Postitive signs in the finance world are likely to continue in 2013

2012 has been another interesting year for the lending market, with many different reports. Some good and some poor.

There have been government initiatives that have made a measurable difference. George Osborne announced the Funding for Lending Scheme in July 2012 and this has already offered some stimulus to the market. We’ve seen a real price war between lenders, particularly for residential mortgages, who have benefitted from the scheme and there is also good availability of loans at higher loan to value (LTV) ratios. We’ve also seen some of the high street lenders approach businesses to make them aware that they are open to lend funds for the right proposal.

Again in the residential market, 90% LTV deals have reduced in price in the last quarter of the year, making the repayments more affordable to first time buyers who qualify for a mortgage and this should be taken as a positive step.

Kensington Mortgage Corporation has already returned to the market with an appetite to lend and some quirky criteria points which should make lending easier for those otherwise unmortgagble. Their range of products are available to residential borrowers and property investors.

Precise mortgages has expanded its product range and has introduced mortgage deals which are competitive enough to take on many of the high street banks.

More lenders have joined the Buy to Let mortgage arena and the competition between lenders has created criteria shifts which will include more potential borrowers and an albeit small price war. Lenders such as Precise, Kensington and Aldermore (to name just 3) will lend to established or experienced landlords without needing a minimum income threshold to be met.

Just before Christmas, figures released reported “average house prices down 0.3% in 2012, however, when the whole report is taken into consideration it is another positive sign. The report by Hometrack reports that 20% of the country reported an increase, up from 12% in 2011 – so while some regions are reporting tougher times in the housing market, the areas who are ‘on the up’ is increasing. Let’s hope that ripple continues through 2013.

The Secured Loan sector has reported considerable growth in 2012 and predicts a similar trajectory for 2013. New lenders also entered this market for the first time. This shows that lending is out there to access. Industry experts predict reducing rates for secured loans throughout 2013, making the cost of borrowing cheaper for home-owners. There is also a report of potentially six new lenders coming to the market in the near future.

As for politics, there is no doubt that in this continuing tough economic time, any chancellor would be under the microscope. Predictions for the future remain varied, but recent reports that we may have entered a ‘triple dip’ recession certainly cause concern across the markets.

Despite this, Prime Minister David Cameron has stated that chancellor George Osborne will still be chancellor at the next election after growing calls for him to be moved. The fact is, the global economy is under strain and no matter what any chancellor could do, this is not going to change. But in the main, there is some good progress in a very tough global economy.

The concept that borrowing more would bring the country out of recession does not make basic commercial sense, although it may get votes. And let’s face it, no matter what you view of politics and who would be right as chancellor, surely there cannot be a logical brain in the country thinks Mr. Balls could stand a remote chance of doing the job.

Maybe I am the eternal optimist, but there is a lot to be positive about as we approach 2013. Certainly for Harvey Bowes Mortgages which has enjoyed another year of continued and substantial growth.

It is certain that there are opportunities in the market – it is up to us to find them. Evidence from a wide range of reports and from our practical ‘hands on’ experience as mortgage and finance brokers is a clear demonstration that finance is out there to be accessed – and that applies for both SME’s and residential lending.

Easy for us to say as brokers, but it is even more important than ever to use a broker for advice and implementation of a loan. Ultimately, as brokers, we work for you, our client and not the lender. While we have a duty of diligence to employ, our job is to put any finance or mortgage application forward in the best possible light. And using this expertise could make the difference between securing finance and being flatly declined.

To discuss your business or personal funding requirements, please contact on the of the team at Harvey Bowes today on 029 2115 6918.

First Time Buyers – can you really get a mortgage?

first time buyer mortgage broker cardiffThis article will go through the choices available, but also the key advantages and disadvantages, as well as the ways in which a first time buyer can help become more elligable for a mortgage. We have to make some assumptions when writing an article, so the best advice is to contact us, our details are at the bottom of this blog. The following subjects are covered:

  • What can you do to improve your credit score
  • What sort of deposit is needed and where it can come from
  • How much do you need to earn
  • Details about Shared Ownership and Shared Equity
  • Details about the New Buy Scheme

Not each element of this article is going to be of interest to everyone. If you are at the start of looking for a property and mortgage as a first time buyer, it may be useful to read all of the subjects below, otherwise please the subjects you are interested in – and please let us know if you find this article useful.

What can you do to improve your credit score?

Many lenders use credit scoring to assess an application for a mortgage and they put reliance on the petterns of a persons credit habits to determin how a person might manage thier mortgage. So, what can a first time buyer do to improve thier credit score and effectively become more elligable for a first time mortgage? It depends on where a person is with their current credit status which will also mean that there are different ways to improve the credit score.

Take for example a person who does not have any credit. It means that you cannot prove your credit-worthiness and therefore get a suitable credit score. But the answer is not to rush out and borrow money, there are better ways to improve a credit score. Here are a couple of options to consider:

  • Mobile Phones: many of the mobile phone providers will enter information on to your credit profile if you have a mobile phone on contract. It does not have to be an expensive contract for a high user. A simple minimum contract paid on time each month will certainly help your credit score. It is also a good solution because any loans a person has will decrease the amount of money that can be borrowed based on the salary they earn. This is because mortgage lenders assess ‘afforability’ too – which is the way they assess if you can afford to repay the mortgage you apply for. If you have loans or credit cards, those monthly payments are deducted from your net monthly income and leave less income available to pay for a mortgage. A mobile phone contract, while still considered for affordability is a relatively low cost monthly committment that provides the lender with an insight into the fact that you pay bills ontime, provided you do of course!
  • Interest Free Agreements: There are often promotions on furniture, even cars, where the seller offers Interest Free finance. If you are buying the item anyway, why not consider applying for the interest free finance to buy the item? Even though there is no interest to pay, certainly for the interest free period, it is still a credit agreement and as such will show on your credit profile.

There are also some do’s and don’ts. Don’t take on any debt you cannot afford. If you have a credit card or store card, don’t keep it at it’s maxium level. Don’t get into debt for debts sake and don’t be late making monthly payments. Do make sure you understand the debt or contracts you take on and always work out the cost of the borrowing. Let me give you an example:

You apply for a credit card and get a £500 limit. The first thing you do is buy a new gadget for the full amount. If you do not pay that off the credit card straight away you are now paying interest. The cost of that gadget is no longer £500. Assume the minimum payment from the credit card company is either 3% of the balance or a minimum of £5, whichever is greater, and the interest rate is 18.9% – if you just pay minimum payments you’ll probably still be paying for that gadget long after it has gone out of fashion and it will have cost a staggering £939.04

If you have defaults or county court judgements, it is very difficult in this market to get a mortgage. Lenders do not have a large apetite for risk. It will be very difficult to get a mortgage in the current climate, but not impossible. If you are in this position, it is best to talk to a qualified mortgage advisor individually.

mortgage broker cardiffWhat sort of deposit is needed?

It will largely depend on what you are looking to buy and how much you can borrow against your income. Suffice to say that for a striaight forward purchase, you are likely to need at least 5% or better still 10% deposit. However, the more deposit, the lower the interest rate of the mortgage available. This works in various stages, anywhere from a 95% loan to a 60% loan. The greater the deposit, the lower rate and therefore less interest you will pay on the borrowing. And since many lenders are happy for a parent to gift you some of all of the dpeosit, any help you get you will help secure a good deal.

Provided it does fit with affordability, there are high street lenders that are happy for the deposit to be a loan, provided it is not also to be secured on the property. So you can take a bank loan for the funds needed to provide the deposit for the property and have a mortgage for the majority of the borrowing. Many of the First Time Buyers that we see enter the market, have some sort of contribution from there parents towards the deposit. Lenders are normally happy with this provided it is a gift and the parent has no formal ‘interest’ in the property.

How much do you need to earn?

Lenders base the amount a person can borrow on affordability. They will want to know what a persons outgoings are and work out what is left to service a persons monthly mortgage payment. As a ‘broad-brush’ idea, some lenders will lend up to 5 times the total joint salary of applicants. To achieve this, one needs a good credit score and have little or no other credit using up income. Lenders do sometimes have a minimum income you must earn in order to apply for a mortgage, it is usually ok for one applicant to be below the minimum provided another applicant exceeds it. This minimum income varys, for some it is £12,000 and other lenders it is £25,000

Shared ownership, and other first buyer schemes

Homebuy Direct:

Introduced in Autumn 2008, this scheme covers newly built homes on specific housing developments across England.  The scheme works by allowing the home buyer a mortgage of up to 70% of the purchase price of the property and then an equity loan of 15% – 30%. The equity loan is partly funded by the government and the property developer.

Typically, no charges are paid on the equity loan in the first 5 years, although the home owner can make part or full repayment after the first 12 months. After 5 years charges apply.

Social Homebuy

This scheme offers housing association or council tenants the opportunity to purchase a share of their home. The home buyer purchases a share (minimum of 25%) and then pays a monthly rental for the amount owned by the association or council. A discount from the market value of the property may be offered to the home buyer, typically £9,000 to £16,000 depending on which area of the country the property is in. If the property is sold within 5 years of purchase, all or a proportion of the discount is repayable. This scheme is not available to all regions or housing associations.

Shared Ownership / New Build Homebuy 

This scheme allows the home-buyer to purchase a share of the new build property, similar to many previous shared ownership schemes. The remaining share is owned by a housing provider, such as a housing association. Typically, the minimum share that can be purchased is 25% and the maximum is 75%. The home buyer would take a mortgage for the share they buy and pay a rental for the amount owned by the housing association. In many cases the home buyer can buy further shares in the property over the coming years which can be done in one or a number of stages. This is called ’stair-casing’.

New Buy Scheme 

The Newbuy Scheme is an excellent government initiative making new homes available through many of the main new home developers with only a 5% deposit. This scheme has proven a success, being well received by potential purchasers and supported by some of the largest new home developers in the country. One reason why the scheme appelas to many is that the buyer gets 100% ownership of the property. Schemes such as Shared Ownership give a first time buyer the opportunity to get on the housing ladder, however, they do not own all of the property and rent a proportion of it. However, with the Newbuy scheme there is no element of rental, just a simple and straight forward full ownership of the property.

To find out more about First Time Buyer mortgage options, please contact the team at Harvey Bowes on 029 2115 6918

Think carefully before securing other debts against your home. Your home may be
repossessed if you do not keep up repayments on your mortgage

Remortgage BTL within 6 months

How do you remortgage your Buy to Let property within 6 months? Take a look at our brief video for an insight.

[youtube http://www.youtube.com/watch?v=zeFUqSiAQRw?rel=0&w=420&h=315]

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The Council of Mortgage Lenders (CML) have produced guidelines on remortgaging a property within six months of purchase; and rightfully so. It must be remembered however, that these are only guidelines, and while some lenders approach this with little flexibility, there are of course lenders who have a practical and realistic approach. The CML policy on remortgages within 6 months is only a guideline and not a rule. As such, some off-the-shelf BTL mortgage lenders will allow a remortgage within 6 months provided there is a reasonable explanation as to why the applicant would look to do so. You can also raise capital on the remortgage if a higher value on the property is agreed by the lenders surveyor. This is a great solution for property investors who are looking to expand their portfolio and either buy at below market value (BMV), carry out improvements to enhance the property value, or use a combination of both skills.

In the video above, we speak of the ability to remortgage your investment property inside of 6 months. There are no tricks to this, it is simply being aware of acceptable criteria for certain lenders. The example we use is of Mortgage Trust (who are not the only lender who will accept a remortgage within 6 months of purchase). Mortgage Trust is a lending arm of Paragon. They will allow a remortgage of a property within 6 months of purchase provided there is a valid reason for doing so. This is an ideal solution for someone looking to recycle the deposit for the property so that it can be used for another purchase, for example. However, the figures have to work. If you buy the property sufficiently below market value and/or improve the property by way of renovation and therefore enhance the value – Mortgage Trust will value the property for mortgage purposes at its current market value. The valuer they send will decide. It is therefore prudent to meet the valuer so that you are able to explain any works carried out. If the valuer agrees an uplifted value from your purchase, you can (currently) borrow up to 75% LTV on the uplifted value with the lender we using for this example, Mortgage Trust. This may allow you to release equity from the property based on the increased house value.

Redeeming your purchase mortgage? The next question we are asked with this strategy is about redeeming the mortgage used to purchase the property. There are usually high early repayment charges and in the current market they are for a minimum of 12 months from purchase. There are some simple solutions:

  1. Initially take a purchase mortgage which is free of any early repayment charges. These are (currently) available, but usually at a lower loan to value such as 60%. If you have the funds to do this, given that you are able to remortgage at 75% of the open market value with Mortgage Trust within 6 months, you can return much if not all of the funds to your cashflow if the figure stack up.
  2. Take a bridging loan for the purchase. This may be needed if the property is not suitable security for a straight forward mortgage at the point of purchase. If not, make sure you plan your costs well, including exit fees from the bridge in addition to the set up costs and interest. you’ll find that the figures for this usually work out very similar to taking a regular BTL mortgage (if available for the property) and paying an early repayment charge.
  3. Port the purchase mortgage. If you can make the figures stack, this is a great way to transfer the mortgage to an ongoing purchase. If your business model is to buy 2 or 3 (or more properties) within a 12 month period, you can take a Buy to Let mortgage which is portable to a new property, port it for the day of completion and have the Mortgage Trust remortgage within 6 months ready to complete on the existing property. Although there are fees to pay for Porting a BTL mortgage, these are far less than paying an early repayment charge. This strategy works if it is carefully planed. And if your plan is to buy properties of similar value at the starting point, the opportunity to Port a mortgage will be that much more easy.
  4. Pay the Early Repayment Charge. If the figures really work, you might opt just to swallow the ERC, but before jumping to a decision to do this, make sure your mortgage broker has explored all the options.

The other alternative is to take a commercial BTL mortgage. Commercial mortgages are assessed by lenders in an entirely different way. As a result, even if you cannot meet criteria to remortgage within 6 months with an ‘off the shelf’ BTL mortgage deal offered by one arm of a lender, you may still be able to achieve it by using the commercial arm of the same lender.

Who are Harvey Bowes Mortgages

HB_gears_003Harvey Bowes are a practice of mortgage brokers. We boast a genuine whole of market service, meaning that we work for you as our client and not the lender. With have a vast knowledge of the finer detail of lender criteria and consider ourselves to be more than just Mortgage Brokers, we are deal makers.

When it comes to BTL and investment property, we are happy to talk through options with you, even if it just bouncing around ideas. We can add to your strategy and business plan as well as help you by way of advice on BTL mortgages. Why not talk to Howard or Rachel at Harvey Bowes today, on 029 2115 6918

Lender criteria is continually changing, talk to us today to find out the latest. Contact Howard Bowes at Harvey Bowes, Mortgage Brokers, on 029 2115 6918

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Your property is at risk if you do not keep up repayments on your mortgage

Harvey Bowes Mortgages always require proof of deposit for the purchase of a property when the applicant is looking to remortgage within six months.

Buy to Let – Tenancy duration at a record high

The average length of tenancy in the UK has risen to a record high of 20 months, according to new research from the Association of Residential Letting Agents.

Strong competition for new properties and an ongoing lack of mortgage finance has increased the importance of regulation in the rental sector as 58 per cent of ARLA members now say there are more tenants than properties available.

Positive figures in the Property Market

Figures for November show the lowest monthly seasonal drop in new ‘for sale’ and ‘sold’ properties for at least five years.
Data from the Agency Express Property Activity Index reflects a “surprising resilience” in the property market as UK residential properties achieving sold status decreased by 1.2 per cent while new ‘for sale’ listings fell 7.3 per cent between October and November.
These figures represent the lowest seasonal drop since the index was started in 2007.