mortgage

A mortgage is a loan that’s secured for the sake of purchasing a property. It can be a home, real estate property, and such like.  The borrower gets from the lender the funds required to purchase the property. In return, the lender gets a promise from the borrower to repay the loan with some added interest. The mortgage document legally secures the contract and provides the lender with a legal claim against the borrower’s property in case they default on repayment terms.

The UK has different types of mortgage programs that are available for the borrowers. Taking a mortgage is a substantial financial requirement and having an understanding of the different types of mortgage programs can be of help.

Types of Mortgage

There are two types of mortgage that one can opt for; the difference lies in the rate of interest to be charged. These are; a variable rate mortgage and a fixed-rate mortgage.

Fixed-Rate Mortgages

A fixed-rate mortgage has a fixed interest rate. It means that the rate of interest will stay the same each month until the expiry date of the initial deal. This is an ideal option for those operating on a tight budget. The borrower is able to know in advance what they should be paying at the end of each month. A key advantage with fixed-rate mortgage is the fact that the monthly repayment doesn’t change even if the lender’s interest rates change.

It, therefore, becomes easier for the borrower to budget their finances. The borrower then has some certainty with the outstanding expenses. The major disadvantage with fixed-rate mortgages is when the lender’s interest rates fall, the borrower will then not be able to benefit from the reduced interest rates. Since the mortgage interest rates are fixed, longer deals are likely to have higher annual percentage rates than the shorter deals.

It makes it possible for the lenders to compensate for the money that they might have lost on monthly repayments in case of a rise in interest. Fixed-rate mortgage deals are also likely to include interest in overpaying or ending the agreement early.

Variable Rate Mortgages

Variable-rate mortgages are those with a fluctuating interest rate over the loan period. It means that the number of monthly repayments can change depending on the interest rates. The borrower should therefore be well prepared to handle the possibility of monthly rates increasing if there is an increase in the interest rates. Borrowers may also consider the possibility of the repayments coming down if there is a decrease in the interest rates. There are different types of variable-rate mortgages that one can consider;

Standard variable rate mortgages

This is the standard interest rate that’s set by lenders. It’s normally linked to the Bank of England’s base rate. Whenever the base rate goes, there is likely to be an increase in the mortgage rates and the monthly repayment rates. Since the standard interest is set by the lender, he can opt to either increase or decrease it during the period of the mortgage. SVR mortgages can be risky for the borrower especially if they are not able to afford the unexpected rise in the monthly repayments.

This type of mortgage should only be considered only by those who are financially secure and capable of coping with the fluctuations in the interest rates. The advantage with standard variable rate mortgages lies in the fact that the borrower is free to overpay or even leave the agreement without incurring any penalty.

Discount Rate Mortgage

This is where the lenders can offer a discount off the standard variable rate for a given period of time which can either be two to three years. The lower interest rates, therefore, mean that the monthly repayments can be worked out cheaper. However, when the period for discount rates come to an end, the rate of interest returns back to the standard variable rates as provided by the lender. The monthly repayment rates are also likely to increase in the process.

Since SVR rates differ between lenders, having a larger discount may not necessarily translate to cheaper monthly installments. For example, having a 2% discount on a 6% SVR will have a higher interest rate of 4%. Compare it to a smaller discount of 1.5% on 5% SVR; the interest rate payable is 3.5%. In discount rate mortgages, penalties might also be charged for ending the agreement early or overpaying.

Capped Rate Mortgage

In capped rate mortgages, the interest rate moves in line with the lenders SVR. This helps with establishing a measure of certainty that the repayment amounts will not go beyond the specified amount. However, it’s important to note that the capped rate of mortgages is higher than the SVR mortgages. This is because the borrower gets to pay for the added security.

 Tracker Mortgage

A tracker mortgage is normally linked to another interest rate. It keeps moving up and down in line with the rate being tracked. For example, if the base rate that’s being tracked increases by 1%, your interest rate will also increase by 1%.

The tracked rate is normally the base rate that’s determined by the Bank of England. The tracker mortgage may last for a period of two to five years. However, there are lenders that might provide a rate that lasts for the entire period of the mortgage. One advantage of this type of mortgage is the fact that its fluctuation is normally determined by the rate it’s linked to instead of the lender.

Tracker mortgages may also attract early repayment charges, and that should be considered before opting to switch before the mortgage period ends. Tracker rate mortgages are also cheaper when compared to fixed-rate mortgages. Ensure that you take time to shop around so as to identify some of the cheaper rates available.

Interest Only Mortgage

Interest-only mortgages enable the borrower to pay off mortgage interest without paying for the capital. The monthly repayments may seem cheaper; however, the capital may still have to be paid at the end of the mortgage period.

 

 

Innovation

There is a reason why Scotland attracts more foreign investors than any other UK region.

Actually, there are many reasons. Our weather isn’t one of them – but a bit of rain is a small price to pay for locating your business in a supportive business environment with great infrastructure and highly skilled people.

Scotland

 

So why choose Scotland for your business?

SCOTLAND is full of skilled TALENT

Our small country has one of the biggest concentrations of universities in Europe, which means you’ll have easy access to the skilled talent you need. Over 50% of our working population has further education.

Our universities aren’t just training up the workforce of tomorrow – they’re also producing spin-outs at a dizzying rate. More companies are formed based on university research here than any other part of the UK.

Scotland offers a very GOOD VALUE FOR MONEY

Did you know that, on average, employing people in Edinburgh costs 33% less than in London? And the money you spend on your staff will go further here – the cost of living in Scotland is up to 50% lower than in other parts of the UK.

Property costs are competitive too – office rental costs in Glasgow can be up to 75% cheaper than in London.

People love living in Scotland

Scotland offers workers a great work-life balance, short commuting times, and both vibrant cities and stunning countryside on their doorstep.

“Our people really enjoy being here. It’s a great place to work hard and enjoy life”. Peter Platzer is CEO of an American company, Spire Global. Much US-based staff came on temporary positions and loved it so much they asked for a permanent transfer.

Scotland attracts a large number of investors

We want you here, and we’ll do everything we can to make your transition as cost-effective as possible. Scotland offered more incentive deals to foreign companies than any other part of the UK in 2017.

If you’re looking for a business location that offers the expertise, connections, products and services you need, Scotland is the place for you.

Business

 

Connections are efficient

We have five international airports that offer 150 destinations, making it easy to hop on a quick hour-long flight to London or a longer-haul one to New York. You can travel between our two biggest cities, Edinburgh and Glasgow, in under an hour too.

Our digital connections will also keep you moving at high speed: in fact, Edinburgh’s internet speeds make it one of the fastest digitally connected cities in the UK.

Scotland is an innovative country

Scotland’s history of innovation is well-known – from penicillin and the steam engine to the television and the telephone, we’re big on big ideas. And our inventive streak continues today – from the skies (more satellites are built in Glasgow than any other city in Europe) to the seas (Scotland built the world’s first floating offshore wind farm).

Innovation

 

Collaboration is the top priority

We believe we can make great things happen when we work together. That’s why Scotland has more collaborations between universities and industry than any other country in Europe.

Our universities work with 26,000 companies every year, helping turn new ideas into products and services.

Scotland is a financial powerhouse

Scotland is one of Europe’s leading financial centres and internationally recognised as the UK’s largest outside of London.

Scotland has also been ranked best performing destination for inward investment outside London for five consecutive years.

Scotland is A NATION OF SELF-STARTERS

Our capital, Edinburgh, beat 68 other UK cities to hold the title of the Entrepreneurial City of the Year. It was also named the best place in Europe to start a tech business.

With statistics like that, there is definitely no better place to start your business.

Scotland has GOT A GREAT TRACK RECORD

Scotland is a great location for overseas companies. We have been ranked the UK’s top location for foreign investment outside London six years in a row, and more than 5,100 global companies have set up here.

Buy to Let

Why get into Property in the first place?

Getting into property has always been a somewhat dream of many!  If you look at many high net worth individuals, you nearly always find out they have a portfolio of properties as part of their wealth!  This makes property shine out as a proper wealth indicator! … and let’s be frank, who would not want to own properties and earn monthly income from them?

But getting away from the shiny ball of owning many properties and earning tens of thousands each month, is the large majority of people who do not have the money to splash on multiple properties and just sit at home waiting for the rent money to hit their bank, OR, maybe you have money to invest but do not know where to start!

Either way, Single-Lets is where you should start… and I am going to explain why!

1. Concentrating on Single-Lets, open up the doors for you to purchase a small low-priced property! 

You do not need to go big on Single-Lets! Having deep pockets is, however, a necessity for other strategies like flips, HMO’s, etc, but it is not a deal-breaker with Single-Lets.  If you do not have a big pot of money to spend, starting on a property with a tag of £50,000 is the right place to start!  (With an initial small investment of just £15,000+ if you are going to have a mortgage).  And if you do have a larger amount to spend but you are new, a small property minimizes the risks connected with larger projects.

2. Single-Lets never go out of fashion!

Unlike other strategies, Single Lets are ALWAYS in demand!  There is no Summer /Holiday Season, or Scholastic Term, or a phase attached to some new strategy that has just been discovered and will quickly disappear after a few months/years!  Estate Agents are always looking for small homes for families.  It is a continuous market.

3. Low-Priced Single-Lets are excellent for cash flow and rental yields!

Rental yield is not correlated to the price of the house!  What do I mean?

If you put a 2-bed property on the market for which you paid £60,000 all in, and get a £500 monthly income, your rental yield is 10%.

If you put a 3-bed property on the market for which you paid £240,000 all in, you will not necessarily get £2,000, even though you have spent 4 times as much!

For this reason, we prefer to have 4 properties of the first kind and actually DO get £2,000 per month!

This is how we are building our own portfolio!

So if you are just starting out and do not have a large amount of cash to spend, you can still start with a small outlay.  As mentioned above, if you are new, maybe live outside the UK, or simply want to know how to start, there is no better way than to start small!

We offer a lot of help with regards to that which we know best – Single Lets!  See below and join our community to learn and invest in property.

 

You can join our closed Facebook Group to LEARN ABOUT PROPERTY here:

You can join our private Facebook Group to receive readily checked PROPERTY DEALS here:

If you want to learn how to Build a Buy-To-Let Business we also have our own signature course which is a comprehensive 30 Video Lessons with a Step-by-Step approach to learning the Buy-To-Let strategy from scratch.

We hope this blog has given you some insight into how we do our business,

 

Until next time, take care

 

Stefan and Jennifer

Innovation

Your Move Scotland has revealed that landlords in Glasgow saw rents rise faster than anywhere else.

According to the data, prices in Glasgow and the Clyde increased by 1.9% month-on-month, well ahead of the 0.2% average across Scotland. On a yearly basis, prices in Scotland grew by 1.7%, buoyed by strong price growth in the Highlands and Islands. The average rent in the nation now stands at £582 (seasonally adjusted). On a non-seasonally adjusted basis, the average rent was £589 in May.

On a monthly basis, it was the Glasgow and Clyde region which posted the strongest price rises, with average rents growing by 1.9% between April and May. This reversed a recent trend of falling rents in the city, leaving the average monthly rent standing at £597.

This put it ahead of the Highlands and Islands, where prices grew by 0.6% month-on-month to hit £692. The region has regained its title of the most expensive place to rent in Scotland. This follows an average price rise of 3.8% in the last year, faster than anywhere else.

On an annual basis, four of the five regions surveyed saw prices rise. In the East of Scotland, prices grew by 2.7% to reach £544 while in Edinburgh and Lothians annual growth of 1.9% left prices standing at £689.

The South was the only region to see prices fall, with the typical rental property now let for £542, 0.9% lower than a year ago. It remains the cheapest place to rent a property in the country.

On a national basis, the average Scottish rental price increased by 1.7% in the year to May and now stands at £582 per calendar month (seasonally adjusted). This figure is 0.2% higher than a month ago. On a non-seasonally adjusted basis, the average rent was £589.

Encouraging signs for landlord returns

Landlords enjoyed strong returns once again, as yields remained at their highest level since November 2018, Your Move Scotland found. Yields increased from 4.6% to 4.7%, the first such rise for two years.

This means investor returns continue to compare favourably to those found in England and Wales. The only two regions to offer returns higher than the Scottish average this month were the North East (5%) and the North West (4.8%).

New regulation for landlords

From 1st April 2020 onwards, any new tenancy will require the property to have an EPC rating of at least band E. By 31st March 2022, all rental properties will need to have an EPC rating of at least band E.

Your Move Scotland’s letting agents will be spending 2019 informing landlords of the upcoming changes so that they can begin any necessary preparations. Landlords who fail to comply will face fines of up to £4,000 if their property’s rating is not up to the new standard, so it is absolutely in their interest to start thinking about this now.

Brian Moran, Lettings Director, Your Move Scotland comments: “Although the property purchase market may have slowed in some areas, demand for rented homes continues to outstrip supply.

This was seen most strongly in the Highlands and Islands region, where prices have leapt in the past year. Scotland’s major cities of Edinburgh and Glasgow showed impressive monthly figures, demonstrating the enduring popularity of these areas.”

 

Property Chain

 

As a first-time buyer of a residential or an investment property, you’re the good guy at the end of the property chain. But what if there is a break further up and everything stalls? Here is how to get things moving again.

A property chain is when home buyers and sellers are linked together because their sale or purchase is dependent on another transaction.

And even as a first-time buyer with nothing to sell, property chains are a major consideration.

While there are no buyers and sellers below you, the party you are buying from will be affected by the sellers of the house they are buying and so on. This is known as an ‘onward chain.’

Any property chain can only progress at the pace of the slowest link. And if one transaction falls through, the chain will break – and the effects of which can be felt by everyone, right down to the first-time buyer on the ground.

In this case, it’s worth getting your head around property chains and what can get them rattling.

Why might a chain collapse?

There are many reasons a sale may fall through somewhere along a property chain.

A buyer somewhere down the line cannot get a mortgage for example, or just changes their mind and takes their property off the market having agreed on a sale.

Other reasons could include one of the parties being made redundant, or a buyer pulling out after a survey throws up costly repairs that need doing.

Gazumping and gazundering also play their part. Gazumping is where a seller accepts an offer from one buyer but then takes a higher offer from someone else at the last minute, thereby scuppering the sale.

Gazundering is where a buyer reduces their offer at their last-minute, often just before the exchange, which may result in the seller being unable to accept and the chain breaks.

What can you do?

As a first-time buyer, the absolute ideal is to find a seller who is chain-free.

This means finding someone who is not looking to buy a property at the same time as selling theirs to you. But, of course, this is not always possible.

There are steps you can actively take, however, to try and keep things on track.

Keep communicating

Communication is key. You need to keep in touch with the seller above you in the chain and respond promptly with all information you are required to provide.

By building relationships, you can increase your chance of keeping a chain together, as it becomes harder to let somebody down once you have built up a rapport.

Take control

The faster you can move towards exchanging contracts, the better.

Keep in touch with your solicitor, estate agent and mortgage broker and make regular progress checks. If you are organised, the process should be quicker and there is less chance of things going wrong.

Get involved 

If you discover that someone in the chain has pulled out because of money issues, you could try getting everyone in the chain to agree to a lower sale price. Persuading all parties, it is of mutual benefit will be no mean feat, but there are occasions where this has worked.

Ask your seller to rent

If the seller of the home you want has lost the home they want to buy and is telling you they’re stuck, ask them if they would consider moving out any way to a rented home or with friends and family. You could even offer to give them a few months’ rent in cash as a sweetener.

Protect yourself

If your purchase does fall through, it can prove costly, as you may have shelled out already for a survey, searches or even legal fees.

It is possible to buy specific homebuyer’s protection insurance to which will pay out in this eventuality. But make sure you read the terms, conditions and exclusions thoroughly.

These are some of my views on this subject, and I hope that the above can help you manage your property purchases, even where there is a chain in the whole process.