Holiday lets: are they worth it?

If you’ve ever considered investing in a second property, you may have already thought about holiday lets. With the popularity of staycations on the rise, now could be a better time than ever to get into the game.

The ability to make some extra cash while also maintaining the possibility of enjoying the property yourself is an attractive prospect for many.

Generally, a holiday let is a property that is let out to tourists for short periods of time as accommodation for their trips. Whether you let out the property for a weekend or a month – holiday lets can command a much higher price than a standard buy to let. As long as the property is available to holidaymakers for a minimum of 210 days of the year, you are free to use it yourself for the remainder of the 12-month period. Shorter term lets can offer an easier role as a landlord too – as you’re not responsible for maintaining a tenant’s primary home.

Some recent predictions suggest that the appetite for staycations will continue to rise post-pandemic after regulations caused a surge in people choosing to holiday domestically. This trend has led to investors looking to make holiday lets a lucrative safe haven for their money. At peak times, some holiday lets in popular tourist destinations can earn as much in a week as a standard buy to let does in a month. Although holiday lets in popular destinations can be more expensive to purchase initially, the return on investment is typically more than a buy to let.

As long as your property meets the furnished holiday let criteria, holiday lets are eligible for full mortgage interest tax relief. As holiday lets are officially categorised as businesses, there’s no limit on the mortgage interest amount incurred that you’re able to offset against your profits. This can be a great way for taxpayers on a higher rate to reduce their income tax bill. Holiday lets are also subject to business rates as opposed to council tax, while there’s also a possibility you’ll be able to claim 100% relief on business rates should your property have a rateable value of less than £12,000.

While the primary reason for moving into the world of holiday lets is to generate income, they also offer the chance for landlords to enjoy them as well. Unlike a standard buy to let, landlords are able to utilise their properties for a certain period throughout the year – creating a happy medium between a second income and a second home.

If you’d like to discuss the options available to you, contact us today.

Green Mortgages: what you need to know

With the COP27 summit last month, the climate conversation is at the forefront of people’s minds once again. Reducing the impact, we have on our planet has become a key priority for homeowners up and down the country as we head towards the point of no return.

Lenders are aware of this and want to help you achieve that – while also working towards their own green targets. Green mortgages are one of the key methods you can use to help your day-today become greener. We look at what green mortgages are and how they can help you to go greener.

In simple terms, a green mortgage rewards you for buying or owning an energy-efficient home. Whether your home is energy efficient at the point of purchase or you make improvements to your home, a green mortgage could reward you for being active in the fight against climate change. Essentially, a green mortgage offers you preferential terms if you can demonstrate that the property you own or are hoping to own meets certain environmental standards. A property with a high energy efficiency rating is likely to qualify for a lower interest rate or cash-back incentive. On top of this, lenders may even increase the maximum loan amount – opening doors to different locations or property types. According to the Green Finance Institute, UK households account for around 20% of the country’s carbon emissions. This statistic alone demonstrates how everyday homeowners can make a real difference in the effort to reach net zero by 2050. What can green mortgages do for you?

So, how can a green mortgage benefit you? Well, there are several pros to taking out a green mortgage. Lenders will offer lower interest rates to encourage you to have a more energy efficient home. This means your monthly payments may be less than they otherwise would – helping you to save money and the planet simultaneously. Having a more energy efficient home would also help you keep your energy bills at a more manageable level – a benefit not to be overlooked amid a cost-of living crisis. A more energy efficient home takes less power to heat and therefore doesn’t cost as much.

As we edge closer to the government’s net zero target, eco-homes are becoming more desirable. As buyers are more frequently valuing the EPC rating of a home as a priority, having a home with a good rating could increase its overall value. Not only are you saving money through having cheaper monthly repayments – but your property’s value could increase.

If your home has an EPC rating of A or B, or you’re looking to purchase one that does, a green mortgage could be the product for you. To find out more, speak to your adviser to have any of your questions answered.

To discuss the options available to you contact Bill Somers Mortgage Services today.

Should you be in on the remortgage boom?

Recent analysis has shown that remortgages have risen by more than a quarter between the months of March and April. This is largely down to the multiple base rate rises announced by The Bank of England throughout 2022 and the response from lenders to raise rates accordingly.

Many consumers are now looking to ‘lock-in’ the current available rates in a long-term fixed mortgage ahead of any more potential rate increases – but is this the right thing to do? We look at how base rate rises and the cost-of-living crisis could persuade you to follow suit.

The number of remortgages have increased by more than a quarter between March and April. Over 50% of borrowers took out a five-year fixed rate product. With rates on the rise, it’s essential you take the time to review your current mortgage. If you’re currently on a variable rate plan or your fixed rate term is coming to an end in the next year or two, now could be the perfect time for you to lock in a new long term fixed rate mortgage before rates potentially get significantly higher in the coming months. As the economy tries to recover from the pandemic and combat inflation, rates are predicted to rise further – so acting quickly could save you money on your monthly repayments.

Remortgaging has other positives at this moment in time as well. Along with locking in your repayment rate, remortgaging now offers a unique opportunity for those worried about making money stretch amid the cost-of living crisis that the UK currently faces. Releasing equity in your property can be the perfect solution to being a little more comfortable as energy prices and inflation both continue to rise. So, if you find yourself struggling to cover the cost of your bills over the coming weeks and months, perhaps remortgaging is worth looking at – it could save you thousands.

There are some, of course, who won’t need to worry about a higher cost of living and are in a slightly more comfortable position financially. Well, remortgaging can still offer benefits to you too! As summer approaches, maybe you’re considering some home improvements? A conservatory? Maybe a home office? Whatever you may be considering, home improvements can be expensive – but not to worry. Remortgaging can make lump sums available to you to finance such projects so that you don’t have to save and could get the work done while the summer weather is (hopefully) warm and dry.

Remortgaging isn’t for everyone, but it does currently offer unique opportunities to take advantage of. If you just want to secure lower mortgage rates for the coming years, want some spare cash to help you through the cost-of-living crisis or maybe you want to add value to your property by doing some home improvements – whatever the reason, remortgaging could be the answer.

If you’d like to discuss the options available to you, contact us today.

Holiday lets: are they worth it?

If you’ve ever considered investing in a second property, you may have already thought about holiday lets. With the popularity of staycations on the rise, now could be a better time than ever to get into the game.

The ability to make some extra cash while also maintaining the possibility of enjoying the property yourself is an attractive prospect for many.

Generally, a holiday let is a property that is let out to tourists for short periods of time as accommodation for their trips. Whether you let out the property for a weekend or a month – holiday lets can command a much higher price than a standard buy to let. As long as the property is available to holidaymakers for a minimum of 210 days of the year, you are free to use it yourself for the remainder of the 12-month period. Shorter term lets can offer an easier role as a landlord too – as you’re not responsible for maintaining a tenant’s primary home.

Some recent predictions suggest that the appetite for staycations will continue to rise post-pandemic after regulations caused a surge in people choosing to holiday domestically. This trend has led to investors looking to make holiday lets a lucrative safe haven for their money. At peak times, some holiday lets in popular tourist destinations can earn as much in a week as a standard buy to let does in a month. Although holiday lets in popular destinations can be more expensive to purchase initially, the return on investment is typically more than a buy to let.

As long as your property meets the furnished holiday let criteria, holiday lets are eligible for full mortgage interest tax relief. As holiday lets are officially categorised as businesses, there’s no limit on the mortgage interest amount incurred that you’re able to offset against your profits. This can be a great way for taxpayers on a higher rate to reduce their income tax bill. Holiday lets are also subject to business rates as opposed to council tax, while there’s also a possibility you’ll be able to claim 100% relief on business rates should your property have a rateable value of less than £12,000.

While the primary reason for moving into the world of holiday lets is to generate income, they also offer the chance for landlords to enjoy them as well. Unlike a standard buy to let, landlords are able to utilise their properties for a certain period throughout the year – creating a happy medium between a second income and a second home.

If you’d like to discuss the options available to you, contact us today.

Rising Inflation: How does it affect you?

As reports of rising inflation in the UK flood the news, we thought the time was right to take a closer look at how it could impact you. With inflation hitting a 30 year high in recent weeks, it’s bound to have an effect.

What is inflation?

Inflation is a measure of the relative value of a currency. It measures how much prices rise and fall and is tracked by several indices – mainly the consumer price index (CPI). The CPI records the average cost of 700 items including everyday items such as food and fuel and a figure is referred to as the headline rate is determined based on how much those prices have gone up over a year.

Why is the rate so high?

The rate of inflation has been rising recently and is currently at a 30 year high, but why is that? Well, one of the biggest contributors to the recent rise has been the increase in the price of petrol. The price of petrol rose by 5.1% month on month in 2021 to reach a record high – with a 7.2p per litre increase between October and November being the biggest increase since the ONS (Office for National Statistics) began keeping records of the price in 1990. Other average prices have also risen recently, with second-hand cars becoming more expensive as issues with supply chains have consistently held up vast numbers of new cars going to market.

What does this mean for you?

In a nutshell, what this rise in inflation could mean for you is that your cash might not stretch as far as it previously had. If you are on fixed pay, then you may feel the effects slightly more as the prices of everyday items increase around you. If you are saving, higher levels of inflation can cause problems. It may not make a huge difference in the grand scheme of things, but if you are looking to stretch your savings, moving to higher risk investments can sometimes reap more rewards – although there is an obvious increase to risk in this method.

What happens to your mortgage?

If you have a variable rate mortgage, the recent rise in the base rate will mean a slight increase in your repayments. However, many homeowners across the country have opted for fixed-rate mortgages, and monthly repayments will not increase for the duration of their fixed term.

In more general terms, a significant rise in inflation can have a negative effect on how far your income can stretch. The good news is there are measures in place to counter it such as the base rate increase and the proposed 6.6% living wage increase set for April 2022.

If you’d like to discuss the options available to you, contact us today.

Shared Ownership: what do you need to know?

There are many government schemes designed to make buying a home more accessible for people who would otherwise struggle to generate a deposit.

There are plenty of options to suit your individual situation. Shared Ownership is another one of these schemes which has grown in popularity in recent years, but what do you need to know before making a decision?

The Shared Ownership scheme is an alternative route onto the property ladder by giving borrowers an opportunity to purchase a share in either a new build or a resale home. Otherwise referred to as part buy/part rent, this scheme involves the borrower securing a mortgage for part of a house and renting the remainder. This means that both the deposit and the monthly mortgage payments are considerably lower and allows first-time buyers to make their first steps towards owning a home. Once the initial deposit is paid, the borrower becomes an owneroccupier, meaning they have the long-term stability of owning a home at a more affordable price. Since 2016, the number of completions for shared ownerships has increased by over 416% – but why is this scheme showing such a rapid rise is popularity?

Eligibility

Naturally, there are a few criteria to be met before an application for a shared ownership can be accepted. Firstly, you must be at least 18 years old (as with all mortgages) with a maximum household income of £80,000 per annum – or £90,000 for those living in London. The scheme is also exclusive to those who are unable to purchase a suitable home on the open market, meaning it is only available to those who need to use such a scheme. The scheme only applies to borrowers who do not own a home at the time of application and don’t have any mortgage or rent arrears. Usual expectations must also be met such as the ability to display a good credit score as well as being able to pay a suitable deposit for the share of the home being purchased. The Shared Ownership Scheme also prioritises accepting members of the military.

How does it work?

On the face of it, the idea of paying rent and a mortgage simultaneously sounds astronomically expensive – but fear not. Both amounts are based on proportion. This means that the monthly payments for a shared ownership can be the same as an average mortgage. Rent on a shared ownership is typically set at approximately 3% of the unsold equity per year. Once a deposit (usually 5% - 10%) is paid, the monthly mortgage payments will be calculated, and the combined payments would usually equate to a manageable amount.

Crunching the numbers

The vast majority of shared ownership purchasers are between the ages of 20 and 40, with the most common age being people in their late 20’s. This shows that it’s common for first-time buyers to take advantage of this scheme due to its accessibility. As well as this, half of all shared ownerships are taken out by single adults, likely due to the fact that it’s one of the easiest ways to obtain a mortgage on a single annual income. The average value of shared ownership properties based on the most recent data from 2019 was £265,000 as the scheme is most commonly used on lower value properties by first-time buyers or buyers on a strict budget. Another interesting statistic surrounding shared ownership is that 94% of people who utilise the scheme are in employment. It has become increasingly difficult for younger people to save for a full deposit in recent years, so the shared ownership scheme helps employed younger people to secure a mortgage without having to secure the funds for a full deposit. If you are looking for a cheaper or more manageable alternative to a traditional mortgage, the Shared Ownership Scheme is certainly one to consider.

To discuss the options available to you contact one of our advisers today

Loan to income vs loan to value: what does it all mean?

Loan to income and loan to value (or LTV) are phrases you often hear in the mortgage industry. The two terms are easy to mix up, understandably, but they are very different.

It’s important to know the difference because both loan to income and loan to value are key factors used to determine how much you can borrow for a mortgage.

Recently, there’s been a surge in lenders offering 95% LTV products aka mortgages you only need a 5% deposit for. Loan to value means the amount of the house price the bank is going to provide, so a 95% LTV means the bank is forking out 95% of the money needed to buy the property. However, many buyers are finding that even though 95% LTV (5% deposit) mortgages are available, they can’t take advantage of them. This is because of the all-important, loan to income multiple.

A loan to income multiple is where the bank takes your household’s income and multiplies it by a certain amount to work out how much they’re willing to lend to you. At the moment, a common multiple being used is 4.49, although this varies depending on several factors and across different lenders so talk to your adviser for more information. As an example of how income multiples work, say you and your partner are buying a property together and you both earn £25,000 each. If you used a lender offering a 4.49 loan to income multiple, the most they would lend you is £224,500.

This is where the difficulty can occur: if you want to buy a property for £249,000 (which was the average UK house price in January 2021), a 5% deposit would be £12,450. However, say you’re the couple earning £25,000 each from before and the bank will only lend you £224,500. As a result, between the bank’s loan and your deposit, you’ve only got £236,950 in total. You’re missing £12,050. See the problem now? That extra £12,050 is money that you would have to save up and pay as part of your deposit, meaning that your 5% deposit becomes a 10% deposit and you won’t be using a 95% LTV product.

Obviously, property prices vary depending on location, size and type: a three bed house costs more than a one bed flat… unless the house is in Middlesborough and the flat is in Chelsea. Similarly, income varies depending on location, profession, age etc. So, although you now know what loan to income multiple and loan to value mean, it’s still worth speaking to your adviser about how they will impact you specifically.

If you’d like to discuss the options available to you, contact one of our advisers today.

The buy-to-let market: where are we now?

After a whirlwind past 18 months, it would seem some form of normality is on the horizon. The pandemic has changed the face of the housing industry drastically given the unprecedented level of uncertainty we were all subjected to. So, how has the buy-to-let (BTL) market changed as we finally emerge from the other side?

First of all, it’s important to note that the BTL market has been doing really quite well throughout the pandemic and is showing signs of improving still. Fears over the stability of the market echoed as the sheer scale of the Covid crisis was realised, but those worries haven’t quite materialised. 

Various schemes designed to encourage market growth throughout the pandemic have given landlords a boost as lower mortgage rates have helped them to manage their property portfolios more easily.  

Is now the time to invest? In recent times, the property market has boomed. House prices have been at an all-time high recently and with the lower mortgage rates still available to potential landlords, could now be the time to get involved in the BTL market? According to a new report by Shawbrook Bank, landlords are growing increasingly confident about expanding their portfolios as mortgage rates fall and rent rises. 34% of landlords are supposedly looking to invest in the BTL market over the coming 12 months, with 1 in 10 planning to expand into new areas given the changes in tenant priorities since the start of the pandemic. Rural areas are becoming increasingly popular with landlords as living in cities becomes less desirable given the rise in flexible working. 

Lack of supply is good news for BTL market Although rent prices have only seen a relatively modest increase of 1.6% over the last year, the sharp increase in house prices has given BTL properties a big boost in value. According to Shawbrook, the value of the private rented sector had grown to £1.2 trillion by the end of 2020, with BTL properties growing by 5.8% in value year-on-year. With the unprecedented lack of supplies and building materials currently available, rental properties are becoming rare commodities. This could see a substantial increase in rent prices over the next year or so. 

Mortgages for landlords BTL mortgage availability took a massive hit due to the pandemic as lenders withdrew a huge number of deals after the outbreak of Covid. Now, however, with the market settling down, BTL mortgages have returned at lower rates, which is great news for landlords. If getting into the market is potentially on the horizon for you, it is important to seek sound advice to make the most of a good period for the buy-to-let market.

If you’d like to discuss the options available to you, contact one of our advisers today