You could try and co-own with a friend or two (or three). Between you, you may be able to raise a sufficient deposit and borrow enough under a mortgage to purchase a property between you. Property can be legally held in the names of up to four people - if a group of four friends or colleagues pooled their savings together they may find that they could obtain a mortgage and afford a reasonable start on the housing ladder. Based on the premise that property prices generally will go up over time, after a few years, everyone has built up more equity in the property and has a larger deposit with which to go off and fund a purchase in their own name if they want to.
However, what happens if we fall out or someone wants to move on but others don’t want to sell the property? All the property owners can enter into an agreement known as a Declaration of Trust. This agreement sits alongside the ownership and sets out who put how much in, how any sale proceeds are to be divided in the event of a sale and you can set down how matters are to be dealt with if one party wants out of the arrangement but others want to retain ownership of the property. This agreement should be set up as part of the house buying process and terms can be agreed before the exchange.
Can’t stand the thought of living with others? Then consider the humble houseboat, not the most spacious - but an imaginative alternative. This is a seemingly more affordable option. In the five years to 2015 official figures suggest London waterways alone have seen a 50% increase in boat numbers. There are static or roving houseboats. Static houseboats having a permanent mooring site and roving houseboats which move from site to site but can remain in almost any location for up to two weeks.
Running a houseboat is not without costs or disadvantages. You would need to consider mooring fees, insurance, boating waterway licences, safety certificates and fuel & maintenance costs. This is in addition to the cost of either purchasing the boat outright or monthly renting. Don’t forget the day to day jobs also such as emptying the lavatory. It is not a lifestyle for everyone.
Another alternative is flat pack housing, for the flat pack generation. This can be a relatively cheap alternative. Renato Vidal, from Italy, has created an affordable flat pack folding home which could be yours for just £24,800 and takes less than a day to install once on site. Providers will often offer a delivery only service where you construct the property yourself, a bare-bones option where they will deliver and make weather-proof but it is up to you to finish off or a full build where the property is built, fitted and connected by the provider. You can then build according to your budget. The main issue here for most will be locating and acquiring the site on which to build along with the associated costs of connecting the property to services and utilities. That alone may put the price of a flat pack property out of reach. Mortgages are also harder to come by on such properties.
It’s common knowledge these days that the average age at which people buy their first property is rising. Average house prices are increasing, and have been doing so steadily for years. Many renters find that they could afford mortgage payments but struggle to save the money required for a deposit, putting the day at which they can buy property distinctly out of reach.
The newspapers are full of “the Bank of Mum and Dad” helping kids out with their property buying - but no one talks openly about the other side. The parents who cannot afford to help their children out during their lifetime for a variety of reasons. They are likely to own property which was bought for tens of thousands of pounds (as opposed to the hundreds of thousands it costs now). It seemed like a fortune when they initially bought, but now they are sitting on property worth hundreds of thousands of pounds. They may be cash-poor but property-rich in that respect. It also means that, upon their death, their children can sell the property and walk away with a sizeable deposit.
There are other options. Most people expect to buy property solely on their own or to buy property with their spouse or partner as somewhere to live together. What is not often considered is the possibility of buying a property with a friend or colleague. Property can be legally held in the names of up to four people. If a group of four friends or colleagues pooled their savings together, they may find that they could obtain a mortgage that bit more easily and afford a reasonable start on the housing ladder. Based on the premise that property prices generally will go up over time, after a couple of years, everyone has built up more equity in the property and has a larger deposit with which to go off and fund a purchase in their own name if they want to.
What happens if they fall out or someone wants to move on but others don’t want to sell the property? All the property owners can enter into an agreement known as a Declaration of Trust. This agreement sets out who put how much in, how any sale proceeds are to be divided in the event of a sale as well as potentially set out the basis upon which one party can “buy out” the other party’s interest. This agreement is often prepared as part of the house buying process.
There are many who have only been able to get on the property ladder due to receiving an inheritance and can see no way they could have achieved property ownership without it. There are many who cannot see the point in struggling to save an unrealistic amount for a deposit when they know that in the fullness of time the issue will resolve itself in the form of an inheritance. Granted, the anticipated figure might be somewhat reduced if the parents have had to fund nursing or care home placements, but a significant number of purchases will be inheritance funded.
Whether you are a first-time buyer, multiple property owner or looking to help your children get onto the property ladder, there’s a mortgage out there for you. At least, that’s what we’re led to believe…
In fact, broadly speaking, mortgages fall into one of only two types - repayment and interest-only.
Under a repayment mortgage, your monthly payment will clear both the month’s interest on the loan and a small part of the capital. The end result being that, when the final payment is made at the end of your agreed mortgage term, you own the property free and clear.
Under an interest-only mortgage, the monthly repayments simply clear that month’s interest that has accrued, however, the capital (the original loan amount) remains untouched. At the end of your mortgage term, you will still have to repay the original loan amount, and the sum will be due to be repaid in full immediately.
Monthly repayments on an interest-only mortgage are typically cheaper than those under a repayment term. First-time buyers tend to opt for interest-only as they appear to be the more attractive, cheaper option. If finances are tight, some borrowers change their mortgage to interest-only, telling themselves at the time that it’s only for the short term and they will change back when finances aren’t so tight. People who do so are unlikely to put repayment plans in place due to the cost. Borrowers believe they will switch to a repayment mortgage when the current deal comes up for renewal, or when finances get easier. The reality is they never do because interest-only will always be the cheaper monthly option.
Some of you may be wondering what an HMO is? Put simply, your home is a standard HMO if both of the following points apply:
Furthermore, your home will be classed as a large HMO if all of the following elements apply:
For clarity, a household is either a single person or members of the same family who live together. A family includes people who are:
HMOs are an attractive proposition for residential landlords as the yield is generally higher than that which can be realised on properties in single occupation. However, there is additional administration which must be adhered to fully.
If you do let an HMO, under current rules and regulations there is a mandatory need for a licence for large HMOs. As of 1 March 2018, there will also be an additional licensing requirement for standard HMOs. This additional licence will only apply in the following Havering wards: Brooklands, Elm Park, Gooshays, Harold Wood, Havering Park, Heaton, Mawneys, Pettits, Rainham and Wennington, Romford Town, South Hornchurch and Squirrels Heath.
Sloane Stanley Estate Trustees v Mundy  UKUT 223 (LC) is a case that challenges the system of lease valuation, specifically the ‘relativity graphs’ used by surveyors and others in the property industry to calculate the value of the property following the increase in the lease. It is the position of the applicant that the existing models are currently too generous to the freeholder. In May 2017, the Upper Tribunal (Lands Chamber) ruled against a new relativity graph proposed by the applicant which would have reduced the cost of lease extension premiums for flat owners.
Leases are known as ‘wasting assets’ as they diminish in value as they expire over time. Traditionally, mortgage lenders wouldn’t provide loans on leases below 70 years, although over the last ten years many lenders have increased this with some lenders requiring 85 years of unexpired term; 5 years beyond the point at which the ‘marriage value’ comes into effect. The marriage value is the additional premium on lease extensions paid to the freeholder that reflects the increase in the value of the property once the lease has been extended.
As a result of the increased lease extension premiums, many leaseholders who have allowed their leases to run down now face inflated costs when looking to extend. In some cases, the premium increases to the point where the property has to be sold at a reduced cost to allow the purchaser to immediately extend the lease at the same time as their purchase to obtain mortgage finance.
Whatever the result of Mundy v the Sloane Stanley Estate, here at Pinney Talfourd we advise all leaseholders to look into extending their lease long before it reaches 85 years. If you have allowed your lease to run down beyond this point, then it really is a ‘sooner rather than later’ scenario to make sure the property is marketable when you look to sell the property or extend the lease. If the legal challenge is successful, we expect changes to the way that leasehold premiums are calculated that could benefit leaseholders - but it may take time for any changes to come into effect.
The big announcements are that stamp duty will be abolished for first-time buyers on property purchases up to £300,000. The Chancellor has also confirmed that in areas of high-cost housing where property purchases are over £300,000 (but under £500,000), the first £300,000 of the purchase cost will be free of stamp duty.
While we can be certain that any reduction on stamp duty is good news for first-time buyers, there are probably individuals out there who have questions as to whether they qualify for one (or both) of the above initiatives. We’ve attempted to assist by answering some of the more pressing questions below.
The government guidance confirms that a first-time buyer is defined as “an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world, and who intends to occupy the property as their main residence.”