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First time buyers

First time buyers

Reducing tax through stamp duty mitigation

14/04/2017

The term stamp duty mitigation is a tax avoidance scheme that occurs during a property transaction. Buyers are usually expected to pay a tax after they fully purchase a house. This fee is paid for the benefit that the buyer gains upon buying a property. Taxes are payable for property values exceeding a given amount. Taxes are exempted for properties with non-taxable values, and for many first-time buyers. These taxes are usually very high especially if the cost of a property is high. The rates of taxes have been increasing over the past few years. This is the reason why many buyers opt to avoid the taxes.

Stamp duty mitigation is undertaken by solicitors either when working by themselves, or alongside accountants. These solicitors advertise their ability to help buyers avoid taxes in cryptic media. This is because the government is very strict about tax evasion and will prosecute anyone who engages in this behaviour. There are many ways in which solicitors can help you avoid paying taxes. The solicitors who engage in stamp duty mitigation never disclose their methods of mitigation to buyers unless the buyers sign Confidentiality Clauses or Non-Disclosure Agreements. Some solicitors entice their clients into tax avoidance by promising them that they will not charge solicitor fees if the scheme fails. This together with the fact that a lot of money is saved when a buyer avoids paying taxes makes stamp duty tax avoidance very popular.

There are many schemes that solicitors may use to avoid paying taxes. One of these is getting a buyer to purchase a property through a company. Companies used are usually fictitious and cease to exist after conveyance is over. The company buys a given percentage of the house that cannot be taxed. The house is then sold to a buyer after which the rest of the value of the house is paid.

The other scheme that is used in tax avoidance is purchasing a property in bits. A buyer may purchase fittings and fixtures of the house separately. This he can do by taking advantage of the minimum house components of a house that can be taxed by Her Majesty's Revenue and Customs (HMRC). Buying a property this way considerably reduces the value of the property such that the amount of tax payable is significantly reduced or annulled altogether.

A buyer may also avoid paying taxes by processing documents abroad. The resulting house sale will be outside the jurisdiction of the HMRC. The HMRC is therefore blocked from levying tax.

The government is acutely aware of these and other schemes that solicitors use to avoid paying stamp duty land tax. The government has enacted various legislations to close the loopholes that solicitors use to avoid paying taxes. More legislations are coming up. The old ones are also being updated to cater for newer tricks. The loopholes are closing quickly meaning that a scheme that worked at one time may not succeed if applied at a different time.

Tax evaders are heavily punishable by the law. The government can demand payment of tax if it discovers a tax evader. The government may also charge interest of the tax and even demand a payment of 100% of the stamp duty.  

What you need to know about restrictive covenants property agreement

13/04/2017

 A restrictive covenants property is a property whose use is limited by a restrictive covenant. A restrictive covenants property agreement is an agreement that is entered into by two property owners one of who agrees to restrict the use of his land for the benefit of other. The covenant usually applies to properties that are adjacent to each other. There is no legal obligation for any party to enter into the agreement. Each party signs the agreement by his own personal will rather than coercion. Once the agreement is signed, it becomes legally binding. Going against the agreement is considered a breach of contract and can be punishable by the law.

A restrictive covenant can be passed on from one property owner to the other if the covenant remains on the title deed. This succession process can be highly inconveniencing to buyers or property inheritors that were not part of the original agreement. These new owners are bound to the agreement just like their predecessors. You may never tell if the property you intend to buy is restricted by a covenant until you see its title deed. The covenant is clearly indicated in the title deed.

It is important for new property owners to adhere to terms of the restrictive covenant of property ownership. Some new homeowners may overlook the covenant and develop a property to the extent that it breaches terms of restriction covenant. This owner is liable for prosecution and may suffer damages to his property. If this property had indemnity insurance against restriction covenant, the owner might not suffer many damages. It is important to find out if a newly purchased property with a restrictive insurance has indemnity insurance. A previous owner may have taken an insurance fearing that he could go against the covenant. You may also take insurance if a property does not have one.

There are other loopholes that you can follow to avoid damages arising from breaching a restrictive covenant. The first is seeking a compromise from the owner of the property that is protected by the covenant. A new owner of this property may not see any importance of the covenant and may be readily willing to let it go. The owner who signed the original covenant may be harder to convince. He may only release the covenant after you pay him some money. It is upon you to decide whether the new development you plan to make is worth the money the other party is asking for.

The very last option for an individual who wants to release a covenant is the Land Tribunal. The Land Tribunal has the authority to release, modify or make partial changes to a covenant. It can only act if it is supplied with relevant information. You must include substantial grounds for making an application to the Land Tribunal. Some of the acceptable grounds that may be considered by the tribunal include:

  • Important changes in the neighbourhood since the covenant was signed
  • Lack of losses of practical value on the beneficiary of the covenant
  • The covenant is preventing the maximal use of another property.

Government schemes for first-time home buyers

06/04/2017

Owning a home in the Home in the United Kingdom is harder year after year. A buyer will have to save up a huge sum of money to even think about purchasing a home. A recent Halifax study in 2016 shows the average price needed for the first time is £400,000. That is not going to encourage low-income earners to pursue a dream of buying a home. However, fortunately there are some government schemes and policies to help provide solutions for people with small budgets for their first home.

As a government initiative to allow more people to own homes, these are the different scheme to help low-income individuals.

Help to Buy ISA

Help to Buy ISA is tax-free saving account scheme for which the government will add 25% bonus up to £3,000 for your first home. It means for every £200 you deposit, the government ads in £50. The good news is that multiple first-time buyers can claim the benefit to buy a property. Property prices below £250,000 (£450,000 in London) are eligible for this scheme.

This is not high considering the average prices of homes, but it is free money. You should definitely consider signing up if you are looking to buy your first home.

Lifetime ISA

Lifetime ISA allows individuals to save money towards a first home. With the government contributing a 25% bonus for the amount collected before the individual is 50 years. There’s a bonus limit of £1,000 per year per individual. The price cap for this scheme is set at £450,000 anywhere in the United Kingdom.

The scheme is effective from April 4th, 2017 and you have to be under the age of 40 to qualify. Better hurry up if your 40th birthday is near.

Help to Buy Equity Loans

This scheme allows individuals to borrow 20% of the value of the property from the government when you deposit a small 5%. The property you are planning to buy does have to be worth less than £600,000. You do not need to pay interest on the loan for five years and is linked to inflation.

The equity loan scheme is ideally suitable to lower the mortgage rates from a lender. Since you are borrowing 75% rather than 95%, it will reduce your financial burden.

Shared ownership scheme

Shared ownership allows you purchase 25 to 75 percent share of property for buyers with less than £80,000 annual income. A process termed as “staircasing” allows the buyer to buy more chunks of the property until they own 100% of the house.

The scheme is available for resale and new-build homes. As you use staircasing, the value of the chunks is calculated on current market value. This is done by the Housing Association and requires a valuer’s fee every time.

Starter Homes

The scheme was launched in March of 2015. The plan is to get 200,000 new homes built to facilitate new home buyers aged between 23 and 40. Starter Homes provides 20% discount to properties of the market price. The price cap for starter homes are set at £250,000 (£450,000 in London), and they cannot be sold or rented during the first five year of first purchase.

Things to consider for first time buyer mortgage

05/04/2017

The process of buying your first home is an adventure full of excitement and worries. First time buyers are very perplexed when it comes to the financial process since it requires and substantial investment. As a first time buyer, they have less familiarity with the mortgage process, legal obligation and requirements. This can mislead them into big problems without their knowledge. The first time buyer mortgage process is also a process one needs to understand to make sure best options are picked.

Basics of Mortgage

Mortgages are long term loans specifically for buying a house. The average time for repayment in the UK is 25 years, but it may be shorter or longer depending on the bank. The eligibility of the mortgage amount depends on the value of the home you are planning on buying. It serves as security for borrowing the money from the banks. Moreover, as with other loans, you need to add interest on top of the mortgage amount. This rate depends upon the mortgage plan you choose. This requires comparing many mortgage options.

Loan To Value (LTV) ratio

You get a better mortgage deal if you are ready to deposit a higher percentage of the value of the house you are buying. If you deposit £20,000 for a property worth £200,000, it is 10%. The ratio of your deposit and remaining value of the property is Loan to Value (LTV) ratio. Lower the ratio, the cheaper the mortgage rates.

There are online mortgage calculators which offer to calculate the amount of loan you could get with your salary, expenses and deposit. Other calculators can calculate monthly repayments when you enter the value of the home, deposit and mortgage repayment duration.

Type of mortgage payment

When you are looking for mortgages, you will come across “repayment” and “interest-only” mortgages.

On repayment mortgage, you will pay interest and a part of mortgage amount every month. With an interest-only mortgage, it is a requirement that you only pay the interest on the mortgage through the mortgage payment period. You can choose to pay part of mortgage during the period to completely pay off the mortgage. If you fail to pay the entire mortgage, it is considered outstanding mortgage and can be subject to seize.

Fixed rate or variable rate mortgages

As they are obvious with their names, fixed rate mortgage have fixed interest rates. However, they are often for a short period of one to ten years. Variable mortgage interest rates are dependable on the bank you choose which can be same or below the standard rate of Bank of England.

First-time buyers have limited number of choices because they often only have the ability to make small deposits. There are some schemes from the government that help them get mortgages with lower rates. However, they have eligibility requirements that you have to fulfil. Your best option to get a good deal on a mortgage is to be informed about mortgage policies.

Consider the rates, your income and expenses as you compare mortgage rates from different banks and lenders. There are also various government scheme to help first-time home buyers with tax-free savings and bonuses. Consider them if you are looking to buy a new home in the future.

All you need to know about what is shared ownership houses

16/03/2017

The biggest question on the minds of most first time buyers considering shared ownership scheme is what is shared ownership houses. The reason behind this question is that shared ownership houses are cheap to buy and are at the same time rented. A buyer pays a portion of the price of the house and rents the remaining. The rent is paid to a housing association or the financial institution that paid the rest of the cost of the property. A buyer can own a minimum of 25% and a maximum of 75% of the house. He may increase his shares through staircasing.

Staircasing with shared ownership houses

A buyer is neither obliged to stay in a shared ownership scheme for long nor required by the law to the staircase. They can only staircase when their situation allows, for example, if you get additional sources of income and want to spend it on the property. Most buyers usually purchase their shares of the property by mortgaging. You must ensure that your mortgage instalments are taken care of before staircasing.

Can you sell shared ownership houses?

Shared ownership properties restrict owners power to the property. An owner of a shared property cannot sell his property before informing the housing association or financial institution with which he co-owns the house. Housing associations and financial institutions have the Right of First refusal that prevents a buyer from selling a house before informing them. They have the right to put the property in the market for a given period of time and can only allow a buyer to sell after the expiry of that.

Who’s responsible for shared ownership houses?

The authority of the housing associations and financial institutions come with obligations. These institutions must take responsibility for property maintenance. This is a responsibility that is bestowed upon them by the state. A buyer is not expected to pay for property maintenance. The cost of repairing floors and walls goes to the institutions. These institutions do not suffer losses despite such obligations. The rent that is paid to them is sufficient to pay for any expenses they incur during your stay. They are just like landlords but with a limited share to the property.

Institutions can own shared ownership properties as freehold or leasehold. You can find out about ownership schemes when you talk to a relevant financial institution. Shared ownership properties are available all over the UK. The number of properties that are owned by institutions differs. It is important to find out what an institution has before you buy.

Selling shared ownership houses

When you get to sell shares of your property, the shares you owned goes to a new buyer. The buyer then gets into an arrangement with the institution you co-owned the property with. The property has to be evaluated before it is sold. Valuation is conducted by the Royal Institution of Chartered Surveyors (RICS). Evaluation help mortgage lenders in calculating the amount of money a buyer needs to pay for a property. A buyer of a shared ownership property must be a first-time buyer. No pre-existing homeowners are allowed into the shared ownership scheme. A shared property owner may get into the scheme if he does not own any other property as a freeholder or leaseholder. 

How does Help to Buy work

15/11/2016

Help to Buy is a governmental scheme that helps you move houses or purchase a residential property with a deposit as little as 5%. How can you use the Help to Buy scheme?

  1. Through an equity loan: the government lends you money to buy a newly built house, regardless if you are an existing homeowner or a first-time buyer;For your 5% deposit, the government lends you 20% of the home value as an equity loan, and you can get a mortgage for the remaining part
  2. You do not pay any interest on the equity loan for the first five years and starting with the sixth year; the interest will be 1.75% of the loan
  3. Starting with the seventh year, you will pay 1.75% plus the inflation based on the Retail Prices Index plus another 1%
  4. With a mortgage guarantee: the government acts as a guarantor for your mortgage lender; the government will cover any losses the lender might suffer from you not paying your monthly mortgage paymentsCan be used for old and new houses up to £600,000
  5. Similar to Help to Buy equity loans, London “Help to Buy” scheme loans you 40% of the house value, rather than 20%, when you buy in London.
  6. Help to Buy ISA: this is the best option for people saving to buy their first house; for every £200 you put in this type of tax-free savings account, the government adds £50, up to £3000. The limits on the house value when you apply for an equity loan is £250,000 in the UK and £400,000 in London.

Am I eligible for Help to Buy scheme?

If you already own a house, you can use Help to Buy to move houses, but not to buy a second home or a residential property you plan on renting. “Help to Let” is the scheme where you can buy a property with the intention to rent. On the other hand, Help to Buy only works with repayment mortgages (you pay back the capital and the interest together; the opposite type of mortgage is paying the interest first and then the capital).

“Forces Help to Buy” is a distinctive part of the Help to Buy scheme, where, if you are serving in the military, you can borrow up to 50% of your salary (interest-free) for a deposit and other buying costs, including legal fees. The maximum you can borrow is 25,000, repayable over the years. You must have completed a minimum length of service before applying, be more than six months away from the end of your service and also meet certain medical criteria.

Understanding the Conveyancing Timeline

17/10/2016

How long does conveyancing take? Many buyers, particularly first time buyers, figure that in buying a house it is only the finance that they have to worry about. Once they have financing settled then the rest should be straightforward and fast to complete. Conveyancing, however, is not as simple and speedy as many would want. The time taken to complete a deal depends on a variety of factors that could expedite the process or cause unnecessary delays. Here are some timelines for various stages of conveyancing accounting for the factors that could affect it.

Finding a conveyancer

If you think you need help with conveyancing, then you have to find a solicitor. Be careful when making your choice as this will determine the amount you are going to pay them as conveyancing fees. As such ensure that you do not simply take advice from your real estate agent as many people do or even from family and friends as the deciding factor. Here, proper research is critical. The internet can be a very useful tool when finding a solicitor. There are numerous sites like reallymoving.com where you can compare quotes for various conveyances. Here you can find a lawyer who is within your budget and even your location. The time spent here depends solely on you. If you want to conveyancer fast then you have to be fast in selecting one.

Pre-Contract Stage

Once you have chosen your solicitor, you will then have to submit your papers. Your solicitor will then proceed to draw up a draft contract. This process can be a daunting task for the solicitor as they have to obtain information from a number of parties. These are such as the mortgage lender, the seller, the landlord and any other relevant party. It is dependent on the number of people that the solicitor has to consult when obtaining information. It usually takes a maximum of 3 weeks and may exceed that depending on the factors mentioned above.

Response to the Inquiries

For a buyer, his solicitor has to check the papers and investigating all the related documents about the property. He/she has to carry out searches starting from the local authorities, the water company, an environmental assessor and any other related party. After investigations, the solicitor can raise any inquiries with the seller's solicitor or conveyancer. The duty of the seller's solicitor will then involve dealing with the questions raised. For instance, if there are some enquiries concerning damages that he may have to refer to the landlord. This process usually takes between 2 to 8 weeks. It may vary depending on enquiries raised by the buyer's solicitor which then depends on the state of the property.

Exchange of Contracts

Once all the inquiries have been dealt with, the two parties can exchange contracts. This usually takes place in the 8th week. It is during and after this period that the transaction takes place. After contracts have been exchanged the buyer’s solicitor will carry out further searches on the Land Registry and bankruptcy. The seller has to ensure that all the finances regarding the property have been taken care of. That means that all the rent has been paid. The seller's solicitor will then communicate to the buyer who will then proceed to arrange payment for the property and the solicitor's account. All this usually happens at the 10th week. However, it depends on the financial arrangements. When a mortgage lender is involved, it might take longer if the lender still hasn't disbursed funds.

Completion

The complication date is where the seller has to provide keys for the buyer. And the buyer can begin the process of moving homes. The keys are exchanged when the agreed amount are moved to sellers account. As per the contract, the buyer will now have the legal ownership of the property.

Residential Conveyancing

20/11/2015

Residential conveyancing involves the buying or selling of a house or transferring the ownership of any residential property. Residential conveyancing solicitors exist to ensure that your property transaction runs as quickly and as smoothly as possible, whether you are buying or selling a house or have any other residential property requirement, from your initial instruction through to completion, you can be sure that they will make everything a lot easier. Moving house is not a simple process. It is stressful and involves plenty of work, tension and endless legal procedures that can cause a number of sleepless nights. It takes time and patience to get everything done just right. A licensed conveyancer or solicitor will make the whole process much easier and faster. Whether you are a first time buyer, a repeat property investor, need advice on shared ownership or are buying a property residential conveyancing solicitors will be able to provide you with the advice and assistance you need. They will be able to tell you the exact stage or situation of the purchase or transaction and will make sure you are kept in the loop at all times. Conveyancing firms will be able to get the greatest transaction for the lowest prices with service that is especially tailored for your assistance.

Legal process of moving home:

The entire process is most likely to take between 6 and 8 weeks from an offer being accepted on a property to completion and moving in. It can take longer, depending on the number of people involved in the transaction, delays or other unforeseen circumstances.

If you are buying a home/ property you must first tell your chosen conveyancer that you would like them to work for you and act on your behalf. They will ask you for a proof of identity and address as well as an initial cheque to cover the cost of initial checks and local authority searches. These costs will vary based on different locations. The firm will at this point send out an instruction form for you to complete and return. Once these searches are completed, the seller of the property will have to fill in a Property Information Form which gives information about the property such as boundaries and any work done to the property and a Fixtures and Fittings Form which gives details of what items are included in the sale like carpets, curtains, kitchen appliances, sheds etc. Next, once your mortgage offer is received, you will have to sign the contract and mortgage deed. You will also have to fill out a Stamp Duty Land Tax form. All additional inquiries have to be completed before you can exchange the contracts. You may then have to pay an initial deposit. Once that is complete, you can exchange the contract and decide a date for the completion. The end of the process of buying a house or completion occurs when money transfers from the buyer (via a lender in most cases) to the seller. It is usually followed immediately by the buyers moving into their new home. You are now the owner of a new house.

Taxes and costs:

Stamp duty is the tax a buyer of the property pays the government. The rates differ but are based on the price of the property. For example, you will have to pay 5% of the purchase price on any property bought between £1,000,000 and £2,000,000 and 7% of the purchase price on any property bought for more than £2,000,000. Property searches generally cost between £100 and £200 depending on the area. Land registration fees usually cost £40 (for properties under £50,000) to £910 (for properties over £1,000,000). Almost all the fees are likely to differ based on the area and the properties condition, as well as the current economic situation.

You can create a budget for moving and plan your purchase according to it to help you save costs. You can now easily purchase the home of your dreams.

Stressed about your first time home purchase? Great Tips for less stressful conveyancing

01/09/2015

In the event that like a great many people you are excessively stressed or time poor, making it impossible to do the conveyancing yourself, the following step is to discover a specialist or conveyancer and "teach them" to do it for you. Abstain from utilising the domain specialists suggested conveyancer as it will probably be a commission based proposal and expense you more. With the property business sector demonstrating guarantees of advancement and reasonableness, first time home purchasers get sharper about purchasing their own homes. For as far back as couple of years, reports had it that dominant part of purchasers get more assurance about acquiring a property - whether to live in or use as a speculation.

On the off chance that you need to be an upbeat first-time home purchaser, here are the most imperative things/tips you may need to consider when investigating having an inconvenience free conveyancing.

Try not to get so energised with your conveyancer:

Despite the fact that this is your first time to purchase a property, think like somebody who did it before. You would preferably search for something snuggled up, agreeable, useful, and near transport and imperative spots you'd frequently go to. Don’t get too excited with your conveyancer. Having this attitude will help you turn out to be additionally recognising when taking a gander at a property.

Get some information about the property before contacting the conveyancing farm

Albeit searching for an inland property, get some information about conceivable flooding when the climate's truly terrible. In spite of the fact that you will be unable to depend on aggregate genuine when posing these questions, you can search for data about the territory through internet.

Save your money:

At the point when remortgaging, inquire as to whether the item additionally accompanies free legals. This ought to spare you many pounds in conveyancing expenses, in addition to takes the bother out of discovering a conveyancer to take the necessary steps .

Having more than one office:

If the firm of Specialists or Conveyancers you are utilising has more than one office, then they can follow up on both sides of an exchange; that is, one side represents the seller, alternate represents the buyer. This ought to help hold time scales down to a base. On the off chance that they don't have more than one office, then they can't represent both the merchant and buyer, as this will be an Irreconcilable situation

You should Keep things composed.

In the event that you have to offer your home first to take care of the expenses, advance beyond time, as you wouldn't have any desire to be gotten in postponements created by a chain of exchanges. Compose your funds, as well. Get a home loan arrangement, search for conveyancers to help you, and check property postings early.

Tidbits:

Continuously verify your conveyancing firm is administered by the Law Society. You don't have to visit your high road specialist any longer - you can do your conveyancing through email/phone. Internet conveyancing is frequently faster than utilising a high road firm. In the event that you get a conveyancing quote – dependably verify there are no shrouded charges. Inquire as to whether they offer a no fruition, no charge administration. Continuously check if your conveyancer charges for things like photocopying, messages and composing letters - a few organisations do . In the event that the price tag changes illuminate your bank and conveyancer at the earliest opportunity, it could defer the trade as new archives and altered home loan offers should be placed set up.

It isn't only the cost of it that could be overwhelming, however the quantity of errands included, printed material to get sorted, and individuals to manage can be debilitating.

Tips on Conveyance

22/04/2015

Conveyance is about transferring property and its ownership in a legitimate way. In UK, it’s immensely important to involve assurance in dealing with property transfer. Conveyance is a service that works for the best interest of the client in transferring ownership. People who are having a first time experience in conveyance often lack patience to keep it up with the process all the way through; for them, this article includes some basic tips on conveyance that can best help you out if you are having a first time experience in this service.

Tips to Know

  • Conveyance is a service that is designed in a way to serve its customer with providing assurance in transferring property in a legitimate way. Service is never a job that can be done overnight. It often takes time to accomplish. From that end, conveyance requires a minimum of 2 weeks to get the first quote on your desired property.
  • The quotes are set after making you complete a specially designed questionnaire by you and if not then after having open discussions with you. The quote is the most important part of a conveyance process whether you are to buy or sell your property. In both the cases, the effectiveness of the service done is measured by the quotes brought by the conveyancer.
  • Check on the authenticity of the conveyancer you are working with. It’s important that you work with a license holding conveyance or property solicitor. This leaves you tension free on the ground that whatever the result be, these people will work professionally.
  • The cost part is one of the most important parts of a conveyance service. You should pay attention to their mode of charging as well as to their deed of contract. The conveyancer includes all the necessary clause on costing and you should check whether there lays any hidden cost beneath the clause or not. Cheap conveyancing often cost you by charging with several hidden costs. This is a mere nightmare for you to count pounds for charges you never heard of before.
  • Before striking a deal, check on the property by yourself. It’s always imperative that you take a look at the property whether it is sound or not and whether it matches the one your conveyancer mentioned.
  • Survey is one of the major inspections that you can conduct to check on the property being sound or not. If you hire conveyancer for this purpose, you can get it done in a legitimate way and trust me, they are professional in doing this job and can leave you tension free with that.
  • One important thing you should keep in mind is that, the property you are buying should at least be for more than eighty years on lease. This is important to understand that, whenever you find cheap quotes at places where you really want to hold your property in, the lease period in these cases are lower than a quote at a level above. Lease period makes the value of the property go up. Therefore, cheap quotes are drawn to befool the buyers of property. A conveyancer can definitely help you reduce the opportunity cost in this case.
  • If you are selling a property, check on the documents and attestations by yourself. It’s important that you take active participation in checking on the identity of your fellow buyer. Fraudsters are at random these days and therefore it requires you to pay extra attention on this ground.
  • Most importantly, have patience all through the way of conveyance and get the best possible quote on transfer of property.