed with it, you will be asked to provide the contact details of a solicitor to act on your behalf.  We would be happy to help and to provide you with a clear fixed fee quote for guiding you through the legal process culminating in the release of funds to you.  For further information feel free to contact our Mr Luke Rees on 01623 663246.

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Mortgages    5 Comments

Here’s the final part of our ultimate first time buyers guide – here we’re dealing with what happens once you’ve found the property and agreed a deal with the seller

Found it! – When you’ve agreed a deal:-

On the face of it you can relax now – you’ve agreed a deal so that’s everything sorted then isn’t it? – – Surely you’ve just got to do a bit of paperwork and everything’s done?

Sorry, but the answer’s no. You may have agreed a deal in principal but it’s a fundamental point in English law that neither party is committed to this deal yet. So both you and the seller could pull out without any reason and there’s no comeback on either of you. Before you have a heart attack please rest assured that most deals will carry on to completion on the terms agreed initially, but I’m afraid you’ve got a while to go before you can relax.

At what stage do I need a solicitor?
NOW! Ideally when you were sorting out the cost of moving house you will have got figures for the conveyancing (Click here for free conveyancing quote). At that stage you would probably have an idea of which solicitor you feel you can work with. Your solicitor’s role in all this is to safeguard your interests when buying the property – they are there to make sure you don’t buy a load of trouble (but if you insist that you’re happy buying a load of trouble then the solicitor will make sure that you do this with your eyes open)

If you’re going to use us then we would recommend instructing us to act at an early stage – even before you’ve decided on the property to buy. As we do no move, no fee, you’ll not lose out by doing this – even if you don’t go ahead. At the point at which the sale is agreed with the seller, the Estate Agent will normally ask for your solicitors details anyway so it’s handy to be able to give them to them.

If you haven’t already instructed your solicitor to act then do it now. They’ll need a fair bit of information about the property – address, price, sellers details, sellers solicitor details, how they can get hold of the HIP on the property, and so on. This will all help them to start the conveyancing

Conveyancing – what’s that all about?
Conveyancing is the legal process of passing ownership of a property from the seller to the buyer. The seller has their own solicitor (it can actually be a solicitor, or a licensed conveyancer, or you can even do it yourself – if you’re mad as a box of frogs that is), and the buyer has theirs.

As an overview, the seller’s solicitor gathers together a load of information about the property – in order to show that the sellers own it, and that the deeds to the property are all in order with no legal problems. They put this information (together with some other documents called searches) in the Home Information Pack for the property (Click here for our Home Information Pack Beginners Guide).

When a buyer is found this information is supplied to the buyers solicitors. They then look through this information and also do some other checking (using things called searches), to make sure that the property is OK for the buyer to buy. If the buyer is having a mortgage then the buyers solicitor will normally act for them as well. Finally the two sets of solicitors sort out the handing over of the money for the property, and registering the buyers solicitors as the new owner of the property.

I’ve written a guide to conveyancing and included that below

Mortgage – getting that sorted out
Although you’ve previously (hopefully) had an indication of the sort of amount you can borrow, you now have to make a formal application for a mortgage offer. A mortgage offer is a formal document from the mortgage company saying that they will lend you X pounds for the purchase of Y property for Z price. If you’ve used an independent Financial Adviser (or IFA) to advise you on the mortgage to go for then they will normally sort out getting the application submitted. At this stage you’ll normally have to pay the mortgage valuation fee, and possibly an arrangement fee for the mortgage (sometimes the arrangement fee is paid later). You may want to have something more than a basic valuation carried out – have a look at the “Survey – do I need one?” section below in relation to this

When you make your application to the mortgage company they will firstly follow up with your employer to confirm that you do actually earn what you said you did. If you’re self-employed they will normally want to see accounts and may require a report from your accountant (your IFA should be able to advise you on what’s required). They will also request a valuer to carry out the valuation on the property. Once all that information has come in they will do some internal processing and eventually send out a mortgage offer to you and a copy of it to your solicitor.

Survey – do I need one?
I mentioned a mortgage valuation fee above – if you’re buying a house with a mortgage then the mortgage company will insist that at the very least you have a valuation prepared (at your expense). Although you are paying for this report, it is being prepared for the mortgage company, not you (although you can see it). As such, they are basically just reporting on what they consider to be the value of the property, and any obvious defects on the property.

For most properties the valuation will be fine for you as well. However if you’re worried about the state of the property itself then you might want to pay more and go for a more in depth survey. Here you’ve got two options – a House buyers report and inspection, and a full structural survey.

House Buyers Report and Inspection:-
This will cost quite a bit more than the valuation but will usually run to 10 sides or more, and will usually make it sound like the house is falling down. They can be useful in giving you a plan of what works you ought to carry out on the property over the coming months and years, including which items are more important/serious. Normally you should be able to direct the surveyor to particular things you might be concerned about to make sure he/she spends enough time looking at them. These reports can be useful but are usually scary to look at – if you’re aware of that before you look at it then it’s not so bad.

Full Structural Survey
If the House Buyers report and inspection makes the house sound like it’s falling down, the full structural survey can make it sound like it’s already happened! It’s basically like the house buyers report on steroids and will go into great detail. For most house purchases this would be overkill.

Guide to conveyancing
This part of the guide is taken from our website – if you want to view it on the website then click here for the conveyancing beginners guide. The version on the website has a jargon-buster built into it which explains in detail all the technical terms used (such as Title Deeds or Searches)

– Step 1 – We will firstly contact the seller’s solicitors and ask for details of how we can get hold of the Home Information Pack (or HIP). This contains the local authority and water searches. If the property is in a mining area we’ll have to request a mining search as well. Searches are simply a list of questions about the property that are sent to the local council, the water authority and the Coal Authority. When we get a copy of the searches from the HIP we’ll have to make sure that the searches are OK for us to use (they have a shelf life of around 6 months and we’ll need to make sure they haven’t ‘expired’. If they have run out then we’ll need to request fresh searches). The HIP will also contain a copy of the title deeds. We’ll also request the Sellers solicitor to let us have a contract, and questionnaires filled out by the seller.

– Step 2 – The only other thing we will need before we can proceed is a copy of your mortgage offer (if applicable). Once we have all of the relevant documents, we will ask you to sign the contract. If you are just buying then we will ask you to for a deposit as well (you will be told how much is needed), but if you are buying and selling then this will generally not be needed.

– Step 3 – We will go through all the above documents with you (either in the office or by preparing a plain english report for you to read at your leisure) and explain any problems there may be with the property. Once you are satisfied that there are no major problems, then you are ready to exchange contracts.

– Step 4 – Once the buyer and the seller are ready, a Completion Date (the “moving date”) is agreed. We then exchange contracts (this means swapping the contract signed by the seller for one signed by the buyers – together with a deposit provided by the buyers). Once contracts are exchanged the contract is binding and neither party can withdraw without incurring massive expense.

– Step 5 – On the Completion Date, we hand over to the seller’s solicitor the remainder of the purchase money and in return receive the transfer document and the title deeds.

– Step 6 – We must then within twenty-eight days arrange for the payment of stamp duty (if appropriate) and, within two months of the completion date, apply to register the buyer’s ownership at the Land Registry.

A word about chains
The above 6 steps set out the procedure for one transaction – one seller(s) selling one property to one buyer(s). What normally happens however is that the sellers are themselves buying on from someone who’s also buying on – and so on until you get someone who’s selling but not buying another property (e.g. they are emigrating, or have already bought their other property or any other reason). This group of transactions is known as a chain.

If there is a chain of transactions, steps 1 to 6 above need to happen for every single person within that chain. The complication comes from the fact that the exchange of contracts bit (which is the first really important step – it’s when everything becomes binding) has to take place for every party in the chain on the same day at the same time – logistically this can be a bit of a nightmare. The other problem is that every party in the chain will have to agree upon the completion (moving) date. Normally this all takes place on the same day – so that in a long chain of 5 or more parties they will all be moving house on the same day.

The hassle of being involved in a chain comes from the fact that each party in the chain will have their own set of priorities and attitudes – one may be in a hurry, one may now be bothered, and one may be unable to move before a certain date (but hasn’t told anyone that yet!). It’s not unusual to see clients to sign contracts and then phone up the chain to see how close we are to exchange, only to find that the person at the top or bottom of the chain has only just started their transaction. Everyone in the chain then has to wait until they’ve caught up before it can go ahead.

As buyers it’s worth your while trying to find out how long your chain is at the outset, and what stage each party in the chain is at. The Estate Agent should be able to do this at the start – it’s in their interest to know this information as well. It’s good to find this information out as early as possible so you don’t get any nasty surprises later on. There’s nothing wrong if you phone up each of the parties in the chain – if you can all stay in touch throughout the transaction it can help to speed up the process of agreeing dates for moving etc – but don’t agree anything without confirming it with your solicitors first.

At some stage near to completion it’s a good idea to meet the sellers and get them to show you how to work the boiler, thermostats, where the main water stopcock is, main gas tap, main electrical supply switch, and so on. It’s not the end of the world if you can’t do this but it’s nice to know it in advance

After it’s yours – moving in
At the end of the conveyancing process you’ll finally get the keys to your new house. This is a very exciting time (and can also be a bit scary!).

If you weren’t able to go through stuff with the sellers before completion then it’s a good idea to find out straight away where the main shut-off is for the water, gas, and electric – should something go wrong it’s no fun looking for this stuff in the dark with a water or gas leak!

You might want to suggest to the sellers that they redirect their post to their new house – they can do this by telling the local post office – it costs a small amount (can’t remember how much – £30 or so) and lasts for a year I think. It’s worth you mentioning it to them so you’re not continually getting their mail and having to forward it on yourself. This service is useful to them and useful to you.

On the day you move in it’s a good idea to take readings from all the meters and let the suppliers know. The sellers should have done this but it’s easy to forget. You then need to contact them and let them know that you’re taking over the supply – they’ll have their own procedure for switching this to you. You might also want to switch utility suppliers at this stage – it can often save you money. www.moneysavingexpert.co.uk has a good section on this.

You now need to let everyone know your new address. Don’t forget to let the council know as well – you’ll be liable for council tax from the date you move in.

Before unpacking your stuff – put the kettle on and have a nice cup of tea and a biscuit – you’ve earned it. You probably won’t have to do all this again for a few years – the average person moves every 7 years.

I hope this guide has been useful to you – if you’ve got any questions about it by all means pop them onto the form at the bottom of the page and I’ll answer them as soon as I can



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Mortgages    2 Comments

Moving house – the ultimate first time buyers guide

I’ve seen a few guides for first time buyers knocking about but I’m not sure that any of them really hit the mark – they tend to just cover the bit that the person writing it is involved in – so if written by a solicitor they just cover the legal bit, if by an estate agent then just the property selling bit. I thought I’d have a go at doing something a bit wider (and hopefully more useful) than that – and here it is.

This guide is meant to cover buying a house or flat in England, Wales or Northern Ireland – note that Scotland has a different legal system in relation to buying a property. Also during the guide I’ll often talk about buying a house, but exactly the same applies if you’re buying a flat.

There’s a lot here! Because of that I’ve decided to split the guide into 3 parts – I’ll be doing the second part next week and the final part the week after.

Part 1 deals with your research – before you start looking round houses
Part 2 deals with the process of looking round houses – what to look out for and so on
Part 3 covers what happens when you strike a deal – the process from then until you move into your new home

Research – before you actually start
You can’t just jump in there and start the process off – you need to do a bit of research first, starting with…

1. What can you afford?
Good question – and it’s probably the most important one to answer before you start. Unless you’ve got a shedload of cash hidden away then the likelihood is that you’ll need to get a mortgage. The bad news is that even with a mortgage you’ll probably still need to have a small shedload of cash available.

What exactly is a mortgage?
It’s a loan, normally over a longer period of time than most loans – often over 25 or even 30 years. The other difference to ‘normal’ loans is that a mortgage will be fixed onto the title deeds of your house (they actually just write details of the mortgage onto the title deeds). That means whenever the house is sold then the mortgage must be paid off. It also means that if you stopped paying the mortgage then they could repossess the house and sell it to clear off the loan.

Can I get a mortgage?
In deciding whether to give you a mortgage the bank or building society will basically look at 2 things
1. Can you afford to pay the mortgage?
2. The value of the house

Deciding whether you can pay the mortgage involves looking at your income – they normally use a multiplier on your salary here – so for example they may lend you up to 5 times your annual salary as a mortgage (this multiplier in turn is affected by your credit rating). If there are two of you then they usually have a slightly different formula (e.g. 4 times the joint salary). So if you’re earning £20K a year they’d lend you a maximum of £100K as a mortgage. Don’t take these figures as gospel – they are just examples.

The value of the house is important to the mortgage company because it affects the amount of ‘security’ in the house – they need to be sure that if it ever came down to selling the house to get their money back, that the house would be worth enough to cover the debt. They link this in to the percentage that they are lending.

So for example if they lent £50,000 on a house worth £100,000 then if they eventually had to repossess they wouldn’t have a problem – even if they took a price reduction for a quick sale and sold if to £90,000 then they would get all their money back.

If however they lent the full 100K, and later had to repossess then there is more of a risk of them being out of pocket – they will have legal costs in repossessing the property and also will want to get back the interest they should have been paid. So from the lender’s point of view a 100% mortgage is risky

It’s a bit difficult to advise properly here because I’m writing this in August 2009. The mortgage market has been on a massive roller coaster for the last year, and it’s hard to see how things are going to be going forward.

What’s changed then?
Well if you go back to mid 2008 and earlier – for the previous 30 years or so it was not too hard to get a 100% mortgage. Although 100% mortgages are more risky for the lender, prices have risen so consistently over the last 30 years that if there was a problem, then by the time the property was being repossessed it had gone up in value and there was plenty of money for the mortgage company to be paid from.

During the credit crunch/recession/bank collapse mortgage lenders came under a lot of pressure not to take any risks. Because of this and a whole host of reasons that I don’t fully understand (but about which everyone seems to have an opinion) it’s not as easy to get a mortgage now as it used to be. At the time of writing 100% mortgages have only just started to come back onto the market. Anything I write here any what deals you can and can’t get will be out of date, so the best thing is to get yourself a broker to let you know what you can actually borrow.

An excellent source of information on mortgages generally is www.moneysavingexpert.com – they have quite a big section on mortgages. When I remortgaged a while ago I followed a recommendation on their site for a broker that looks at the whole of the market – I used London & Country (www.lcplc.co.uk) – I phoned someone up and they gave me examples of what I could borrow. I get no incentive for recommending these sites – I just think they’re good.

Personally I’ve found a lot of the online stuff so confusing (i.e. with so many conditions, and exceptions) that it was easier to speak to a human being and let them tell you what deals they can get you.

One last point on this – Don’t believe the hype. Don’t listen to what you hear in the press – their role is not to tell you whether or not you can get a mortgage, their role is to sell newspapers – nothing more, nothing less. So don’t be put off by press speculation about mortgage availability – speak to someone who knows and find you what you can actually borrow.

So from all that, you should have an idea of what sort of money you can borrow on a mortgage and how much money you will have to chip in towards the purchase price yourself. It’s also a good idea to work out what other costs you’ll have to fork out when you buy a house (e.g. conveyancing, stamp duty etc – if you can’t wait then click here for an instant conveyancing quote) but I’ll come back to that later – this talk of mortgages is practically sending me to sleep – lets get onto the house itself!

2. Finding the property of your dreams
The good news over the last 10 years is that with the help of the internet it’s got a lot easier to search for properties – you can search within a given area, London borough, price range, whatever. Perhaps the best known of the property portals is www.rightmove.co.uk but there are a fair number of others out there too such as www.primelocation.com and www.home.co.uk

Using these sites helps you check out a whole area quite quickly. However it’s still worth taking a drive around areas you’re interested in – you sometimes get a feel (good or bad) for an area that doesn’t come across on the websites – there could be a scary-looking pub at the bottom of the street – or a wonderful park. It’s also worth driving or walking through at different times of the day (and night).

On the question of where you should buy – although it’s corny it’s still true – the 3 most important factors are Location, Location, and Location. Buying in a good location will make it easier when you come to sell. However if a property’s in an excellent location then of course you’ll pay more for it, and it’s sod’s law that the one you really like is just too expensive. You may therefore have to compromise to get a property that contains all you need and in an area you can afford.

There’s so much out there!
I know whenever I’ve started to look for a property, I’ve found that I get very excited by that massive number of properties available – once you start looking it seems there are loads and loads – you must be able to find something in this lot!

There’s nothing out there!
However when you start looking through you start to realise that this one’s too small, that one’s next to a pub. This one’s got a pokey kitchen, that one smelled funny, and so on. It’s not long before you do an about-face and decide that there’s nothing out there after all. What you’re doing here is narrowing things down – which is very important unless you just want to be viewing properties every day for the next year.

Stuff you might want to take into account to help narrow down the choice includes
– How many bedrooms
– Does it have central heating? If so – is it fairly recently installed?
– Does it have double glazing?
– What’s the kitchen like?
– What’s the bathroom like?
– How big is the garden?
– Is there a garage/off street parking?

Now it may be that because of your price range and where you want to buy some of these things are non-starters. But things like the number of bedrooms is pretty crucial and should help you to weed out a lot of properties quite quickly.

What sort of property should you look for?
Most first time buyers will be buying a smaller, cheaper property. If you’re in London this will almost certainly be a flat, (most of London is divided into flats) and if you’re in other parts of the country flats will still be something to consider because they are generally cheaper than houses. Most first time buyers will either be buying a new or newish flat, maisonette, or town house, or an older mid-terrace property or flat.

New properties
A number of builders have gone into the market of selling starter homes – building developments of flats, town-houses and maisonettes. These can often look very attractive as you can normally move in with no work to do.

Pro’s and cons of a newer property:-
– extras are often thrown into the price such as dishwasher, washing machines. Whilst these are useful they can sometimes be used as justification for a slightly higher price. The only reason I mention this is that if you have to sell the property again quite quickly then it might not fetch what you thought – when you’re coming to sell yourself then things like the washing machines etc will generally be ignored
– Don’t forget you’re buying from someone whose job it is to sell you the property (as opposed to buying from a private seller – an ‘amateur’. That’s not necessarily a problem – just bear it in mind)
– You will normally get a 10 year guarantee on the property from the date they are built
– The rooms in newer properties can be smaller than on older properties
– Insulation in newer properties can be a lot better than on older properties
– You usually have no work to do – you can just move in
– The property has no ‘character’
– People generally love them or hate them

Older properties
As a starter home you’re probably usually looking at mid terraced properties – from around 100 years ago. Usually solidly built but at that time builders paid little attention paid to damp proofing so this has often been a problem over the years. However an injection damp proof course usually sorts sorts this out and most mid terraces should have one.

Pros and cons of an older property:-
– You’re more likely to have to do stuff to an older property (again though the previous owner may have sorted all this out)
– They can have character
– Insulation etc will not normally be very good (but can be remedied quite cheaply)
– Double glazing – they won’t necessarily have this
– Again people love them or hate them

Finally in terms of the value of houses on the same street, a good piece of advice is to try and buy the worst house on the street – it will be pulled up in value by the better houses; conversely a spanking house on a shabby street will never achieve it’s potential value.

What about a fixer-upper?
Usually when you’re looking round you’ll find something that would normally be out of your price range because it ‘requires modernisation’ – a fixer-upper. Now you don’t need me to tell you whether it’s within your abilities to do DIY work on a house – personally it’s something I really enjoy, but if you’re taking on something like this:-
– Go in with your eyes open – get estimates for all the work required
– This WILL cause hassle with your mortgage – especially if you’re having a high percentage mortgage – they will often make a retention (hold back part of the mortgage money) until key works have been done – you’ll then have to come to an arrangement with the seller on getting some of the work done between exchange of contracts and completion OR borrow extra money to tide you over until the work has been done
– If you’re planning on doing the work yourself you need to make sure you can comply with any statutory requirements (planning regulations, building regulations etc), but also make sure you’ll have the time – fixing up a property yourself is rewarding but knackering. It’s no use having a lovely house and a broken marriage!
– If you have the patience, skill and time, it can mean that you get into a nicer property than you thought you could

3. Is it the right time to buy?
It’s stick my neck out time! I would say that YES! this is about as good a time as you’re going to get to buy a property. Prices are on the rise once again. Interest rates are at an all time low. Although mortgage deals are nowhere near as good as they used to be when compared to the bank of England base rate, in terms of the actual rate you’d be paying they’re still pretty good.

As an example a couple of years ago the bank of England base rate was 5.75% At that time you could get mortgages with special introductory periods of below the base rate – Cheltenham & Gloucester were doing a 2-year tracker deal at 4.74%

Currently the bank of England base rate is 0.5% One of the best trackers you can get (today) is from RBS/NatWest – at 2.89% which is 2.39% over base.

Now if you focus on comparison with the base rate it looks awful – you used to get a deal below base and now the best you can get is way over base. However what actually matters to you is the amount you’re paying out. 2 years ago you’d have been paying out 4.74% – now you’d be paying out 2.89% – that’s about £150 a month less!

So even if the banks aren’t offering great deals when compared to the base rate, the actual rates you can get now are actually pretty damn good!

In terms of house prices we’ve seen house price increases in all the statistics for the last few months. As conveyancers we’ve noticed this in terms of the volumes of people moving house. The low point for us was the 6 months leading up to January 2009 – from February the number of people moving has gradually risen.

It’s impossible to say how quickly prices will rise from here on in, but I do believe they are only going one way now for the foreseeable future and that is upwards.

4. Cost of buying a house (legal fees stamp duty etc)
Part of working out what property you can afford is working out the total costs of buying. Here are some of the things you should take into account:-
– Mortgage administration fee – many mortgage companies charge this – it’s basically a fee for saying yes. They charge it because they can. It can be anywhere from a few hundred pounds to a few thousand but should be made clear to you at the outset of arranging your mortgage
– Mortgage valuation fee – This is the mortgage company getting a valuation on the property – you have to pay for this – it’s normally a few hundred pounds. See note below on Surveys
– Conveyancing fees – this is where we come in – Click here for an instant conveyancing quote. This quote will also include things we need to pay to other people on your behalf (such as Stamp Duty, Land Registry Fees, and additional searches)
– Moving costs – are you going to use a removal company, hire a van, or borrow your dad’s car?

5. HIPs and Energy Performance Certificates
Every house being sold now should have a Home Information Pack (usually called a HIP) prepared on it and available for you to look at. It’s worth checking this out now as any HIP prepared after the 6th April 2009 will include a questionnaire filled out by the sellers – useful to read through this before you look round the house as it can give you a bit of background information. The HIP will also include an energy performance certificate (known as an EPC) – this basically produces an energy rating for the house.

At the time I’m writing this (August 2009) this information is largely irrelevant – other than that if the house is inefficient it will cost more to heat than one that is more efficient. However, in view of the importance of all green issues politically, I think it can only be a matter of time before we start to see tax implications for inefficient houses – so for example if your house is very inefficient you may pay more in local government tax. It’s not relevant yet, but it may become a factor in the future. Having said that, even if your house is inefficient you will be able to take steps to help it (such as more insulation, energy-efficient light bulbs and so on).

If you want a quote for providing you with a HIP, then click here for a free HIP quote.

That’s it for now. Next time we’ll deal with the process of looking round houses, and making an offer to buy one.



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Mortgages    2 Comments

Moving house is one of those things that causes incredible upheaval in your life. If you’re thinking of moving it’s a good idea to get it clear in your mind – before you start – what you’re going to have to do, and in what order. This can help to reduce some of the stress later on.

We sometimes get calls from clients who’ve seen a house they’ve fallen in love with and want to go ahead and buy it when they haven’t sold their own house and they can’t afford to do this. These people sometimes talk about taking on bridging loans (to allow them to own two properties at once) – this is very risky, very stressful, and can all too easily end in tears.

So this guide is designed to give you an overview of what you should do and in what order. These ‘Sladey top tips’ are aimed at people who are selling and buying – for first time buyers I’ll do a separate guide.


Here’s an overview of the order in which ideally you should be doing things

Step 1 – What can you afford?

Step 2 – Do you want to Move? (and some cautious looking around)

Step 3 – Sell your house

Step 4 – Look for one to buy

Step 1 – What can you afford?
So you’re thinking of moving house – what next? Well the first thing is to find out what you can afford – there’s no point in looking at Madonna’s old place when you won’t even be able to afford the heating bills.

Generally, what you can afford, will be made up of the following:-

1. How much money you’ve got in your existing house (so if you sell it and pay off the mortgage, how much money you’ve got left over) – this is known as the equity in your house
2. How much money you’ve got saved up – if you want to use those savings on the new house
3. How much money you are going to borrow on a mortgage.

There are two main unknowns here – firstly how much money you’ve got in your existing house (because you don’t know how much your house is worth), and secondly how much money you can borrow on the mortgage (because you don’t know how much a bank or building society will lend to you).

1. How much money you’ve got in your existing house
The best way to find this out is to get a valuation of your house carried out by an estate agent. They will still generally give you a free market appraisal type valuation – i.e. what they think you’ll be able to get if you sell your house now. Obviously this is only their opinion but they should have a better idea than most of how much your house will sell.

If you don’t feel like getting an Estate Agent into your house then you can also do your homework yourself online – there are a number of sites where you can tell how much properties sold for. Two I’ve used are http://www.nethouseprices.com/ and http://www.houseprices.co.uk/ – they both get their data directly from the Land Registry (the amount that people paid for their property is now public information that anyone can look at). Don’t forget if you’re looking at these sites it’s just raw information – you have to look at the actual properties sold as well and decide if they are worth more or less than your home. You also have to consider when they were sold – property prices were on the rise for so many years, but fell back during 2008. In our experience they’ve now bottomed out, so it’s a very good time to buy, as chances are they’ll never be this cheap again.

Knowing how much your house is worth is only part of the equation – most people have a mortgage on their property and you need to take into account how much it will cost to pay this off. You should try and get hold of your most recent annual statement from your mortgage company (they send this to you each year and it shows how much you owe on the mortgage). You also need to bear in mind if you’re still in any ‘special rate’ periods. This normally affects you if you’ve had a mortgage in the past on a special rate – e.g. 1% over base or a fixed rate. In order to give you this special deal the mortgage company usually stick in a penalty clause – so that if you pay the mortgage off within a certain period of time you’ll have to pay a penalty. The details of how much you have to pay will be on the original loan documents that you signed when you took the mortgage out (if you can’t find these then you might be able to get a copy from the solicitor who acted when you mortgaged, or by contacting the mortgage company themselves).

These penalty payments can be a nasty surprise if you’ve forgotten about them – they usually run into the thousands. If you’re near the end of the penalty period it’s usually worth waiting until it’s run out before you pay the mortgage off – in such cases paying your mortgage off just one day early can cost you thousands of pounds.

So from getting a value on your house and working out how much to pay off your mortgage you’ll be able to work out the equity you’ve got in your house (i.e. how much money you’ve got tied up in it)

2. Money you’ve got saved up
You presumably know this already – if you don’t then maybe you’ve got a bit too much!

3. Money you can borrow on a mortgage
Again this is something you’re not going to know off the top of your head. The mortgage market has been in massive turmoil since the start of the banking crisis and it’s a completely different world to just a couple of years ago. However, contrary to what the papers might say, the banks and building societies ARE lending mortgages – they’ve got to as it’s a major source of income for them. The important thing here is not to listen to the newspapers or the people down the pub – check out the reality for yourself.

For this I’d recommend you speak to an Independent Financial Adviser who checks the whole of the market (i.e. not tied to any one lender) – they should be able to tell you how much you can borrow, and on what terms. With the interest rates at an all time low at the moment money has never been so cheap to borrow. People have moaned that the banks are no longer being so competitive over the rates they offer compared to the bank of England base rate, but the actual rate you’ll pay at the moment is generally the cheapest it’s ever been. For which IFA to choose (and more financial information) I’d recommend checking out Martin Lewis website www.moneysavingexpert.com – we’ve no affiliation to him at all but there’s good advice on the site.

After speaking to an IFA you should have a good idea of how much money you’d be able to borrow.

The amount you can borrow is normally linked to how much you’re earning, and how big a percentage of the purchase price you want to borrow – usually the better deals are saved for people who are borrowing now more than 75% of the purchase price. You can get mortgages up to 95% now – they might not be on such a good deal, but don’t forget this will probably still be a lot cheaper than it was 2 years ago – just because the Bank of England base rate is so low.

After you’ve done all this homework you should have a clear idea of what you can afford.

Step 2 – Do you really want to move house?
This might seem a daft question to ask but it’s important to give it some consideration at this stage. We have had clients who get up to the final stages and pull out because actually they didn’t really want to move. This causes headaches for everyone involved.

This used to be made worse because Estate Agents often used to run a ‘no sale no fee’ policy, partly with the aim of encouraging people to put their properties on the market which then encourages them to move when people start making offers! This really encouraged speculative sellers who are sort of swept up into selling their properties on the basis of “what do they have to lose?” However these are often the sort of people who would pull out at the last minute when they realise it’s not actually what they want.

This has all changed with the introduction of HIPs – Home Information Packs. It’s now the law that before you put your house on the market you have to have a HIP in place. HIPs generally cost between £300 and £500, and do not operate on a ‘no sale, no fee’ basis – you’re going to have to pay for the HIP even if you take your property off the market.

So if you’re selling you’ll have to put your hand in your pocket and pay for the HIP (there may be an option to pay over a period of time but sooner or later you’ll have to pay for it). The upside is that when you’re buying you’ll be buying off people who are serious about it (so less likely to pull out at later in the transaction), and also that they will have done a couple of the searches that you need to have done (the Local Authority and Water searches) – so you won’t have to pay for them again.

To help you decide if you want to move it might be an idea to look round and see what’s out there. This is a bit of a double-edged sword though – it’s sod’s law that if you look now you find the house of your dreams, and you can’t go ahead and buy it. Just looking around though might make you appreciate that there are a number of houses out there that would suit you – it can help you make that decision to move.

Step 3 – Sell Your House
So if you are serious about selling your house then the next thing to do would be to put it on the market. For this I would recommend using an Estate Agent. Estate Agents may not have a great public image, but in the UK I think they do provide a valuable service. I moved house in 2004, and the advice of my agent was really useful. I already knew what the house was worth but my agent advised I advertise it at a slightly lower price, stating that I wanted ‘offers over’ this amount. This created a bidding war which meant I got quite a bit more for the house than I was expecting. I would never have thought of this myself. This isn’t appropriate in some markets (the market’s nothing like 2004 at the moment so it’s probably not appropriate), but they should be able to give you good advice which could save you money.

The other thing is that British people tend not to be comfortable haggling – and this is another area where the Estate Agent comes in handy – as a go-between. If you’re buying though make sure you remember the Estate Agent is acting for the seller – not you. If you’re selling make sure your Agent is looking after you.

How to choose an Estate Agent? I would still say personal recommendation counts for a lot – try and speak to people who are selling and ask what sort of service they are getting. Also see who’s got a lot of boards up in your area – this could be an indication they’ve got a good name in the area.

Once you have the house on the market you’ll hopefully get viewings and offers on it. During this period it is a good idea to cautiously start looking to see where you want to move to. Again you can’t commit to any new house at this stage because you haven’t sold your own property. This is not unusual – most other people looking round will be in the same position. You may even find the house you want, and make an offer on it. Sometimes the seller will accept your offer – sometimes they’ll tell you to come back when you’ve sold your own. This is a fair thing to do because until you’ve sold your own house you really cannot go ahead with the new one (unless you get a ‘bridging loan’ which I would avoid like the plague).

I would recommend you instruct your solicitor on the sale at this point – before you’ve got a buyer. Your solicitor can then get a copy of the deeds ready, and get you to fill out property information forms so that when you do find a buyer you can move ahead quickly.

Eventually you’ll agree to sell your house. Again this should be to someone who is either a first time buyer or has a completed chain beneath them (i.e. everyone in the chain has definitely sold their property) – so none of them are still waiting to sell. A chain of transactions can only move at the pace of the slowest link in the chain – so if someone hasn’t sold yet then none of you can go ahead.

Step 4 – Look for a property to buy
So now you’ve sold your house – this is where things get exciting/stressful! If you’ve already found somewhere to buy you can now go to them and make a firm offer to them. You’re now in a stronger position, and may feel you want to negotiate more on the price (for example if you’ve dropped the price on your own to sell it, then you might want to recover this by reducing your offer on the one you’re buying).

If you haven’t found one yet then you need to get looking NOW! If you take too long to find one to buy then potentially your own buyer could pull out and go elsewhere (if it came down to this you could always move out into temporary accommodation and put your furniture into storage rather than lose the sale. This causes a lot of upheaval but at very slow times it can be a good idea).

The plus side is that now you’ve sold you are VERY attractive to people selling their house – this can allow you to negotiate harder on the price.

Once you’ve struck a deal then you should instruct your solicitor on the purchase as well. We’re then into conveyancing (I’ve put some beginners guides to conveyancing on the main website)

What’s the point of all this?
The hard thing about all this is tying everything together. You can find the house of your dreams, but not have sold your own; on the other hand you may sell yours really quickly but not be able to find somewhere else to buy. While you’re doing all this you’ll be meeting weird and wonderful people in all sorts of different situations who are moving for all sorts of different reasons.

If you do things in the order I’ve stated then I’m afraid it will probably still be a stressful experience, but it might be a bit less stressful than the alternatives. For example you find the house of your dreams and lose it because you haven’t even started to sell your own, or you can’t afford it because you haven’t done your sums, or you get way down the line and finally realise that what you really want is to stay where you are and buy a boat.

Reaction from others:-
Funnily enough when we last moved the thing that took me by surprise was the reaction of others. Telling people that you’re moving seemed to make people question whether they themselves should be moving, which in turn provoked some surprising reactions. A couple of people became quite defensive about the value we’d placed on our house saying it must be worth a lot more than that (translation= “if your house is only worth that much maybe mine isn’t worth as much as I thought”). Moving house is one of the great upheavals in life, and I can only assume that being presented with someone who’s going through it makes people question whether they should be thinking about it as well. Anyway, what do I know?

Hope this article is useful – please feel free to comment or ask questions below



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Mortgages    4 Comments
On last week’s property show on the BBC they mention that auctions can be a good place to buy property. I touched on it in last week’s blog (which you can read here) – but as it’s such a big subject I thought I’d spin it off into a mini-guide all on it’s own.
There’s a lot of plus points about buying from auction – you can can get a property at a fantastic price, and things will happen at quite a speed – if you win the auction then you’ll walk away knowing that the house is going to be yours in 28 days time. This is great when you think that most conveyancing transactions take a few months to go through from start to finish.
So where’s the catch?
There’s not a catch as such but there are a few really important things you need to be aware of before buying at auction.

Most of the important stuff is related to the proceudre – how things happen at auctions. But before I start going through that you need to bear in mind that although you can pick up a bargain, you can also pay over the odds for something. It really depends on who else is at the auction and how much they are prepared to pay. No-one there is going to stop you spending too much unless you have the self-control to stop yourself. the ideal advice is to set a limit that you’ll bid up to and don’t go any higher. Trust me, when you’re in the thick of bidding on something it gets pretty exciting (although perhaps I should get out more) – if you’ve bid on an ebay auction before then you’ll know that it can get quite exciting near the end, but here you’ve got all your bidding rivals in the room with you and an auctioneer who’s trained to try and egg you on into spending some more cash – “Come on now sir – don’t lose it for a few hundred pounds”
It’s also worth blowing the myth that you’ll end up buying a property by just nodding your head or scratching your nose at the wrong moment. Auctioneers don’t want this to happen and if they are in any doubt as to whether you’re bidding they will generally ask you. If you are bidding though, make your own bids clear. Normally you won’t have to shout out the price you’re bidding – the auctioneer will just call out the figure and if you raise your hand and confirm it then you’ve bid at that price – if you’ve ever watch ‘cash in the attic’ then you’ll already know the procedure.
OK so, given that you’re thinking of buying at an auction what do you need to know?
1. Overview
When you’re at the auction and the hammer drops – you’re committed – you’re legally bound to buy that property at the amount you’ve bid. You’re also bound to pay over 10% of the sale price there and then (i.e. at the auction) as a deposit, and the rest of it will become payable 28 days later
2. Essential Steps:-
Because of this you need to:-

a. Check out the property first (i.e. before the auction) – the sellers are meant to put the title deeds, searches and any other relevant documents with the estate agents at least 7 days before the auction – so get them checked out. Most solicitors will check them out and do you a report on the deeds for a fixed price (we certainly do) – you can then go along to the auction with your eyes open. It’s important to do this stage because otherwise you could (for example) buy a house with no access to it, or where there is a boundary dispute, or other things that could cost you a fortune in the long run. Whenever you’re buying property in the UK it’s ‘buyer beware’ – if you buy a pup then it’s basically your problem.
You have to consider why the property is coming to auction – there are plenty of legitimate reason why people sell at auction – investors wanting to get rid of their stock, someone’s died and the house is part of the estate – anything where people just want a quick sale. However it could also be that there is a problem with the deeds and previous buyers have pulled out because of it – they might stick it to the auction on the basis that someone won’t notice the problem.
So make sure you get the deeds and documents checked out by a professional before the auction (the documents will usually be available at the auction just before bidding starts but that’s cutting it a bit fine to be checking them there. Nothing wrong with cutting it fine, but if it was me I’d like to know in advance that all is OK) .
b. The Deposit:-
VERY important. You’ve got to be able to produce 10% of the purchase price on the day as a deposit – a cheque is normally acceptable but check with the auction house first to make sure – they might insist on a bankers draft.
c. The rest of the money:-
You’ve also got to pay the rest of the agreed price 28 days after the date of the auction. If you don’t then the seller can keep your 10% deposit and sell the house to someone else!!!!! To get this in place you’ve either got to have the cash available, or get a mortgage offer in place. A mortgage offer will cost money in terms of arrangement fees, and valuation fees (the bank will need to send someone out to make sure the house is worth lending on etc – you’ll need to allow time for this to be set up and done before the auction – the last thing you want is for you to commit at the auction and find the bank won’t lend you the money). Also you can do all this and then lose out on the property – in which case the fees you paid to the bank is money down the drain. Another option on this is if you can arrange the money by a second mortgage on another property – people who own buy-to-let’s will often do this (i.e. they borrow more on their other properties and use that money to pay for another property). However if it’s your main home you’re buying (or you don’t happen to have loads of properties lying about!) this is unlikely to be an option.
3. The mechanics of it all: – a picture in words….
When you go to the auction there will usually be a desk where the solicitors are sat. These are solicitors representing the people who are selling. They will have the deeds and document with them, so you can go and ask them any last minute questions. Don’t forget however they are acting for the seller not for you.
The auctioneer will start the auction. You sit down and wait nervously for your property to come up. You bid. You win (hurray!). Normally you would wait until the end of the auction before completing the paperwork. To do this you would go to the Solicitor who’s got the deeds. You’ll sign one copy of the contract and he will give you another copy of the contract signed by the seller, along with the other documents (searches guarantees etc) relating to the property. You’ll pay the deposit (sometimes to the solicitor, sometimes this is paid to the auctioneer). You’ll let the solicitor know who your solicitor is. You walk out of the auction hall incredibly excited, incredibly nervous or both.
You take your documents to your solicitor, who will then move the rest of the transaction forward – basically sorting out payment of the rest of the money. At this stage although you might want your solicitor to ask some additional questions about the property, the answers won’t affect anything – you’re already committed to buying it. It makes sense to use the same solicitor you used to check out the deeds at the start (you did do that didn’t you?), as they may well do you a deal on the fees – taking into account what you’ve already paid them.
If you’ve got any questions about auctions ask them by commenting on this thread – I’ll answer as soon as I can.

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