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Quarter Of Potential Property Investors Don’t Know How To Apply For Buy To Let Mortgages

New Research Discovers That Quarter Of Potential Property Investors Don’t Even Know How To Apply For Buy To Let Mortgages

New research by a specialist mortgage lender has discovered that an amazing 28% of would-be property investors don’t know how to apply for a buy to let mortgage in order to finance their property purchases.

The figures show that 1 in 4 potential property investors considering investing in property to boost their retirement income don’t know how to apply for a buy-to-let mortgage to get started on their property investment journey.

The research, conducted by specialist mortgage lender Kensington, also found that 54% of people approaching retirement age would consider investing in property using buy-to-let mortgages in order to help increase their income in retirement, but many didn’t know what they needed to do or what evidence to provide in order to apply for the correct type of mortgage.

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Landlords Warned To Get Ready For Universal Credit

Landlords Warned To Get Ready For Universal Credit  Chaos!

National Universal Credit Roll-Out
Starts February 2015 

Department of Work and Pensions (DWP) Secretary, Iain Duncan Smith surprised commentators with an announcement that Universal Credit (UC) will be rolled out to all Jobcentres and local authorities in the UK by February 2015 following the apparent success of the pilot scheme that was originally trialled in the North West.

Many Universal Credit detractors predicted that nothing significant would happen, before next year’s General Election, however, Iain Duncan Smith stunned everyone by announcing that Universal Credit will be rolled out to all Jobcentres and local authorities across the country, starting February 2015.

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Mortgage Market Review Already Causing Delays For Borrowers

Mortgage Market Review Already Causing Delays For Borrowers

Mortgage Market Review Already Causing Delays For Borrowers

Would be residential property buyers are dismayed about the change of the rules on residential mortgages, with strict lending criteria tightened following the introduction of the Mortgage Market Review (MMR).

Since 26th April 2014, mortgage lenders have been required to carry out much more detailed checks of a borrower’s financial situation to be sure that they can truly afford to purchase and continue to afford the property, both now and in the future.

The introduction of the MMR is supposed to help regulate the residential property purchase market and does not yet apply to buy to let mortgages, but that could happen in time.

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Mortgage Market Review Hits UK Property Market

Mortgage Market Review Hits UK Property Market

Mortgage Market Review Affected Housing Market Before Launch

The new regime for the approval of mortgages came into force over the weekend (26th April 2014) but even before it was officially launched it was having a dramatic effect on applications, with loan offers being carefully scrutinised and the impending process had lenders asking even more questions before approving any mortgage offer.

I experienced the vagaries of the system myself, when taking a call from a lender the day before funds were due to be released, I was asked to provide even more details than ever before on a loan application, culminating in further delay to purchasing, and the details I had to provide and verify could have been done weeks before.

The lender said the additional information was in order to comply with MMR and this was before the official launch date. The property I was purchasing should have completed last week, before the MMR introduction date, but the delays caused by the lender requesting verification of the additional information required to process my loan meant that the loan process was delayed and resulted in dragging things out, until 9am today, when my solicitor called me to say that the purchased had finally completed.

The additional requirements of the MMR will result in the death of quick purchasing by property investors, however, I now know that in order for loans to be agreed that I have to provide extremely detailed accounts, financial projections, and provide verified proof of everything I have ever done in order to prove affordability.

The personal finance industry publication Mortgage Strategy says 7 out of 10 mortgage brokers reckon that it will be harder and slower for prospective purchasers to get a mortgage loan under the new MMR regulations.

For all new mortgage applicants it means not only providing evidence to the lender of all income and earnings including payslips or audited and verified accounts for the self-employed, but also requires providing details of all spending, too.

Mortgage applicants must itemise and cost spending on things they cannot do without, as set out in a list provided by the Financial Conduct Authority (FCA), including food, household cleaning and laundry, all heating costs, water bills, telephone, essential travel and existing property charges such as council tax, buildings insurance, ground rent and service charges for leasehold apartments.

Applicants must also disclose discretionary spending on clothes, household goods, personal goods such as toiletries or leisure activities.

The FCA says mortgage applicants must itemise other debts such as credit card bills, outstanding loans, child maintenance and alimony payments.

Mortgage lenders and finance providers must consider how interest rates are predicted to change over the next five years, to gauge the affect on borrower’s mortgage repayments. If payments are likely to go up then the lender will check that the borrower can afford it based on disclosed financial commitments.

And if mortgage terms extend into a borrower’s retirement, the lender has to check on pension income predictions too, in order to judge continued affordability.

Will Landlords Be Safe Under New Rental Rules?

Will Landlords Be Safe Under New Rental Rules?

Tenants Charter could put tenants in a

stronger position over PRS landlords

Regulations which hand private rented sector tenants more power and rights to request longer leases have been greeted with cautious optimism, although the new code of practice, intended for launch by the Government, would bring in much-needed protection for many tenants from rogue and inexperienced landlords.

The proposed Tenants’ Charter, could mean honest and hard working landlords are at a disadvantage and could be put off from renting out properties.

The results of the introduction, could lead to another shortage of available rental stock for the UK property market leading to rent increases and landlords becoming trapped by more stringent legal binding agreements.

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New EU Rules Will Cause Mortgage Rate Confusion

New EU Rules Will Cause Mortgage Rate Confusion

European Ruling Set To Make Mortgage Rates Harder To Understand

New European rules could make mortgage rates even harder for customers to understand as Euro bureaucrats want to introduce a new way of calculating interest rates on residential property mortgage loans and experts are warning that this could be a recipe for confusion.

Under the new proposed EU directive, mortgage lenders would be expected to tell borrowers the maximum interest rate they have charged over the past 20 years, and display this figure on all of their literature.

However, industry experts say customers are already confused by the rates that lenders are forced to display, and that this will make it even harder for them to understand mortgage rates.

David Hollingworth from mortgage broker, London & Country, said:”I think that there is a chance that borrowers become overloaded with information and APR rates that mean little to them, and so risk them being ignored altogether, the extra information could lead to more customers failing to shop around and remaining on expensive standard variable rates (SVRs).

The EU credit directive concerning the mortgage change is expected to be approved later this year. It will compel lenders to display a new annual percentage rate (APR) on all of their literature. This will be calculated using the highest level that the lender’s SVR has reached in the previous 20 years.

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Scotland Leads Way On PRS Regulation

Scotland Leads Way On PRS Regulation

Better Regulation Of Scottish Private rented Sector On Way

As we reported on Wednesday, the Scottish government reviewed its strategy on PRS regulation on the 30th May and more new legislation will definitely be on the way, however, landlords and letting agents will be an important part of the consultation

The Scottish Government said that it “does not have a monopoly on good ideas. In order to deliver on the vision for the sector, we will engage with all of our partners on their innovative ideas.”

The Scottish Government PRS regulation strategy intends to improve the quality of the private rented sector in Scotland, including redefining the landlord registration scheme in order to target the worst offenders.

In 2011 it was estimated that some 11% of all households were within the PRS and the Scottish Government predict that this number will increase as there are already 500+ letting agencies north of the border who are managing over 150,000 rental properties, estimated to be about half the actual number.

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Confusion Remains Over Displaying EPC's

Confusion Remains Over Displaying EPC’s

As of the 9th January 2013 the laws regarding Energy Performance Certificates (EPC’s) changed, however some landlords have stated that the regulation changes are still causing some confusion.

An EPC is a certificate stating how environmentally friendly a property is. By law an EPC must have been commissioned on all properties prior to marketing for sale or to let, and must be obtained within 7 days of the property first being marketed.

If an EPC is not obtained within 7 days, a further 21 days are allowed providing it can be proven that all reasonable efforts were taken to obtain the EPC beforehand. It is the responsibility of the seller or landlord of the property to obtain the EPC not the Estate Agents.

Although changes have been made there are certain similarities between the new laws surrounding EPC’s and the previous regulations.

For example, EPC’s are still required for all properties with the amendment that listed buildings are now exempt. An EPC must still be displayed on all documents however; the requirement to put the front page of the EPC into advertisements and property particulars has now been replaced with a requirement to insert the asset rating instead.

A summary of changes that have been made due to the new legislation are as follows:

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Avoid Tenant's from Hell

Avoid Tenant’s from Hell

As thousands of people struggle to sell their properties in the current financial climate, many are turning to renting them out in order to move on with their lives. However this comes with its own problems and responsibilities that many people are not really prepared for.

Being a landlord means you have legal responsibilities towards the housing of others. In order to stay on the right side of the law, provide a place where people want to live and avoid tenants from hell, it is recommended that landlords should seek to use recognised and trusted professional services to help them operate their rental property business and educate themselves before it’s too late.

The most common concerns faced by new landlords regarding offering a new tenancy are:

  • Background of tenants
  • The rent / rent arrears
  • Property maintenance
  • Insurance
  • Legal compliance

Tenant Referencing

Every landlord wants to avoid the tenant from hell, someone who doesn’t respect where they live, the neighbours or the landlord and who doesn’t pay the rent. Tenant referencing can help landlords avoid bad tenants and professional referencing should include:

  • Credit Check
  • Employers / Accountants Reference
  • Landlords / Managing Agent’s Reference
  • Financial Review
  • Bankruptcy Search
  • Anti Fraud Check

Rent Guarantee

With the current financial unrest still being felt by many people, employment uncertainties and austerity measures still emerging, it can be a worry for landlords and their tenants about being able to pay the rent on time.

The rent can be guaranteed providing that the conditions of the rent guarantee insurance are met, usually meaning that the applying tenant must be credit checked and properly referenced prior to the start of the tenancy.

Property Maintenance

Landlords may need to provide repairs or conduct regular maintenance on their rental property in order to maintain their income producing asset. They may know a bloke from the pub that can do the job but it is recommended to use recognised tradesmen to do any work on the property. Repairs will be done to the correct standard and tradesmen should be professionally registered with their respective federations to ensure quality. Any repairs involving gas can only be conducted by a GasSafe registered engineer.

Insurance

Landlords need to ensure they have adequate insurance for the protection of their rental property, many mortgage providers demand proof of insurance. There are a multitude of different insurance products on the market but it is recommended that landlords protect the landlord’s contents within a property as well as the fabric of the building. This means fixtures and fittings such as the kitchen and bathroom suite are insured. Find out more here

Legal Compliance

Self managing landlords need to ensure they are compliant with over 70 separate pieces of government legislation and a raft of local authority regulations. There are a number of useful governement resouces that can be found on the web, however, it is recommended that landlords seek professional property management agents to ensure that all the correct legal requirements are met.

Following on from Mike Clarke’s post on Spotlight on the 20th September – More Anger Over English Planning Law Changes I came across this story in last week’s press and thought I should share this here so that it can be read by other landlords…

The Government has insisted there is no “malign intent or hidden agenda” in its planning reforms in the face of a huge outcry over the proposals.

Adopting a more conciliatory tone than that shown by ministers in recent weeks towards opponents of the reforms, planning minister Greg Clark said the current public consultation over the proposals is genuine.

Ministers have previously expressed a determination to “win the battle” over the draft reforms, which slim down 1,000 pages of policy to 52 and focus on a “presumption in favour of sustainable development”.

The Government says the changes to the planning system are needed to boost growth, give communities more say in their local area and protect the environment, but concerns have been raised they could lead to a return to urban sprawl and damaging construction

Mr Clark admitted that some of the draft National Planning Policy Framework may not be expressed in “the clearest way” but insisted there is no Government agenda to change the nature of planning.

At a seminar organised by the British Property Federation, Mr Clark said: “The idea that the Government and I would have any part in introducing a set of reforms that have an impact on the ability of local people to express themselves and did anything to undermine the protections to the natural and historic environments that all my life I’ve been passionate about is simply not the case.”

He said the presumption in favour of sustainable development – which opponents say has not been explicitly defined – is not intended to introduce a “loophole” through which development could be imposed on local communities.

Countryside and environmental campaigners have claimed the reforms tip the balance too far in favour of short-term economic growth instead of protecting the environment, and ministers had labelled those who criticised the planned changes as “semi-hysterical”, “left-wingers” and of “nihilistic selfishness” for opposing housing development.

Prime Minister David Cameron, however, wrote to the National Trust on Wednesday assuring them that sustainable development is about maintaining balance between economic, environmental and social concerns, sentiments echoed by Mr Clark.

The planning minister said that when “1,000 pages is cut down to a document which is 50-odd pages it is inevitably the case that not everything is expressed in the clearest way, but that doesn’t signal any malign intent or hidden agenda to subvert the process”.

Read the full Daily Express article here

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