Help to Buy Explained

7003Help to Buy

There are two strands to the Government’s Help to Buy scheme, Equity Loan and Mortgage Guarantee. Both are designed to help people to get on the property ladder, even if they only have access to a limited lump sum for a deposit.

Equity Loan 

The Equity loan scheme was released in April 2013 and applies to new build properties only. It is available to first-time buyers but also to those who are already homeowners and looking to move. The value of the house or apartment must be less than £600,000. While this may seem counter-intuitive it does help the housing market by enabling developers to sell properties of varying sizes and keep the housing market moving.

Buyers are required to raise 5% of the total capital as a deposit, the Government then subsidises up to 20% of the value as a further deposit on top of that raised by the buyer. This means that the buyer has access to a deposit of 25%, which in turn allows them to access better mortgage rates.

The really good part about the deal is the cost of the money that come s from the government. It is provided interest free for the first five years. The following year interest will be charged at 1.7% rising by a further 1% of that amount each year plus inflation every year after that.

Borrowers can repay the loan at any time, without penalty. The idea of this is to encourage buyers to pay off the initial loan and put the money back in the pot for the next wave of buyers.

One cautionary note about the scheme is that if you do not repay the government’s part of the loan before you come to sell the property, then the government retains a percentage stake in the property, equal to the amount of loan outstanding. This is calculated at the current market value of the house

Example

You buy a property for £100,000
You raise £5000 as a deposit
The government pays a 20% deposit of £20,000

You pay nothing back to the government and

Five years later you sell the house for £120,000
he government reclaims £24,000

Obviously if the house were to double in value, then the 20% stake doubles to, so £20,000 becomes £40,000

Not all lenders are participating in the equity scheme but you can find out more about participating Help to Buy lenders here.

Mortgage Guarantee 

This is the second phase of Help to Buy, and it came into effect in October 2013. Buyers will still need to raise 5% of the mortgage value as a deposit. The government then guarantee a further 15% of the value to bring the total deposit up to 20%.

This is designed to give mortgage lenders the confidence to lend money to buyers who would otherwise only have a very small deposit. Apart from Natwest, Halifax and HSBC, most lenders are yet to release their rates for these Help to Buy Mortgages, and are not likely to publish details until early in the New Year.

The major difference for this scheme rather than the equity one above is that this arrangement is available for existing properties and is not restricted to new build. There is still a maximum price ceiling of £6000,000, and you cannot use it for a new home, under a shared ownership scheme or to get yourself an investment property.

The administration of the scheme will be very easy for buyers. Although you will have to sign some paperwork in relation to the scheme, most of the mechanics are dealt with by the lender and the government between themselves.

Anyone wishing to apply for either of these schemes will be subject to the same credit checks as they would with any other mortgage application. So you will have to prove you can afford the repayments and have an acceptable credit record.

­Click here to Find out more about Help To Buy.

Other useful sites include the Governments site: https://www.gov.uk/affordable-home-ownership-schemes

Rightmove also have some really useful information: http://www.rightmove.co.uk/help-to-buy.html

Development Jobs Set to Boost Housing in East London

The Royal Docks is to become home a New Business District - the Biggest UK Development to Date

East London’s Royal Docks have attracted Chinese business Investment to Develop the Area (Image courtesy of the Royal Docks Trust)

The London borough of Newham is set to become the next property hotspot following an announcement by the Mayor Boris Johnson of plans to develop the land north of the Royal Albert dock as a business district set to be worth £6 billion to the UK economy. The site will be developed by ABP China (Holding), a successful commercial developer, who have estimated creation of 20, 000 jobs in this region in what will be the biggest shift east since Canary Wharf was built in the 1990’s.

The development land, which comprises some 35-acres, is situated in the heart of Royal Docks Enterprise Zone and is owned by the Greater London Authority. ABP will be aiming the majority of the business at Chinese and other Asian businesses looking to establish headquarters in our capital as a gateway to Europe. It is the first direct investment by a Chinese developer in London. When it is completed it will provide over 3.2 million square feet of work, retail and leisure space.

Mayor of London, Boris Johnson, said: “For centuries the waterways of east London were the throbbing arteries of UK trade and commerce. This deal symbolises the revival of that great era, continuing the re-invention of this once maligned part of the capital into a 21st century centre of trade and investment.

Creating a third financial district in the capital, this development will act as a beacon for eastern investors looking west, bringing with it tens of thousands of jobs and billions of pounds of investment for the UK economy.”

This will make it the largest UK development of its kind, which is great news for the borough, which has also benefited from the successful and on-going regeneration of Stratford, following the Olympics in 2012. The hope is that the site will boost local employment by some 30% and generate around £23 million in business tax alone, and in addition it is expected to act at a catalyst for further development in the area. It is certainly likely to see an increase in new homes developments to service the area as it grows.

Sir Robin Wales, Mayor of Newham said: “The Royal Docks Enterprise Zone offers an unrivalled investment opportunity and this deal further strengthens Newham’s growing reputation as an ideal destination for international business.

We welcome ABP’s ambitious vision for the Docks which are already home to London City Airport, the University of East London, the Siemens Crystal and the Excel. ABP’s proposals will bring further investment from abroad and unlock future development. It will also create benefits for local people by providing thousands of new jobs and further enhancing the waterfront for people to enjoy.

Newham will work closely with ABP and their UK development partner, Stanhope, to ensure that as many of these jobs as possible are accessible to local residents. Our successful Workplace jobs brokerage scheme is ideally placed to ensure this happens.”

Developers, ABP, have recently completed a large development in Beijing, and they are currently working on a 75 million square foot development in Shenyang in north-eastern China. They will be working with UK developers Stanhope and architects Farrells, and they predict the first occupiers will move in in 2017.
It is the latest in a string of investments in the area including exhibition space at the Siemens Crystal Centre, Emirates Air Line – the UK’s first urban cable car, and new homes development along Great Eastern Quay, and Silvertown Quays. There are also future plans to create the UK’s largest floating village at Royal Victoria Dock. Transport links to the area will be enhanced by the new Crossrail station coming to in 2018.

Chairman of ABP, Mr Xu, said: “I am very pleased and very proud that my company ABP has reached this agreement for the Royal Albert Dock with the Greater London Authority. This project will be hugely significant for both the Chinese and UK economies.

My vision is to develop a world class international business district which will initially target Asian businesses to help them secure a destination in London, which in China is seen as the gateway to both the United Kingdom and the wider European economy.  Our plans aim to strengthen trade between east and west, provide new local jobs and deliver benefits for the wider London and UK economy.”

Tenant Admin Fees Guide for Tenants

Estate Agents fees need to be transparent

Letting Agents Need to Ensure Their Tenant Admin Fees are Transparent

Tenant Admin Fees are a Fair Way to Do Business

Housing Charity Shelter would like to see letting agents fees outlawed in England and Wales having already persuaded the Scottish Parliament to scrap tenants’ fees. We want to explain why this could be a bad thing for tenants.

The job of a letting agent is quite time-consuming and, as we know, time is money. It is expensive to rent property to tenants. There are many costs involved in setting up tenancies, and obviously the majority of these costs are borne by the landlord. However there are costs that link directly to a tenant including references, legal documents, and the time spent with tenants finding just the right property for them. All of these are legitimate reasons that the tenant should bear some of the costs of renting property, and are often charged as tenant admin fees, but perhaps the most relevant one is to ensure that the tenant is fully committed to the process.

Where a tenant does not pay any fees but decides to take a rental property the landlord often suspends marketing the property while the agent takes out references. (Even where marketing continues the agent is accruing costs by keeping that property on the market in terms of advertising and conducting viewings). There is nothing holding that tenant to the property and so in the meantime he finds another property that suits him just a bit better and so off he goes leaving the first landlord and agent high and dry.

Rising Costs Mean Rising Rents

Who should bear the costs of referencing the tenant, and any other legal and administrative work that has been undertaken by the agent? If it is the landlord then he will put his rent up, if it is the agent he will put his fees up, then landlord will then put the rent up.

With no fees charged to them the tenant could switch properties several times before committing himself, with no financial penalty at all. Most landlords will have experienced this problem even where the tenant has had to lose a couple of hundred pounds to move on to another property, so imagine how much worse this will get if there is no financial commitment on his part.

There is a myth that all landlords are rich, that all agents are rolling in money, and that all tenants are honourable people who are taken advantage of by sharks.

Most people are reasonably honest and respectable, and I include landlords, agents and tenants in this generalisation, but of course there is a measure of self-interest driving all of us, so if there is no concrete commitment in place there will be more timewasters costing the industry money, and so overall prices will rise, and this will mean that rents will rise.

In our opinion the only way to deal fairly with this situation is for agents to charge a reasonable fee for the work they do; to be open and transparent with their fees; and for everyone to keep to their side of the bargain.

Guide for tenants

  • Ask your Letting Agent what fees they charge before you view a property.
  • When you have found a property, ask for a written break-down of how much you will pay for the specific property you want to rent.
  • Check if the Agents charge for renewals, check out fees, and any other miscellaneous fees.
  • Make it clear to the Letting Agent that you will not pay for any charges that they do not detail in this initial exchange.
  • Ask for confirmation from the Agent, in writing, of all monies that you will be expected to pay including the rent up front and deposit so you are absolutely clear in your own mind what you will need to pay for.
  • Don’t commit to renting a property unless you intend to move into it.

It will be interesting to see how the Scottish system works out over a period of time, and whether in fact tenants are any better off due to this change in legislation north of the border.

If you want to find out more about becoming a tenant, and avoiding tenancy pitfalls check out the Top 10 things tenants should know, when renting a property on DIY Doctor’s project pages.

You can read more about Protecting yourself from Rogue Agents if you are thinking of renting a property.

First Sale for Riley Marshall

First house sale for Riley Marshall

Riley Marshall Directors Stephen Riley (left) and Bruce Marshall (right) with sales negotiator Shane Sutherland celebrating completion of their first sale

As a well-established Letting Agent with a great reputation for letting houses and flats quickly and professionally in South East London, Riley Marshall have moved into sales, and they are just celebrating their first success.

Following the creation of a new letting department the team have just cracked open a bottle of champagne to celebrate their first completion. The landmark sale is expected to be the first of many, as the house sales market is flourishing in South East London.

It made complete sense for us to be offering this service to complement our existing business, and increase the range of services we can offer to our clients” explains Director Bruce Marshall, “We knew the service would be in demand, and we are pleased at how quickly the sales department is growing following our soft launch earlier this year”

Riley Marshall have offices in Surrey Quays but they are also well aware of the importance of the internet when it comes to marketing property effectively for their clients. London is truly an international city, so it is vital to have a vibrant online presence to ensure that the office is open globally at all times.

Director Stephen Riley is busy updating the website at the moment and the new site is due to be launched later in the summer, it will boast a host of new features to ensure that customers get exactly what they want online. Stephen says “we know our customers are already happy with the service we offer in person and we want to match that with a new interactive website, that brings the business right up to date”.

If you want to talk to Riley Marshall about selling or renting a property please get in touch with us on 020 7394 1160. We are particularly keen to hear from developers, as we have an excellent track record of beating expectations when it comes to working with local and internal development companies.

Does Your Estate Agent Offer Tenant Screening Services?

Visas and Passports

Private Landlords, Letting Agents and Estate Agents Should Check Passports and Visas to Stay Within New UK Immigration Control Legislation

UK Private Landlords to be Responsible for Border Controls

New legislation announced in the Queens speech last month outlined an immigration control measure which obliges Landlords to ensure that their tenants are legally entitled to be in the country.

Most landlords will be carefully checking their tenant already. Including ensuring that their tenant is in employment, that they are who they say they are, and that they have good references from previous landlords, to protect their own interests in terms of getting the best tenant for their property.

However what is not clear is how much responsibility the Government is going to expect the average landlord to take, when checking the legal status of tenants and their rights to be in the country.

As a responsible Letting and Estate Agent Riley Marshall is already checking that they only deal with legitimate tenants. We have used our insider knowledge to put together these guidelines to help you stay within the law when it enters the statute books. To help you we examine what is best practice when finding and vetting tenants for your property.

If you are not using an estate agent how are you getting references for your tenant?

An agent will often use a specialist reference agency to provide a rounded profile of the tenants background and credit history which should also include checking their status in terms of their right to be in the country and to work legitimately. You can find out more about how a good estate agent will help you with references and other rental processes of finding and vetting tenants who will be right for your property, in our series ‘What your Agent Does for You’.

So what documents should landlords be checking?

Ask to see a passport

  • Check the photo and the dates appear to be legitimately linked to the person you have in front of you,
  • Take a copy and file it safely.

Check for a work Visa

  • If the person is moving here from abroad they may need a work Visa – Using their passport to identify their nationality check on the UK Border Agency Website to see what documentation they need.
  • Most citizens of EU Countries do not need a Visa or Permit to work in the UK but Bulgarian and Romanian citizens do need authorisation at the moment – this is likely to change though so it is best to check the website.
  • People coming into Britain from the European Economic Area and Switzerland do not need permits or Visas to live or work here (except for Bulgaria and Romania as mentioned above). This area covers most EU countries but includes some that are not in the EU and excludes some who are – Iceland, Norway, Finland, Sweden, Ireland, United Kingdom, Denmark, Germany, Netherlands, Belgium, Luxembourg, Austria, Portugal, Spain, France, Italy, Greece, Liechtenstein, Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, Slovakia, Bulgaria, and Romania.

Check the status of all tenants

  • If one tenant is coming over to work and their family is joining them ask for their passports too.
  • Check with the Border Agency website what rules will apply to them when they are in the country.

Ask to see proof of previous addresses in the UK

  • This is not a fail-safe measure of being legal in the country but it helps build up a picture of whether they are legitimate or not.
  • A recent Council Tax or Utility Bill will prove that this tenant has been a resident in the country prior to moving into your property.

Ask for previous Landlords References

If there is any doubt about how legitimate a previous landlords reference is then you can always ask for earlier landlords references. This can be useful because they have no axe to grind in terms of being totally transparent about their dealings with a tenant.

However if your tenant has just moved here from abroad this may prove difficult in terms of being able to contact the landlord and verify who they are.

One Final Note of Caution

Employers are already expected to check these conditions before employing overseas workers, but just as they are not allowed to discriminate between workers because of where they come from, there is little doubt there will be similar expectations of Landlords when this legislation becomes concrete.
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Court Ruling is Good News for landlords and tenants

Landlords of rental properties to let can feel secure in taking rent in advance

Court ruling allows landlords to feel secure about letting to overseas tenants

The latest ruling in the case of Johnson vs Old clarifies the distinction between rent paid in advance and security Deposits held in case of loss or damage to the property.

You will probably have been aware of the ongoing case between Johnson and Old, which questioned whether money taken in advance for rent was in fact a Deposit in the eyes of the law – and as such should be protected by the landlord in an approved scheme.

For those not in the know, in this case the tenant could not prove a reliable credit history before letting the property. So she was asked to pay the first 6 months in advance. After renewing a couple of times (paying six months rent in advance each time)  the tenancy finally became a periodic tenancy, and the tenant simply paid each month in advance. Later the tenant fell into arrears and when the landlord served a Section 21 notice the tenant argued that it was invalid, because the initial 6 months rent paid in advance was a ‘deposit‘, and so it should have been protected. In the initial case the judge agreed with the tenant and ruled that it was a deposit. As it had not been protected the landlord would then have to return the whole 6 months rent and may have been liable for an amount up to three times that initial amount.

This is good news for everyone involved in letting, the landlord, agent and the tenant all benefit from the decision of the court of appeal.

Paying six months rent in advance where tenants who do not fit into strict financial guidelines is common practice in the industry. It allows them to secure property if there are credit issues; where tenants are coming in from abroad; or have just started work etc. to be able to rent a property when they don’t tick all the boxes in terms of financial references. This money is never meant as a tenant’s deposit it is simply to ensure rent is paid during the fixed term of the contract, where it is harder for a landlord to accelerate a Notice for Possession through the courts if it is necessary because of non-payment of rent.

If landlords felt that this was not a secure and simple option for them they would be unlikely to rent property to tenants in this position, which would be bad for the rental sector, as one of the reasons people are renting is because they have financial irregularities or they are in a job which moves them around the globe regularly. This would reduce the market for Landlords and their agents to be able to let to, and it would reduce the stock of properties available to tenants.

We can now all get back to the business of renting property

We recognise the need to secure tenants deposits at the beginning of the tenancy, and to disburse them appropriately and transparently at the end of the tenancy, and we always ensure this is done at Riley Marshall. We welcome this sensible ruling on a cynical suit, brought by a tenant who could not meet her financial commitments, and so turned on her landlord to shift the blame.

If you want to find out more about deposits and the procedures for protecting them please go to our blog ‘How secure is your deposit?’. We are always happy to answer questions about the letting process, renting property, deposits or references. We rent and sell property around South West London. So if you are a landlord or a prospective tenant please call us on 020 7394 1160.

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The great council house sale – news now in

1

Council Houses are sold off by the Government

The government has announced that the “Right to Buy” sales of council houses to tenants are at their highest level since 2007.

In April it will be 12 months since the government set out measures to encourage tenants to buy their council homes. The scheme introduced by the coalition raised the potential discount for tenants from £16,000to £75,000 in some areas. This has led to sales of nearly 3,500 homes, an increase of 30% on the previous financial year.

The ‘Right to Buy’ scheme offers tenants discounts of up to 60% of the value for a house and 70% for a flat, with a maximum discount of £75,000.

The final quarter of last year saw the biggest rise in the rate of sales – with tenants buying 2,010 properties between October and December 2012, double what was sold in the previous quarter.

Thatcherite legacy

This mass sell-off of council properties was last seen in the Thatcher era, and many people are worried that the policy will lead to a shortage of council and other affordable housing, however the government deny this.

According to the Government the resulting income of £210 million will be ploughed back into providing affordable rental housing.

The Market is picking up

The housing market has started to see some general improvements recently as lenders have been offering some of their lowest ever mortgage rates.

The New Buy scheme, launched last Spring, has helped to boost the housing market. In fact more than 3,000 homes also been reserved under the scheme which allows first-time-buyers to buy with just a 5% deposit.

The availability of mortgages has also increased since the ‘Funding for Lending’ scheme was initiated by the Government in August 2012. This basically gives lenders access to cheap finance in order to help borrowers to gain a mortgage.

This Government do seem committed to using the Housing Market to drive the economy forward and out of recession.