faster-payments

Why Fast Payment is Everything

In the world of bridging and online lending, getting finance fast is key for everyone involved. Everyone wants to do business quicker and faster these days and the old days of going to the bank, filling in forms and posting them off and waiting weeks for a response is just unthinkable.

In the bridging industry, people want that fast finance to secure the property they have in mind. For buy to let investors, they are looking to complete on a property with the funds ready, before a competitor or another buyer comes and gazumps them. The company or individual will have plans to renovate and do up the property for the purpose of reselling it or renting it out to tenants.

For the purpose of auction finance, speed is everything. Those that have bought a property at auction will typically have 28 days to come up with 90% of the purchase price. Sure, most people will be able to dip into their savings or profits from other investments or also use money from other investors, but whether it is 20% or 50% of the property finance, they need funds and they need it quickly.

Realistically, most of the bridging companies we feature can actually transfer funds within the space of the just a few days. However, it is getting all the relevant paperwork and sign off that takes time between the you, the lender and your solicitor. Below we give some of our top tips to make the application and funding process faster

 

How To Make the Application Quicker

Finding the right loan product: Well, firstly you have to find the right loan product and you have to understand exactly what you need. If you are looking at construction costs and refurbishing a property, you will more likely need development finance rather than bridging. Therefore, you should not be wasting time researching bridging providers and instead find development specialists like Castle Trust and UTB.

Using an impartial broker like Octagon Capital can help to make your life much easier. Our team has seen every type of application and scenario under the sun and should be able to tell you very quickly exactly what you need. We regularly get applications asking for one thing but needing another, so narrowing down your search can certainly speed things up, especially if its quick loans UK that you are looking for.

Complete a survey beforehand: Most lenders we work with need a RICS survey completed in order to process your application. This obviously needs arranging and setting up an appointment with a professional to come visit your property in question. Surveys from a RICS qualified surveyor are valid for several months until they have to be renewed or a new appointment is required. So to make your application quicker, you can take the initiative and arrange a survey before you have applied or as soon as possible. You will need to fit the bill of this survey yourself and typically, the bigger the property, the more expensive it is - at a maximum of £3,000.

The downside is that if you organise the survey during the application process, the lender will appoint the surveyor and include the cost in the overall loan terms, allowing you flexibility to pay if off much later.

But on the plus side, a surveyor not only gives you a solid valuation of your estate, it also points out any potential flaws or issues with the property which you may have big plans for. Things like asbestos, subsidence or construction issues could save you serious time and money in the long run - so there is certainly an advantage of having a surveyor earlier rather than later.

Get your paperwork ready: Most loan companies will request information about to confirm your identity and address. Having copies of your pay-slips, bank statements and utility bills at your address for at least 3 months can only come in handy when making your application. No need to scour around looking for them if you have them already printed and raring to go. But make sure that they are recent and not ones from last year or a previous address or employment.

Similarly, for those regulated loans that require credit checks in order to approve your application, you can make sure that you are on top of this by checking your credit report beforehand. There are free trials available on the likes of Experian and Noddle and then cost is just a few pounds afterwards per month, or you can always request a one-off statutory credit report for just £2.

You may find that in fact you have some anomalies on your report that are bringing down your credit score and actually there are some things you can do to improve it. For instance, removing any store cards or credit cards that you do not use is worthwhile as it means you have less risk of doing into debt or overspending. For the very least, you should make sure that you are on the electoral roll as submitting your address with the local authorities makes you more credible when applying for a loan.

Do your homework: Some lenders we work with need to see a business plan or some kind of proposal with your plans for the property. As a minimum, you should have a balance sheet with your estimated costs and potential profits. This means getting estimates and quotes for builders, furniture, electrical, architects, gardeners and more, prior to making your application. If you have not got this information handy and available already, it simply slows down the process of getting your funds.

Depends on the amount: Understandably, the more you wish to borrow, the more checks that need to be carried out (typically). If you are borrowing a minimum amount of £50,000, this may be easier for the lender and bank to transfer to your account in one lump. However, if you are applying for £10 million or £20 million, this may require more checks and procedures in order to transfer the money to your business.

Depends on the project: If you are a homeowner moving into another house that is already built, this may require less checks and surveys than something that is just a plot of land. Again, if there is less work for the surveyors and lenders to do, this will fast track your funding.

For more information, read the FCA's policies on making and receiving payments.


first-time-buyers-help-from-parents

Do First-Time Buyers Rely On Parental Support?

As many of us are fully aware of, getting onto the property ladder in the UK can seem an almost impossible feat. The Chancellor Phillip Hammond announced in the budget released in November that first-time buyers will now be exempt from paying stamp duty with immediate effect (or only paying for a property worth £500, 000 or more, previously, stamp duty was required for all residential properties above £125,000). However, whilst a step in the right direction, for many prospective home-buyers, the situation remains difficult.

Indeed, research conducted by the University of Cambridge and Anglia Ruskin University has shown how numbers have dropped considerably when it comes to getting on the property ladder. Home ownership has fallen by more than half in the last 25 years. For those aged between 25- to 29, this number has fallen from 63% in 1990, to 31% in recent years.

As a result, many are turning to their parents to help them afford their own home.

How many first-time buyers receive help from their parents?

In a report by Legal & General, they predicted that by the end of 2017, nearly £6.5bn will be loaned by the bank of mum and dad to help their offspring get their foot onto the property ladder, an increase of over 30%.  It is a historic high.

In even more stark statistics, over a quarter of homes bought this year in the UK were financed by parents. In fact, the growing amount of mums and dads providing financial support to their children means that they are now the UK's ninth biggest mortgage lender.  It was also noted that those who received help from parents were mostly under 30, making up over 79%, as well as the fact that those who receive parental support for financing a mortgage can on average buy a property 2.6 years earlier than those who do not receive money from their parents. In London, this figure almost doubles to 4.6 years.

Overall, a third of first-time buyers in the UK (34%) rely on parental support to put down a deposit on their very first home. Less than a decade ago, only 1 in 5 relied on such financial support.

Why?

With young people in the UK being increasingly referred to as 'Generation Rent' the problem is in many ways a vicious circle. House prices are staggeringly high, and not in line with wage growth, so people struggle to pay for a mortgage. For many, this will mean that they also have to rent for longer, which then means rent prices increase as demand goes up and they could be left struggling to afford for monthly costs too. In fact, in 2017, rent costs more than mortgage repayments typically do in the UK. (Source: money blog UK)

Even worse, in the ten years up to 2015, the number of young people who remained living at home with their parents had increased by an overwhelming 700,000, according to the insurance company Aviva, as a result of incredibly high deposit and rental prices. They also estimated that by 2025, this number could rise to over 3.8 million based on current data, which could make multigenerational much more common in the UK in the future. In addition, the average house price in the UK had risen by more than 50% to around £280,000 between 2005 and 2015, which all goes some way to explain the dismal statistics.

Helping with rental costs too?

As a result of the aforementioned depressing mortgage and rental statistics, many parents are not just financing mortgages for their children, but rental costs too. The Legal & General Report highlighted that £2.3 billion rental payments in 2016 were made by parents, whilst one in 10 renters in the UK receive financial support from their parents to help pay their rent each month.

Expectations of being paid back?

For the majority of recipients (56%) of parental support to get their first home, there will not be an expectation of paying the money back.  On average, the amount given to home buyers by the bank of mum and dad was around £21,600. For the rest, 21% of recipients were expected to pay it back interest-free, and for 2% the expectation was to back the money with interest added.

A barrier to social mobility?

Chair of the Social Mobility Commission, the Rt Hon Alan Milburn, has expressed his concern over the increasing reliance of first-time buyers receiving help from the bank of mum and dad -which still remains a luxury for the few. Milburn believes that the housing market is widening inequality in the UK.

Those fortunate enough to have parents both willing to help them get on the property ladder and have the financial means to do so is now increasingly becoming the reason why owning a home has become a reality. For those from low-income families, home ownership can remain just a chimaera. For example, the report estimated that only 10% of households without formal educational qualifications feel able to help their children with purchasing a home.

What can be done to address the housing market inequality?

In order to address the widening inequality when it comes to the housing market, the Social Mobility Commission in its most recent State of the Nation 2016 report has recommended that:

  • The government needs a greater focus on those with average incomes through its starter home initiative. In the event of these homes being sold, the same discount should be applicable to those from a similar, low-income background.
  • Building 3 million homes in the next decade with at least one-third being commissioned by the public sector.
  • Redevelop the worst estates in the UK to improve work opportunities for low-income tenants.
  • Increase sale of public sector land for the development of new homes.

The reality is that parents will rarely need to assist with their children when it comes to bridging finance. This is because the services we offer are typically used by existing homeowners looking to move home or buy to let property investors looking to break property chains. Nonetheless, the statistics above provide an interesting argument and for more information, follow our blog and social media.


money-gold-coins

Ways to Avoid a Payday Loan

When applying for most bridging loans, the provider will run a credit check on your account. This involves accessing real-time data on your credit report, giving the lender an insight into other credit products you have applied for, are using and amount of debt that you owe. Whilst having a mortgage and credit card accounts is very normal, having a payday loan is something that may turn the lender off you and decline your application.

These are high-cost examples of short term credit and used by individuals typically in emergency situations. Bridging lenders therefore see individuals using them as a last resort and financially stretched, therefore they should not be taking out a secured loan or an additional mortgage as this could create further debt. Especially for those that live in the residence as the premise of having your home repossessed is certainly a worst case scenario.

If you apply for an unregulated lender like MT Finance or Regentsmead they may not carry out credit checks at all, preferring to assess the value of your property in question and the opportunity. However, affordability also plays a role so being free of debt and payday loans is advisable.

What is a payday loan?

A payday loan is also known as a short-term loan.  The cost of borrowing money is usually significantly higher than say, a credit card or increasing the credit on an arranged overdraft due to the interest rates on short-term loans bad credit. These interest rates are so high that even if you are able to pay back the money within the repayment period, it will still cost you considerably more to give back than you asked for. Whilst the eligibility criteria for these loans tend to be less stringent, (for example, if you have been turned down for a credit card as a result of a bad credit score, you still have a good chance of being accepted) and therefore the money is easier to access,  these costs can get completely out of control if you end up struggling to pay back this loan. As a result, taking out payday loans should be really be used in emergencies only.

What should I consider before using payday loans?

Taking out a payday loan should be seen as a last resort for most people. Why? as previously mentioned, you can end up in spiralling debt pretty quickly, and you could end up finding your credit score being affected. That is even if you pay the short-term loan back on time!

If you are seriously considering getting a short-term loan and it is for one of the reasons below, we believe that it would probably not be the right solution for you.

These include:

  • Using a short-term loan to pay mortgage or rent.
  • For household bills
  • You intend to use this loan to pay off other debts.
  • The money will be used for unnecessary expenditures such as going out, luxury food, or new clothes.

Getting a payday loan may also not be the right decision for you if:

  • You have another payday loan outstanding.
  • You don't know how you will pay the money back within the repayment schedule.
  • You aren't sure where you would be able to find the money to pay back the short-term loan at all.

Alternatives to high cost loans

Using a credit card may be a better alternative to a payday loan and as a longer-term solution. However, be sure to only spend as much as you can afford to repay, otherwise, this can end up a costly affair when it comes to repayments.

Borrowing from family or friends

Your pride may take a hit, and it is most likely that it is an option that you would like to avoid considering. However, it could stop you ending up in considerable debt that you may experience if you took out a payday loan.

If you did decide this alternative set up some ground rules so everyone feels comfortable with the situation. Any borrowing agreement should be put in writing. You should also speak with your family member or friend what would happen in the worst case scenario if you couldn't pay the money back, or were late in doing so, as this could cause arguments in the future. Once you've made an agreement, be sure to also work out a feasible repayment plan.

Agree on an overdraft with your bank

Speaking with your bank over a temporary increase on your overdraft can be a way to get some money without getting into considerable debt. However, make sure that you don't end up in an unplanned overdraft, as you may have to pay high fees for using one.

Can you ask for a pay advance?

If you are in employment and find yourself really struggling to get by before payday, it may be worth asking your employer for an advance on your wages. After all, if you don't ask, you don't get!

Similarly, if you have just started in a new job but are a recipient of benefits, you may be able to ask your Jobcentre Plus adviser for a short-term advance just to tide you over until payday, with the expectation that this will be then paid back through your earnings or benefit payments.

Where else can I get help?

If you need extra support or information about what to do next in your situation, you could contact:


help-to-buy

What is Help to Buy?

Help to Buy is a government scheme that means you could buy a home with a deposit as low as 5%. Introduced in the March 2013 budget, the scheme was designed to make it easier for people with smaller deposits to get on the property ladder, and for existing homeowners to move house.

How does Help to Buy work?

With a Help to Buy Equity Loan, the Government lends first-time buyers up to 20% of the cost of their newly built home, which means some only need a 5% cash deposit and a 75% mortgage to make up the rest. And, you won’t be charged loan fees on the 20% loan for the first five years of owning your home.

Since the launch of the Help to Buy: equity loan scheme (1 April 2013 to 31 March 2017), 120,864 properties were bought with the support of the scheme, according to official figures. 81% of these sales were to first-time buyers.

There are two fundamentals to the scheme. The first is an Equity Loan scheme, which is open to both first-time buyers and home-movers but is restricted to new-build homes. So, if you’re looking for a modern place to live, a Help to Buy equity loan could be a good way to reduce the deposit you need to save up for. Even if you buy through Help to Buy and have a mortgage for less than the full price of the property, you become the legal owner with 100% title to your home.

So, if you wanted to buy a house for £400,000 with a 5% deposit you would need:

  • £20,000 deposit
  • £300,000 mortgage loan
  • £80,000 loan from the government

Taking advantage of the Help to Buy scheme has two main benefits. Firstly, you only need a 5% deposit. Secondly, as you’re only borrowing 75%, you will be able to acquire better mortgage rates.

Help to Buy: London rates

To reflect the current property prices in London, the government will lend buyers up to 40% of a new-build’s price, rather than the 20% limit that applies outside of London. This means the maximum you can borrow from Help to Buy in England is £120,000, but up to £240,000 for London. There is no minimum amount.

How much do you need to pay?

Help to Buy equity loans are interest-free for the first five years. After this period, you start incurring a monthly interest fee, which starts at 1.75%. This increases yearly by any increase in the Retail Prices Index, plus 1%.

Because your equity loan from the government doesn’t decrease in size (unless you opt for early repayment), over time the cost of the admin fee could become pretty substantial, especially if inflation increases significantly. These fees come in addition to mortgage repayments.

Buyers must repay the equity loan in full after 25 years, or when your mortgage term ends, or when you sell your home – whichever happens first. The repayment is equal to the market value of your loan at the time, rather than the same quantity that you borrowed.

Following the purchase, buyers can also at any time make voluntary part repayments (also known as ‘staircasing’), or even a full repayment, of the Help to Buy assistance at the current market value. The minimum voluntary repayment is 10% of the market value at the time of repayment.

When participating in the Help to Buy scheme, you could either end up paying back more or less than you borrowed. This depends on whether your home increases or decreases in value.

For example, a person might take a 20% equity loan to buy a property worth £400,000 – so the loan is £80,000. However, when they decide to sell, the property’s value has increased to £500,000. The amount needed to repay the loan now jumps to £100,000, 20% of the new value of the home, not the amount first borrowed.

Extra fees

Buyers also need to pay a monthly management fee of £1 per month from the start of the loan until it is repaid. This fee, as well as the interest fees, do not count as repayments to your equity loan, so, unfortunately, do not reduce the amount owed.

To qualify for Help to Buy:help-to-buy

  • You need deposit of at least five percent
  • The maximum purchase price is £600,000 (though this limit changes for Help to Buy ISAs)
  • The property purchased must be your only residence - you cannot rent out your existing home and buy a second home with Help to Buy
  • Buyers must take out a first charge mortgage with a qualifying lender.
  • Help to Buy buyers outside London must be able to fund up to 80% of their selected property through a conventional mortgage and deposit.
  • London Help to Buy buyers must be able to fund 60% of the property through a conventional mortgage and deposit.
  • Buyers cannot use the scheme if they require the main mortgage to be more than 4.5 times their household income.

The Local Help to Buy Agent will assess your application to ensure that you are in a position to afford a conventional mortgage for the purchase.

The Help to Buy scheme is available in England only. The Scottish GovernmentWelsh Government and Northern Ireland Housing Executive run similar schemes – check out their websites to find out more.

Where are Help to Buy homes available?

Help to Buy homes are available from house builders registered to offer Help to Buy homes in England. Registered builders will make it clear in their advertising if Help to Buy homes are available on their development sites.

Your Local Help to Buy Agent can also help you find out more about the availability of Help to Buy homes in your area.

What’s next? There are four main steps to successfully purchasing a property with the Help to Buy scheme. We’ll cover those in detail in another post.

For more detailed tips on buying a property using bridging, read more here


first-home

Money Saving Tips for First-Time Home Owners

piggy-bank

Saving on Your Mortgage

  • Do your research when it comes to finding a mortgage provider.

As a first-step, make sure you check your credit score. If lenders see you as a risk, they will charge you more to account for that risk. Look into getting your credit ratings up before taking out a mortgage. Secondly, take the time to contact a number of lenders; do not just go for the first provider you stumble across. Mortgage deals vary enormously and you could end up losing out on a great deal. Utilize mortgage comparison sites, with a particular eye on their administrative fees.

  • Overpay on your monthly payments while interest is low.

If your dealer allows you to overpay on monthly payments, then go ahead whilst you can. There is a potential to save a fair amount by paying more when interest rates are low, such that you have less to pay back when interest rates rise. After all, the longer you take to pay back your mortgage, the more interest you wind up paying. Bear in mind that the larger you pay out on your initial deposit, the lower your interest will be when you come to putting out those monthly installments as the total amount you have to pay back will be lower.

  • Get off Standard Variable Rate 

After your introductory rate, your mortgage provider will likely put you on the (usually expensive) Standard Variable Rate (SVA) if you fail to ask for a special rate. Be vocal with your provider, and make sure you scout out the alternatives that are on offer.

Saving on Utilities

  • Switch service providers

If you have a current service provider from previous accommodation, research the market for better deals. Don’t stick with an expensive provider merely out of convenience. The market is always changing, so looking to switch every three years or so is good practice. If you are looking for a provider first-time thorough research is equally necessary, and you should be aware that switching later down the line will likely do your bank account some good in the long-term.

  • Save on electricity

Simple tricks such as turning down the heating and using energy-saving light bulbs will make your home more energy efficient and thus cost effective. Ensure that window and floorboard draughts are fixed-up, and that your home is well insulated.

  • Save on water

Firstly, make sure there is a fully-functioning boiler in your new place. The maintenance costs of a bad boiler can be astonishing, oftentimes surpassing the cost of replacing one altogether. If your new home has a water meter, the most obvious way to save is to be mindful of your water usage. This is important not only for costs, but for environmental factors also.

Saving on Your Interior

  • Buy online

Sourcing your interior features online allows you to very easily and quickly compare the prices of items using the web, and also offers you reviews on the quality of the items you’re interested in. If you prefer to see items in person, look them up before you go instore to evaluate what else is out there and at what price.

  • Buy Second-Hand

Marketplaces such as gumtree and eBay are great for finding cheap items to furnish your first home. Ask a seller if you can view their item before buying to ensure that it is in good condition. You can save on delivery costs by picking up items yourself.

  • Do your own DIY

If you are up to it, avoid wasting money on hiring in painters and decorators to fix up your place. DIY is far cheaper, and it can also be fun! If you are less confident in this area, see if you can get a friend or family-member to help you with the process. For more specialized jobs, make sure you get multiple quotes before going with a decorating service to be sure as to how much the job should really cost.

Budgeting

A final, and vital way to make sure you don’t overspend during your first move is to budget efficiently. Keep track of your spending by keeping and logging receipts and payments so that you can easily visualize how much money is leaving your account and where it is ending up. Whether you log this on a spreadsheet, in an expenses diary, or in an app, budgeting can save you from losing track of your earnings. Be aware of the potential hidden costs that accompany home-ownership.

 

By researching the mortgage deals that are on offer; staying vigilant with your energy usage; avoiding impulse-buying and keeping organized with your spending; you have the potentiality to save plenty of money on your first move.

Even if you are a seasoned pro and looking for development finance for your fifth project, a lot of these good tips apply and can help you save money and get the best rates for all your utilities.