Will the stamp duty holiday continue past March 2021

This year has been a roller coaster when it comes to the mortgage market, during lockdown 1 in March Mortgage Products fell dramatically with lenders very nervous what the affects of the pandemic would bring, removal of higher LTV schemes saw less first time buys able to get a foot on the ladder. 

The transition to have Mortgages underwriters working from home, desktop valuation instead of physical visits also affected the lenders capacity to accept business.

However, since then mortgage approvals have reached a 13 year high with lenders gaining more confidence and assessing their products to meet the growing demand.

This strong improvement has all been helped with temporary stamp duty holiday

So, will the stamp duty holiday continue in 2021?

There was a strong push from the industry to extend the stamp duty holiday past the 31st March, however the government have now confirmed that this will not be the case.

More than 22,000 people signed a petition calling for the stamp duty holiday to be extended for a further six months.

The petition stated: “Extending the stamp duty holiday for an additional six-months will assist many buyers who are looking to move to a property that they will not be able to afford otherwise. This will help to stabilise the housing market.

As it received over 10,000 signatures, the government was required to respond.

The Treasury said the stamp duty holiday was designed to be a “temporary relief” to stimulate market activity and support jobs that rely on the property market.

“The government does not plan to extend this temporary relief”, it stated.

It added that the pandemic caused uncertainty for buyers and sellers with property transactions down by as much as 50% during the first lockdown

“To stimulate immediate momentum in the property market and to support the jobs of people whose employment relied on custom from the property industry, the government decided to introduce a temporary Stamp Duty Land Tax (SDLT) relief. This relief increased the starting threshold of residential SDLT from £125,000 to £500,000 from the 8 July 2020 until 31 March 2021. Since the relief was introduced, transactions have increased and seasonally adjusted data shows that in October 2020, transactions were 8% higher than October 2019.

“As the relief was to provide an immediate stimulus to the property market, the government does not plan to extend this relief. SDLT is an important source of government revenue, raising several billion pounds each year to help pay for the essential services the government provides,” it said.

The Treasury confirmed it will maintain the stamp duty relief for first-time buyers which increases the starting threshold of residential SDLT to £300,000 for property purchases below £500,000.

What impact will this have?

This news will see a rush of potential buyers looking to get their application in to the lenders by January. 

The fear then will be will the lenders cope with this influx, timescales this year have been dramatically increased with more underwriting required, searches taking a lot longer and some lenders taking up to 28 days to even look at a mortgage case.

This extension could see borrowers who did not budget for the stamp duty finding they are unable to complete prior to 31st March due to tight timescales and finding they now have the bill to pay.

Clever Mortgages know the importance of choosing the most suitable lender for your circumstance whether that is because of bad credit, low credit or you just don’t know where to start.

Lenders criteria and timescales will be very prevalent in 2021 especially if you are looking to take advantage of the stamp duty holiday, so talk to the experts who can help. 

Clever Mortgages will look to assist you from start to finish, liaising with the lender, solicitors and estate agents to ensure you are fully supported through your property purchase.

Furlough Mortgages

The current situation with furlough mortgages

You may have been on furlough or finding yourself on an extend period with the current scheme running until 30th April 2021.  If you are looking to purchase a property or remortgage your current home, you may find it difficult to find a lender to accept your furloughed income, especially if you also have bad credit and a poor credit score.

Around 9 million people have been furlough since the pandemic began and whilst some returned to work after the initial scheme came to an end, with the Government resurrecting the original 80% version it meant people went back on furlough or had the period extended.

Due to the risks associated with borrowing large sums of money and the lenders requirements to satisfy Financial Conduct Authority (FCA) affordability rules its important lenders understand your income both now and for the future.

Originally when furlough began, lenders would look at affordability based on the 80% provided by the Government.  However, changes to the scheme, along with the recent extension has made lenders more cautious.

Can I get a mortgage on furlough

Currently, lenders are looking for customer to have returned to work and have a clear payslip with no furloughed income showing, they may even request two payslips and confirmation from the employer that you will not be going back on furlough.

The lending market is therefore even more difficult to navigate, and we would urge you to speak to a mortgage broker such as Clever Mortgages, who deal with all types of mortgages and are also specialist in bad credit mortgage advice.

Clever Mortgages can assess your situation now, to see if a mortgage is possible and if not work with you on a plan for when to apply to a lender.  If you use a mortgage broker such as Clever Mortgages, with access to 100 of lenders, it means you aren’t going lender by lender yourself, running up marks on your credit file and potentially reducing your credit score.

If there is a second person to add to the mortgage and they have not been on furlough, it might be that will be enough to support your application.  We can also look at product transfer options to save you money with your existing lender.

You may also find that there is less availability for those with a smaller deposit, say 5 or 10%.  We have seen lenders start to offers these products again, but you have to match the criteria to achieve it, again this is were speaking to a mortgage broker is key.

Whatever your situation, please feel free to contact Clever Mortgages on 0800 197 0504 or using the live chat on our website to talk to the team.

Why use a broker?

Buying a new house doesn’t have to be a stressful process. Sure, moving all of your belongings and updating your details everywhere can be tiresome, but it’s an essential part of moving home that has to be done. Where the real stress of moving home comes in, usually, is trying to find the right mortgage provider.

People who go direct to their provider spend hours upon hours trawling through comparison websites trying to find the most suitable deal, comparing rates, calling different providers and so on. It can be an incredibly wearing process – unless you go to a mortgage broker.

What is a broker?

A broker is a Financial Conduct Authority (FCA)-regulated professional who specialises in finding mortgages for people. They do this by taking your circumstances into account and learning about your situation before recommending the most suitable mortgage deals for you.

Why use one?

There are many reasons why it’s beneficial to use a mortgage broker – here’s a few of the main ones.

Greater choice

One of the main benefits of using a mortgage broker is the fact that you can often get access to exclusive mortgage rates that aren’t available to people who go direct to their provider. The reason for this is that there are some lenders who only lend through brokers, and as a result you can get offers that might not be listed on comparison websites and potentially save a great deal on your mortgage payments.

Less hassle

Hate paperwork? Mortgage brokers remove a lot of the hassle from getting a mortgage deal over the line, and will often complete the majority of paperwork for you.

Using a broker also protects you against filling in paperwork incorrectly, which is actually something that happens often due to the fact that the paperwork involved with moving house can be quite confusing at times, and they’ll also deal with the lender on your behalf.

The most suitable deal for you (even with bad credit)

Mortgage brokers are experts in getting the most suitable deals for their clients. A good broker will take the time to learn every detail about your situation and how your circumstances might affect what rates you’re eligible for.

Once they’ve done this, brokers will comb the market in order to find the most suitable mortgage deal on the market for you. Even if you’ve got extenuating circumstances such as a bad credit score, for example, and have been rejected for a mortgage deal by some of the bigger high-street banks, a broker will be able to find you a deal.

Again, they’ll be able to do this due to the fact that they’ve got access to rates that simply aren’t available to people choosing to go direct their mortgage providers. This means that whatever your credit score, the chances of you getting the most suitable deal to suit your circumstances is greater if you choose to go to a mortgage broker.

Help to buy scheme – April 2021 – March 2023

The new Homes England Help to Buy Equity loan scheme commenced on the 16th December 2020.  This scheme is only open to first time buyers purchasing a new build property.

The scheme is design to help people struggling to save their own deposit to meet lenders requirements and get on the housing ladder.

Even if you currently have or have had previous bad credit, a poor or low credit score, the Help to Buy scheme is still available to you.

How does it work?

All parties to the scheme need to be first-time buyers and purchasing a newly built property in England to apply.  The builder also needs to be registered with the Help to Buy scheme.

You can borrow a minimum of 5% and up to a maximum 20% (40% in London) of the purchase price.  The equity loan is from the Government, which is used as a deposit on the property and the Government have a percentage stake in the property.

There is a maximum purchase price cap by English region

Region (England)

Maximum property price

East Midlands

£261,900

West Midlands

£255,600

East of England

£407,400

Yorkshire and the Humber

£228,100

North East

£186,100

North West

£224,400

London

£600,000

South East

£437,600

South West

£349,000

Do I need to have my own deposit?

Yes, the scheme and a mortgage lender will expect you to have your own deposit, a minimum of 5% of the purchase price.  This is added to the Government equity loan and along with a new mortgage you will have the funds to purchase the property.

How does the Government Equity loan work?

The equity loan is interest free for the first 5 years, after that you will pay interest on the loan amount.  This allows you to get familiar with budgeting to live in your first property, so please ensure you factor in this additional cost at the 6-year point, unless you plan to pay the loan off.

The payments you make at the 6 year point are to pay the interest only, you will not reduce the amount owed, that balance stays the same.  However, you can repay all or part of the equity loan at any time and reduce the balance.  The minimum repayment is 10% of the value of the property at the time of the repayment and you have to pay in 10% multiples.

You only pay interest on the original amount borrowed from the Government, this amount doesn’t change.

What repayments will I make?

You will of course pay monthly for your new mortgage and these payments will be confirmed by a mortgage adviser.

The Government equity loan is interest free for the first 5 years.  You must pay a £1 monthly management fee.

After the 5 years, you continue to pay the £1 monthly management fee, plus interest on the equity loan.  The current interest rate is 1.75% and this will increase each April by the Consumer Price Index (CPI), plus 2%, and that’s of the interest rate and not added to it.  For example it won’t be 2.75% (1.75% + 2% (assuming no increase to CPI) it will be 1.75% x 2% = 0.035% + 1.75% = 1.785%  You must continue to make these two payments until the equity loan is repaid.

Your mortgage adviser can help you work out these payments and review your budget with you.

When do I repay the equity loan?

When you sell your home, you will be expected to repay the loan.  Also, if you reach the end of the equity loan term (maximum 25 years) or you pay off your mortgage.

If you failed to meet the terms of the equity loan contract you could be asked to repay the balance in full.

The amount you pay back is based on a percentage of the market value at the time you want to repay some or all of it.  Therefore, if the value of your home increases so does the amount you owe on the equity loan, if the value falls, so does the equity loan.  For example, if your equity loan was 10% you will have to pay 10% of the properties value at the time you repay the balance.

How do I apply for an equity loan?

You’ll need to find a new build property provided by a builder registered with the Help to Buy scheme.  You can contact your local Help to Buy agent by clicking here, they can also help you with the Help to Buy application.

The next step is to apply for a mortgage, or if you want to get an idea of your lending options, especially if you have or had bad credit then contact Clever Mortgages.

For properties in Wales and Scotland

Similar schemes exist in both Wales and Scotland.

In Wales the maximum property price is £300,000, with a 5 year interest free loan and is also called Help to Buy.

In Scotland, the scheme is called Affordable New Build Scheme and for properties up to £200,000 in value.  The Scottish Government loan is a maximum 15% but is interest free for the whole duration of the term.

You can search each Governments site to find more information. Wales or Scotland 

Bottom Line

If you’re a first-time homebuyer, all these details and technicalities could be overwhelming. Clever Mortgages are a team of experts that help first-time homebuyers go through the entire financing and home buying process. We have helped lots of clients through the HTB buying process with step-by-step assistance.

Remember, even if you currently have or have had previous bad credit, the Help to Buy scheme is still available to you.

If you’re ready to become a homeowner, give us a call today!

Why use a broker?

 

Beat the Stamp Duty rush and save money with a bridging loan

We’re currently seeing one of the busiest housing markets in over a decade as people rush to beat the Stamp Duty Land Tax (SDLT) deadline.  It’s not too late to take advantage of the incentive though, with other lending options available, which could get your property purchase over the line before the end of the SDLT holiday.

On average, house prices have increased by 3.5% over the past 12 months, and the first quarter of 2021 is set to record a property uplift of 100,000 additional sales before the end of March. Nottingham, Manchester and Leeds appear to be the most buoyant cities, with house prices increasing over the past year by 5.3%, 5.2% an 4.9% respectively.

Despite the Covid-19 pandemic, these figures show now is perhaps one of the best periods in recent times to move home.

The current SDLT incentive means you don’t have to pay any Stamp Duty when you buy a new main residential property as long as it’s valued under £500,000, allowing you to potentially save thousands in fees when buying a new property.

Different rates apply to investment properties, such as Buy to Let or additional homes, but there are still savings to be made.

This period isn’t going to last for much longer though. The current holiday on Stamp Duty is scheduled to end on 31st March 2021, so if you’re thinking about moving home it’s best to do it sooner rather than later.

In fact, it’s estimated that only half of the mortgages applied for in January will be completed before the deadline, making it even more vital to get things moving now. This is due to the large increases the market is seeing in both demand and volume of moves.

So what happens if you want to move home but are seeing a delay, stuck in a chain that’s not moving, or lost a buyer and worried about missing the SDLT deadline?

How a Bridging loan can help

Bridging loans can provide quick funds to bridge the gap whilst you’re waiting for your transaction to complete. They work by allowing you to borrow funds to buy the new property, before selling your current one (you can read more here).  This could allow you to buy your new property, save the stamp duty and then transfer your mortgage to a more traditional one once you’ve sold.

Kevin Blount, Director at Clever Mortgages, said: “Beating the deadline on Stamp Duty could save you thousands of pounds, so if you’re considering moving then it really is a smart move to do so before the deadline of 31st March of next year.

“A bridging loan can help you by offering short-term finance that drastically speeds up the process and allows you to move to offer more quickly. This is opposed to moving home the traditional way, which could take months to complete due to the boom in demand we’re seeing.

“As such, we’d advise anyone thinking about moving to seriously consider a bridging loan in order to beat the Stamp Duty deadline and to get in touch with us if this is something you’re interested in.”

To find out more about how a bridging loan could help save you money on your move, give us a call on 0800 187 0504 or arrange a call back at a time that suits you.

*Data taken from Hometrack’s UK House Price Index Report for October 2020

Looking to buy a house

Are you looking for a mortgage to buy a new house?

When you’re looking for a house, the fun part is trying to find the home to suit you.  However, figuring out where to start when you’re looking at finance options can seem like a daunting task. With so many differing schemes, mortgages and housing options out there, it can be hard to narrow down exactly where you should start if you want to buy a property.  To help you on your path, we’ve put together this guide to give you an idea of where to begin and what to do when you’re looking to buy a home.

Look at your finances:

urchasing a home and taking on a mortgage is primarily a financial endeavour, so you might want to begin by looking at your financial situation and find out what costs come with buying a house. You might be expecting mortgage repayments to be a factor, but what else do you need to do? This again can seem daunting, so we’ve broken it down into questions you might want to look at to get a better understanding of your finances, and what steps you can take to make affording your dream home a reality.

How much do you have saved?

To get a mortgage on a property, you’ll usually need to put down a deposit. Some mortgages are available with as little as 5% deposit (5% of the total value of the home you wish to purchase) but due to the financial impact of coronavirus, lenders have temporarily withdrawn many 95% mortgages, meaning you’ll likely have to look towards saving a deposit of 10% or more. There’s a chance that 95% mortgages will still return to the market, but saving a larger deposit usually results in lower mortgages repayments (as you are borrowing less, which also results in lower interest repayments as opposed to borrowing a larger percentage of the value of the property) and access to better deals and rates -lenders view larger deposits as a less risky lending decision and are more likely to offer the better available deals.

What are the other fees that come with purchasing a property?

You’ll also need to consider the other costs that come with buying a property, such as;

  • Booking and arrangement fees
  • Valuation and survey fees
  • Legal fees
  • Stamp Duty
  • Land registry
  • Furniture transportation

Read more about the costs of moving house here.

Look at your finances outside of savings:

To understand what you need to look at, you should understand how a lender views approval on a mortgage. The lender is taking a risk when they decide to lend to you and want to be sure that they’re making a safe lending decision when granting you approval for a mortgage.

It’s a common misconception that lenders only look at your credit history when making a lending decision. This can be a factor, but lenders are taking a far more flexible approach in their decision making — looking at several factors surrounding a potential borrowers financial situation and not just the credit report.

Credit report

Your credit report will show your borrowing history, which will include things like credit cards, personal loans, payday loans, catalogue accounts and most forms of credit agreements registered against your name. It will also display any missed payments, defaults, CCJ’s, bankruptcy and so on. However, some of these will drop off your credit record after 6 years.

As well as your credit limit (which isn’t the amount of credit you have taken, it’s the amount that is available to you) and the amount of open accounts you have, your credit report shows lenders what your borrowing history is and how likely you are to repay.

Typical High Street lenders often look adversely on a bad credit history: however specialist lenders — like the ones our brokers at Clever Mortgages have access to — consider a variety of credit histories, understanding that we can’t always control a bad-credit situation and considering applicants from a different perspective.

It’s often said that it’s better to have a few, well managed credit accounts than many, poorly used accounts. Closing any unused accounts could help boost your score and make you a more attractive borrowing prospect.

Income and expenditures:

If you want to take out a mortgage, you need to be sure you have the regular income available to take on that credit commitment. Again, another misconception is that only applicants in full-time employment can get a mortgage, but with modern lenders recognising the increase in self-employed, freelance and contract workers they have adapted to this change and offer more products for a changing market. This means that as long as you can prove you’ve got a consistent taxable income to meet the lending requirements and any other criteria, it’s likely there’s a mortgage product suited to you.

Your income will dictate how much you can borrow for your mortgage. Lenders often place a cap of around 4-4½ times your annual guaranteed income, but they may also take into account any bonuses, commissions or Government benefits you receive. Your credit history might play a part in deciding how much you can borrow, and any other expenditures will be accounted for and considered when determining affordability.  When making a mortgage application you’ll need proof of income, through wage slips (if employed, accounts if self-employed) and bank statements so it might be worth considering collecting this documentation as you prepare for buying a home.

You need to be living within your means to be a viable prospect to a lender. This means your income should cover your outgoings with a surplus. This is because a lender will need to be sure you can afford a mortgage now and to continue long term, even if rate increase.

Expenditures are any regular outgoings that you pay; this includes your utility bills, rent or current mortgage payments, child maintenance, credit card repayments, loan or debt repayments and any other consistent payments. Collectively, your income and expenditures make up your budget and what you can afford to spend, but more importantly in the eyes of a lender — how much you can afford to repay over the term of your mortgage.

What kind of mortgage?

Mortgage products come in different forms, and one product or deal might not be the best option for one borrower but perfect for another- and vice versa. Mortgage products come in various forms, suited to different financial situations. Again, this can be another point of confusion: with all the different lenders, products, deals and rates available, how do you know you’re getting the best mortgage for you? Mortgage brokers can help you search the market and understand the mortgage options you have available, helping you to make sense of what can be a confusing market.

  • Fixed rate mortgage – A fixed rate mortgage is where your interest rate and monthly repayment stays the same for a set time period (usually between 2-5 years).
  • Variable rate mortgage – Every lender will have their own standard variable rate (SVR), which is considered their basic mortgage rate. This interest rate goes up and down, usually in line with the Bank of England’s interest rates but sitting a few percentage points higher.
  • Discount mortgage – A discount mortgage is when a reduction is applied to the lenders Standard Variable Rate (SVR) for a certain length of time (typically 2-3 years).
  • Tracker mortgage – A tracker mortgage is a type of variable rate mortgage. What makes them different from other variable rate mortgages is that they track movements of another rate, the most common rate that is tracked is the Bank of England Base Rate.
  • Offset mortgage – Offset mortgages can be linked to a savings account as well as your current account. Your savings will be ‘offset’ against the value of your mortgage, and you’ll only pay interest on your mortgage balance minus your savings balance.

Read more on mortgage types here.

If you have little spare money but want to get a mortgage, you could consider taking out a mortgage over a longer term, risking paying more in interest but perhaps lowering the monthly repayment. Comparatively, if you have a larger amount of disposable income you could consider taking a shorter mortgage term, paying more per month but paying less interest (than on a longer term) and clearing the loan faster.

If you’re an essential worker (including NHS Clinicians Paramedics & Nurses; Teachers Armed Forces Personnel; Army, Navy, Royal Air Force; Firefighters; Police) you could be eligible for the Hero’s Mortgage Range. Click here to find out more.

Decision in Principle

A decision in principle (DIP) is an informal, but often credit checked, quote on how much a lender might be willing to lend you. It’s not an approved mortgage application, nor is it a guarantee that the lender will lend you that amount-but it’s a rough guideline that can help you figure out the price bracket of houses you can bid for.  Getting a DIP can make it easier to work out what you’re likely to be able to borrow and can back up a proposed bid on a property, increasing your chances of being accepted by prospective sellers.

Find a property, or get an idea of what kind of home you’d like to live in:
If you’ve got your deposit saved and received a decision in principle, you should have a rough idea of what you can afford to borrow. This means you can start to peruse houses and take a serious look at where you would like to live.  It’s likely you’ve already taken a look at the properties in the area you wish to move to or live in, but now you can look towards finding one you want to buy and making a bid.

Can I get help with buying my first home?
If you’re a first-time buyer, you might be wondering if there’s any support available to help you purchase your dream home. Luckily, there are several schemes and programmes designed to help prospective buyers get a boost onto the property ladder.

Help to Buy

Help to Buy is a UK Government-funded project, designed to help people with lower incomes get onto the property ladder. There are several schemes within Help to Buy, focussing on different aspects of the buying process and all created to help as many people as possible secure their own homes.

Read more on Help to Buy mortgages.

Help to Buy – Equity Loan

The Help to Buy equity loan scheme gives you the chance to purchase your home with a small deposit by boosting the amount you’ve saved. You would initially be expected to save up a minimum 5% of your deposit, then using the Help to Buy equity loan, the Government would grant you a loan of up to 20% (of the property’s value) — giving you a 25% deposit and access to far more mortgages and better deals.

The Help to Buy equity loan is available to first-time buyers and current homeowners.  However, the property must be a new-build and can’t exceed the value of £600,000. The Government also provides a slightly altered scheme in London for prospective buyers, offering an equity loan up to 40% of the property’s value, reflecting the increased property costs that London dwellers face.

If you have more than 5% saved, don’t worry! You can save up to 65% of your deposit and still be eligible for this scheme — if you use a minimum of 10% Help to Buy equity loan and a minimum 25% mortgage.

Another huge benefit of this initiative is the interest — or lack-of. You won’t be charged any interest for the first five years of taking out your equity loan. After that you’ll only be charged a fixed fee of 1.75%, which rises each year following the increase of the Retail Price Index, plus 1%.

The Help to Buy equity loan scheme has been extended to 2023, meaning there is still time to save up a 5% deposit and take advantage of this offer, However the scheme is being amended from 2021. This scheme is available in England – and although there Help to Buy opportunities in Scotland, Wales and Northern Ireland, the terms are slightly different, so it’s worth looking this up if you want to buy a house in any of these areas.

It’s important to be aware that you can’t use the Help to Buy scheme to buy a second home or property to let.

Help to Buy – ISA

Unfortunately, the Help to Buy ISA scheme ceased accepting new applicants November 2019, if you’re eligible you can still apply for a Lifetime ISA.

Help to Buy – Shared Ownership

The Help to Buy shared ownership scheme is, a combination of buying and renting. Often aimed at first-time buyers and low-income households, this initiative allows you to buy a share, usually around 25% — 75%, of a resale or new-build home. You would own some of the house and pay a reduced rent for the rest.

This allows prospective buyers on a lower income to access the property ladder, as your deposit would be a percentage of the share being purchased as opposed to the overall cost of the property, meaning you would need a much smaller deposit and mortgage than with full ownership.

Shared Ownership properties are always leasehold, meaning you’d own the properly for a pre-agreed span of time but not the land. It’s possible to renew leases. You do have the right to buy additional shares in the property, if your share reaches 100% equity, the property would no longer be shared ownership. It’s important to check if there’s a cap on the number of shares you can purchase in the property as this may hinder those who aspire to full ownership.

Right to Buy

Right to Buy is a Government initiative aimed at helping local authority tenants to buy their council homes with a substantial discount.

The discount you get is based on the:

  • Market value of the property
  • Type of property, for example house, flat
  • Amount of time you’ve rented and lived in the property

There is a limit on the discount you can receive but the savings are still substantial, making this a great solution for council tenants to get onto the property ladder. If you’re purchasing a property with a Right to Buy mortgage and you’ve lived in the property for 3-5 years, you could be granted a discount of 35%. After that the discount increases 1% for each additional year you’ve been a council tenant.

To qualify, you must have been a council tenant for a minimum of 3 years. This doesn’t have to be a consecutive 3 years, so, if you had a spell of renting privately in between living in a council home, then you could still be accepted.

You’ll still have to provide a deposit and take out a mortgage with the Right to Buy scheme, but if you’re struggling to save enough for a deposit, some lenders may allow you to put your discount towards the purchase price, meaning you wouldn’t need the initial lump sum.

If you were renting a council home before it transferred to another landlord (such as a housing association), you might still be eligible to buy your home with the Preserved Right to Buy scheme.

Read more on Right to Buy here.

Lifetime ISA

A Lifetime ISA is a savings account designed to help people aged between 18-39 buy their first home or save up for retirement. Using a Lifetime ISA, you can put in up to £4,000 per tax year, which leads on to one of the most attractive features — the bonus.

The Government will pay a 25% bonus into your Lifetime ISA account, up to a maximum of £1,000 per tax year. This bonus would be paid in monthly so you’d benefit from compound growth — plus, any interest you earn on what you save would be tax-free.

So, if you save £2,000 in a tax year, the Government would pay you a bonus of £500.

It’s important to remember that you can’t just withdraw the money from your ISA to spend on whatever you like without facing a penalty — unless it’s to help buy your first home. After you turn 60, the money can be used as you like to support your pension. If you withdraw any before you’re 60 though, you could face a 25% penalty on the total amount in your account.

At Clever Mortgages, we have access to a wide range of mortgage solutions. Get in touch now and let’s discuss your lending requirements.

How can we help?
Clever Mortgages could help you find your perfect mortgage, specialising in helping people with bad credit. With access to over 100 lenders and 1000s of products, we could help find the right mortgage solution for your financial situation. Get in touch with one of our expert brokers and get the ball rolling on moving into your dream home!

A Guide to Separation, Divorce, Dissolution and what to do with your mortgage

Dealing with a separation, dissolution or divorce is difficult, and figuring out what to do with your home, mortgage and shared belongings can be confusing, especially when children could be involved. We’ve put together this guide to help give you some guidance on what options are available for your mortgage and home following a separation.

Although a break-down of a relationship can be a hard time, it’s vital you keep up repayments on your mortgage until you, your ex-partner and your lender have come to an agreement on how you are going to manage the family home and mortgage. Contact your mortgage lender as soon as possible and ensure all mortgage repayments are paid on time, failure to meet repayments could risk damaging your credit report and accruing mortgage arrears. They might be able to offer you help if needed.

What happens to the home if you are not married or in a civil partnership?

If you and your ex-partner jointly own the home, it can be divided in several ways- but each situation will have its own unique requirements and approach to a solution.

You could sell the property and both move out:
If you sell the home, you can pay off any remaining mortgage and divide any money left over from the sale appropriately. Money gained from the sale could be used to put down a deposit on a new property.  If the mortgage value is greater than the property sale value then you’ll have to come to an agreement to pay off the amount owed.

Remember you must maintain payments whilst a selling the property or risk bad credit and even repossession.

One buys the other out:

If you or you ex-partner have a joint mortgage and one wishes to buy the other out of the property, you’ll need to work out the fair percentage of the property each of you own. This can be done by agreement between yourself and your ex-partner, or by mediation through a court if you’re struggling to reach a mutual agreement. Once you’ve figured this out, whoever wishes to keep the property would ‘buy’ the other out of property and assume full ownership. The mortgage lender will need to be satisfied that the person remaining in the property will be able to keep up mortgage repayments with their sole income. Usually, the lender would agree to allowing one of the partners to have a sole mortgage but if affordability is an issue the partner keeping the home could look at seeking a guarantor mortgage- where a suitable relative agrees to make repayments if you are unable.

If you’re looking to remortgage to raise money to buy your ex-partner out of your current property, we could help. Get in touch with one of our expert mortgage advisors.

Keep the home and not change ownership:
You could choose to continue living in the home and not change ownership. This could be an option if you have children under 18 or still in school however isn’t always financially viable, as yourself or your ex-partner might have to seek a new home and the expenses that come with it. It would also rely on you maintaining a good relationship with your ex-partner and repayments must be made on time and as usual. If seeking a new mortgage, please speak to us at Clever Mortgages to discuss lenders criteria and affordability.

Retain a stake in the property:

You could transfer part of the value of the home, meaning that one of you would own most of the home but the partner who gave up some of their share of the property would still retain a stake in the home- so that when the property is sold, they would still get a percentage of its value. This can make sure your children have a place to live until they turn 18 or leave home.

Pay off the mortgage:

If you have very little left to pay on your mortgage it might be simplest to continue paying the mortgage, this means you could sell the home and divide the full proceeds.

What if we have a joint mortgage and are breaking up?

If you have a joint mortgage, or any joint-credit with your ex-partner, your credit files will be linked. Most couples choose to separate the mortgage and remove the financial ties. If one of you chooses to stay in the property, it would mean the partner who stays in the house doesn’t have to rely on their ex-partner for the mortgage. The partner who leaves the home should be able to borrow more for a new property with their name removed from the joint mortgage, as that would provide more free income.

If you have children?

It’s often recommended that the primary caregiver remains in the family home with the children until they turn 18 or leave home, however all families are different, and this can’t always be the case. As an unmarried couple, you won’t have any legal requirement to financially support each other after your split, but you’ll both be expected to pay towards your children, and to prioritise their needs when deciding how to divide the family home and assets.

If the home is in your ex-partners name only:

You might be able to make a claim for a share of the properties value if you’ve paid towards the mortgage or financed home improvements that have raised the value. This isn’t guaranteed and financial contributions don’t automatically give you a share of the property, however you can make a claim if you feel as though your contributions were substantial enough to entitle you to a share of the properties value.

You can make a claim without any formal legal document declaring your entitlement to shares in the property, but it can be a complicated area of the law and it’s important to seek legal advice.

What happens to the home if you’re divorcing or dissolving your civil partnership?

If you and your ex-partner lived together in the family home, it would be considered a joint asset. This means you both have a legal right over the home until the divorce is finalised, regardless of whose name is on the deed and nobody can be forced to leave the home without legal intervention. If the family home is in your ex-partners name and you’re trying you preserve the right to stay in the home, or prevent it from being sold by your ex-partner while you still occupy the home- you can register your ‘home rights’ with HM Land Registry, you can only do this if they are the sole owner.

You move out and sell the property:

If you sell the home, you can pay off any remaining mortgage arrears and divide any money left over from the sale appropriately. Money gained from the sale could be used to put down a deposit on a new property.

You can buy your ex out of the property:

If you or your ex-partner have a joint mortgage and one wishes to buy the other out of the property, you’ll need to work out the fair percentage of the property each of you own. This can be done by agreement between yourself and your ex-partner, or by mediation through a court if you’re struggling to reach a mutual agreement. Once you’ve figured this out, whoever wishes to keep the property would ‘buy’ the other out of property and assume full ownership. The mortgage lender will need to be satisfied that the person remaining in the property will be able to keep up mortgage repayments. Usually, the lender would agree to allowing one of the partners to have a sole mortgage but if affordability is an issue the partner keeping the home could look at seeking a guarantor mortgage- where a suitable relative agrees to make repayments if you are unable.

If you’re looking to remortgage to raise money to buy your ex-partner out of your current property, we could help. Get in touch with one of our expert mortgage advisors.

Leave the home and mortgage as is:

You could choose to continue living in the home and not change ownership. This could be an option if you have children under 18 or still in school however isn’t always financially viable, as yourself or your ex-partner might have to seek a new home and the expenses that come with it. It would also rely on you maintaining a good relationship with your ex-partner and repayments must be made on time and as usual.

One of you could retain a stake in the property:

You could transfer part of the value of the home, meaning that one of you would own most of the home but the partner who gave up some of their share of the property would still retain a stake in the home- so that when the property is sold, they would still get a percentage of its value. This can make sure your children have a place to live until they turn 18 or leave home.

You could finish paying off the mortgage:

If you have very little left to pay on your mortgage it might be simplest to continue paying the mortgage, this means you could sell the home once the mortgage is paid and divide the full proceeds.

What if we have a joint mortgage and are separating?

If you have a joint mortgage, or any joint-credit with your ex-partner, your credit files will be linked. Most couples choose to separate the mortgage and remove the financial ties. If one of you chooses to stay in the property, it would mean the partner who stays in the house doesn’t have to rely on their ex-partner for the mortgage. The partner who leaves the home should be able to borrow more for a new property with their name removed from the joint mortgage, as that would provide more free income.

If you have children and are divorcing or dissolving a civil partnership?

If you and your ex-partner have children together, you’ll need to prioritise their needs. It’s often the case that the primary caregiver of the children remains in the family home after a divorce or dissolution with the children, at least until they turn 18 or leave home. This isn’t always affordable or viable though, and each family is different so there’s no set path of managing a separation, but if you’re struggling to come to an agreement you could consider mediation.

Keeping in touch with your lender:

It is absolutely vital that you keep up all mortgage repayments until you’ve come to an agreement on what will happen with the family home. Make sure you inform your lender that you’re going through a separation and keep in touch. You’ll need to check with your lender and have their agreement before transferring any ownership if one of you decides to stay in the property as your lender will probably have their own affordability checks they will want to carry out.

Court and disagreements?

If you’re still unable to come to an agreement after mediation and your separation isn’t proving to be amicable, you might be considering going to court. The courts will take into consideration both of your circumstances when ruling on what will happen with your family home. If there are children involved, then the safety and well-being of the children will be the priority concern of the courts when making a decision.

When court seems likely, it’s usually recommended to seek legal advice to support you through the court proceedings.

Mesher and Martin orders:

You could have the option of taking out a Mesher or Martin order if you live in England or Wales:

Mesher order

A Mesher order is a family court order that stops the home being sold for a set period of time, usually because there are children still living in the home.

If you take out a Mesher order, one of you can stay in the property with the children until the set period end, usually when the youngest child turns 18 or finishes education. The property stays in both owners’ names for this time, even if only one person is currently living in the property.

Martin order

A Martin order is similar to a Mesher order, but children aren’t often involved. In this case, one of you could stay in the property for the rest of your life – and the home would not be sold until that person moves out, remarries or passes away.

This is so long as the other partner does not immediately need the money.

What if my house is in negative equity?

If your home is in negative equity, it can make the separation process slightly more difficult, but not unmanageable. A property being in negative equity means that the current value of the home is less than the value outstanding on the mortgage loan. As the sale of your house won’t be enough to pay off the mortgage in full, both yourself and your ex-partner will need to decide what to do.

You can sell the house and split the remaining mortgage debt, or continue making mortgage payments and see if market conditions improve. There are ways to increase the value of your property which could help boost the equity in your home.

What are my mortgage options?

Staying in the family home?

If you want to separate your joint mortgage and stay in the family home and are worried about affording the mortgage by yourself, we could help you find a more affordable mortgage and even raise some money to buy your ex-partner out the property.

If you have children and you’re receiving child maintenance payments from your ex-partner, some lenders are willing to consider this when looking at your income, even more so if the payments have been regular for some time or are court ordered.

Looking to buy a new property?

If you are looking to buy a new home after a divorce, some people choose to use the money raised from the sale of their family property, or obtained through being bought-out of the home, to put towards a deposit for a new property and mortgage. If you’re looking for a new mortgage, get in touch with one of our expert brokers!

Why use a broker?

Mortgage brokers have a wealth of experience helping customers in difficult financial situations or complicated mortgages. They have access to a wide range of lenders, meaning that a mortgage broker could find a product or deal that your current lender might not offer, and often have access to exclusive deals that aren’t available directly. Our expert brokers can help you navigate a confusing period and find the best outcome for your personal situation.

How we can help?

It’s surprisingly common for the turmoil associated with a separation or divorce to cause financial issues, sometimes impacting your credit report. If you’re looking for a mortgage after a divorce or separation and worried about your credit report harming your chances of being accepted, we could help. Our brokers are specialists in bad credit situations, working with lenders who specialise in adverse credit situations and helping 1000s of customers find their perfect mortgage. We understand that things aren’t always easy, and we work with our customers to understand how we can help and give the best advice to get you back on track.

Mortgage Myths

TRUTH: You don’t actually apply for a mortgage until you’ve made an accepted bid on a home, but you should look for a mortgage before then and have a good idea of how much you’re likely to be able to borrow. A mortgage broker can help your scour the market for the lenders most likely to accept your application and even get a ‘decision in principle’,  an unofficial guideline of how much the mortgage provider could be willing to let you borrow.

TRUTH: Your parents can gift a deposit and help you get on the property ladder, but that’s not the only way your parents can help. If your parents are homeowners, they can act as a guarantor on your mortgage, meaning they would cover any repayments should you fail to meet them.  However it’s worth noting this could put their own property at risk, so be sure you can afford to meet repayments before applying.

TRUTH: Mortgages can work out cheaper than rent payments, depending on the type of home and prices in the area. It’s also worth noting that mortgage payments go towards you owning the home, whereas rent payments grant you the right to live in a property owned by someone else. The size of your mortgage repayments with largely depend on the amount you wish to borrow, and the term you wish to borrow it over.

TRUTH: You can get a mortgage with bad credit; it’s not impossible-just slightly harder. Mortgage brokers like Clever Mortgages have access to specialist lenders who consider more than just your credit history when making a mortgage decision.

TRUTH: You might be able to get a mortgage from your bank, but there are many lenders on the market, some of which might be able to offer better deals or rates so it’s often wise to look around before settling on a mortgage.

TRUTH: The interest rate will play a part in the calculation of your mortgage repayments, but a lower interest rate doesn’t necessarily mean you’re getting the best deal. If you have a tracker mortgage, the interest rates could be subject to rise and fall with the market, so what is a low interest rate now could potentially increase, and vice versa. Additionally, a fixed rate term will eventually end, at which point you’ll automatically be transferred onto your lenders standard variable rate (SVR) which could see your mortgage payments rise. It’s also worth looking at the fees and whether the mortgage product offers any additional features, like free survey or discounted fees. If you’re struggling, a mortgage advisor would be happy to help-just get in touch!

TRUTH: When it comes to taking out a mortgage, or any credit, affordability is key. If you have a regular income — whether through full-time, part-time, freelance, contract work and so forth — then as long as you can prove your ability to meet repayments there should be lenders that will consider you.

TRUTH: Many lenders are taking a far more flexible approach to borrowing and consider ages far higher than they may have done in the past. There is no maximum age for applying for a mortgage: some lenders do have their own minimum and maximum age limits, but as long as you have the regular income to pay the mortgage repayments over the full-term of the mortgage — and meet other affordability criteria — there are most likely mortgage options available to you.

TRUTH: There are many resources available to support first time buyers regardless of age, and some government schemes like Help to Buy and Lifetime ISA’s which can help with building a deposit. The misconception that young people can’t get on the property ladder or get a mortgage isn’t true-mortgage lenders will likely have a minimum age for lending but that is usually between 18-21.

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Payment holidays: what will the impact be on you?

Payment holidays have been widely used as a way of relieving the strain put on UK households as a result of the widespread financial impact of coronavirus, with 1 in 6* mortgages now utilising payment holidays.

In times of great uncertainty, payment holidays provided a much-needed ‘break’ from repayments for some households, but with many of the initial 3 month repayment holidays drawing to a close, the FCA have announced that mortgage holders can apply to have their holidays extended for another 3 months. Read more here.

With these announcements, it’s important to consider the potential long-term impacts of payment holidays.

At present (5/06/2020) the extension only covers mortgage products, and the FCA’s statement confirms that:

  • Mortgage holders who have not yet applied for a payment holiday and experience financial strain, may still do so up until 31st October 2020
  • The ban on lenders repossessing homes during the crisis has been extended to 31st October
  • Lenders must contact customers who have had payment holidays and discuss what to do going forward. If repayments can continue, then that option is advised but payment holiday extensions should be available to those who need them. The option of full or part payment holidays should also be available.

What is a payment holiday?

A payment holiday is a pre-agreed break, or ‘holiday’ from making repayments on a loan you owe, such as a mortgage. The holiday must be approved by your lender for it to be official, not making payments with lender agreement would be considered a ‘missed payment’ and could harm your credit report.

Since the payment holidays were introduced in March by Chancellor Rishi Sunak as a method of offering support to homeowners struggling financially during lockdown, UK Finance figures show 1.86 million* customers have taken a payment holiday since the start of the crisis.

How will a payment holiday impact my credit?

Following the initial announcement of payment holidays being utilised Equifax, Experian and TransUnion offered more support to those being impacted, by preventing authorised payment holidays from having a negative impact on credit scores. This protected the credit scores of homeowners in financial difficulty that needed to take a break from repayments.

However, it’s important to remember that your credit report isn’t the only source of information lenders use to determine approval for credit applications. Whereas your credit report won’t indicate a payment holiday has been taken, Open Banking and other affordability assessments that allow lenders to view bank statements would likely show a repayment holiday and could impact creditworthiness when lenders determine risk.

An FCA spokesperson said: “Credit files are an important tool, along with other checks, for making sure that credit is affordable. To minimise the impact of the coronavirus crisis, we have made sure that there is no negative impact on the credit file of consumers who have been granted a payment deferral. Credit files will show that consumers have been up to date with mortgage payments for the duration of the payment holiday”.

Repayments

When a payment holiday is approved and repayments temporarily cease, you’ll still be charged interest on the sum you owe. You won’t need to pay it back all at once and the method of repayment varies between lenders, but lenders will usually seek repayment by:

  • Increasing monthly repayments after your payment holiday has ended to spread cost
  • Extending the term of your mortgage — keeping your monthly repayments the same but adding more time to your payment term

Christopher Woolard, Interim Chief Executive at the FCA, said: ‘It is important that if a consumer can afford to re-start mortgage payments, it is in their best interests to do so. Customers should talk to their firm about the best option available for them.’

Making sure you can afford potentially increased mortgage repayments after taking a payment holiday is an important factor to consider when deciding whether to take one.

How we can help:

There are a variety of alternatives to payment holidays, and our mortgage advisors specialise in finding the most suitable solution for your personal circumstances.

If you’re on your lenders standard variable rate (SVR) or are approaching the end of your fixed term you might be eligible for a product transfer. Your current lender, bank or building society can only talk to you about the products they offer, they are not able to offer you products from other lenders and you are potentially missing out on better options.

Even if you’re concerned with how a payment holiday could have impacted your creditworthiness, our advisors specialise in helping with all kinds of credit situations, from debt consolidation to getting a mortgage after bankruptcy.

 

*Source: UK Finance as of 28 May 2020 (https://www.ukfinance.org.uk/press/press-releases/lenders-commit-to-ongoing-support-for-mortgage-borrowers)

 

Chancellor Rishi Sunak has announced that the stamp duty threshold has been raised to £500,000.

What is Stamp Duty?

Stamp duty is a tax paid when buying a property in England or Northern Ireland. Also known as Stamp Duty Land Tax, there are several rate bands that dictate the overall cost of stamp duty. Until 8th July 2020, homebuyers would be expected to pay stamp duty on properties bought for more than £125,000, with further relief offered to first-time buyers up to £300,000.

In Scotland, Land and Building Transaction tax is paid and in Wales it’s Land Transaction Tax.

What has changed?

Previously, buyers would expect to pay no stamp duty on a property valued up to £125,000, or £300,000 for first-time purchases- but Chancellor Rishi Sunak has announced that this has been raised to £500,000.

This change will be temporary but will take effect immediately, applying from 8th July 2020 and will last until 31st March 2021. This temporary holiday on stamp duty is to support buyers that have been financially impacted by the pandemic, boosting the property market and giving more people the opportunity to afford their first home.

This means if you buy a main property for up to the value of £500,000- you won’t need to pay stamp duty. Any properties above this value will be subject to stamp duty, but at the rate relative to the value of the home.

Property or lease premium or transfer value SDLT rate
Up to £500,000 Zero
The next £425,000 (the portion from £500,001 to £925,000) 5%
The next £575,000 (the portion from £925,001 to £1.5 million) 10%
The remaining amount (the portion above £1.5 million)

 

Sunak announced during the Summer Economic Update that: “The average stamp duty bill will fall by £4,500. And nearly nine out of 10 people buying a main home this year, will pay no stamp duty at all.”

Second home owners and buyers looking to purchase buy-to-let properties will also see benefits from the stamp duty holiday, but will still need to pay the additional 3% stamp duty.

Property or lease premium or transfer value SDLT rate
Up to £500,000 3%
The next £425,000 (the portion from £500,001 to £925,000) 8%
The next £575,000 (the portion from £925,001 to £1.5 million) 13%
The remaining amount (the portion above £1.5 million) 15%

 

If you’re looking to purchase a home and want some expert advice on getting a mortgage, why not get in touch? Our brokers will be happy to help you find your perfect mortgage!

Help our Heroes

For every completed Heroes mortgage or remortgage*, we will gift £100 to the NHS to support the vital work they are doing to keep us all safe in this time of uncertainty.

Everyone here at Clever Mortgages appreciates the efforts of the essential workers that are working relentlessly to reduce the impact of COV-ID 19. As such, we are going to donate £100 to the NHS for every completed Heroes mortgage or remortgage*.

Our brokers have a wide range of access to mortgage products on the market, including The Heroes Mortgage range introduced by a specialist lender. The product range includes mortgages for first time buyers, home movers and those looking to remortgage. These specialist mortgage products are designed for the Heroes among us, the essential workers that provide vital community services:

  • NHS Clinicians (including Paramedics & Nurses)
  • Teachers
  • Armed Forces Personnel (Army, Navy, Royal Air Force)
  • Firefighters
  • Police

This mortgage range recognises and understands that these roles rarely take on a 9-5 outlook and treats each case individually. With flexible lending criteria, the Heroes mortgage range is designed to help make our essential workers homeowners.

  • Mortgage loans of up to 5x income, subject to affordability
  • Overtime and second job income included in overall income
  • Limited credit history considered
  • Bad credit accepted
  • Debt Management Plans (DMPs) considered

Clever Mortgages say:

Mortgages for heroes are specifically tailored for borrowers currently employed in essential public sector roles. With the lenders approach, they understand that certain professions require real people to underwrite their case, and not rely on credit scores and system generated responses.

How can we help?

If you’re an essential worker and would like to enquire about getting a Heroes mortgage or remortgage, our expert advisors will be happy to help! Just get in touch and we might be able to set you on track to finding your perfect mortgage!

*see our full terms and conditions here